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submit such information to the Council
as the Council may require for the sole
purpose of assessing whether the
financial market utility is systemically
important.
(b) Prerequisites to information
collection. Before requiring any
financial market utility to submit
information to the Council under
paragraph (a) of this section, the Council
shall—
(1) Determine that it has reasonable
cause to believe that the financial
market utility is, or is likely to become,
systemically important, considering the
standards set out in § 1320.10; or
(2) Determine that it has reasonable
cause to believe that the designated
financial market utility is no longer, or
is no longer likely to become,
systemically important, considering the
standards set out in § 1320.10; and
(3) Coordinate with the Supervisory
Agency for the financial market utility
to determine if the information is
available from, or may be obtained by,
the Supervisory Agency in the form,
format, or detail required by the
Council.
(c) Timing of response from the
appropriate Supervisory Agency. If the
information, reports, records, or data
requested by the Council under
paragraph (b)(3) of this section are not
provided in full by the Supervisory
Agency in less than 15 calendar days
after the date on which the material is
requested, the Council may request the
information directly from the financial
market utility with notice to the
Supervisory Agency.
(d) Notice to financial market utility
of information collection requirement.
In requiring a financial market utility to
submit information to the Council, the
Council shall provide to the financial
market utility the following—
(1) Written notice that the Council is
considering whether to make a proposed
determination under § 1320.12; and
(2) A description of the basis for the
Council’s belief under paragraphs (b)(1)
or (b)(2) of this section.
Dated: July 20, 2011.
Alastair Fitzpayne,
Deputy Chief of Staff and Executive Secretary,
Department of the Treasury.
[FR Doc. 2011–18948 Filed 7–26–11; 8:45 am]
BILLING CODE 4810–25–P–P

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COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 40
RIN 3038–AD07

Provisions Common to Registered
Entities
Commodity Futures Trading
Commission.
ACTION: Final Rule.
AGENCY:

The Commodity Futures
Trading Commission (‘‘Commission’’) is
adopting regulations to implement
certain statutory provisions of the DoddFrank Wall Street Reform and Consumer
Protection Act (‘‘Dodd-Frank Act’’). The
Commission also is amending its
existing regulations governing the
submission of new products, rules, and
rule amendments. The final regulations
establish the Commission’s procedural
framework for the submission of new
products, rules, and rule amendments
by designated contract markets
(‘‘DCMs’’), derivatives clearing
organizations (‘‘DCOs’’), swap execution
facilities (‘‘SEFs’’), and swap data
repositories (‘‘SDRs’’). In addition, the
final regulations prohibit event
contracts involving certain excluded
commodities, establish special
submission procedures for certain rules
proposed by systemically important
derivatives clearing organizations
(‘‘SIDCOs’’), and stay the certifications
and the approval review periods of
novel derivative products pending
jurisdictional determinations.
DATES: Effective date: September 26,
2011.
FOR FURTHER INFORMATION CONTACT:
Bella Rozenberg, Assistant Deputy
Director, Division of Market Oversight
(‘‘DMO’’), at 202–418–5119 or
[email protected], Riva Spear
Adriance, Associate Director, DMO at
202–418–5494 or [email protected],
Phyllis Dietz, Associate Director,
Division of Clearing and Intermediary
Oversight at 202–418–5449 or
[email protected], and Joseph R. Cisewski,
Attorney Advisor, DMO at 202–418–
5718 or [email protected], in each case,
at the Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street, NW., Washington, DC
20581.
SUPPLEMENTARY INFORMATION:
SUMMARY:

c. Voluntary Submission of New Products
for Commission Review and Approval
(§ 40.3)
d. Amendments to Terms or Conditions of
Enumerated Agricultural Contracts
(§ 40.4)
e. Voluntary Submission of Rules for
Commission Review and Approval
(§ 40.5)
f. Self-Certification of Rules (§ 40.6)
g. Delegations (§ 40.7)
h. Availability of Public Information
(§ 40.8)
i. Special Certification Procedures for
Submission of Rules by Systemically
Important Derivatives Clearing
Organizations (§ 40.10)
j. Review of Event Contracts Based Upon
Certain Excluded Commodities (§ 40.11)
k. Staying of Certification and Tolling of
Review Period Pending Jurisdictional
Determination (§ 40.12)
III. Cost Benefit Considerations
IV. Related Matters
a. Regulatory Flexibility Act
b. Paperwork Reduction Act

I. Background
On November 2, 2010, the
Commission published proposed
regulations to implement certain
statutory provisions of the Dodd-Frank
Act and to amend existing regulations
governing the submission of new
products, rules, and rule amendments.1
The Commission is hereby adopting
final regulations 40.1 through 40.8, as
amended below, and new regulations
40.10 through 40.12 to implement
certain provisions of the Dodd-Frank
Act, to clarify submission-related
regulatory obligations of registered
entities, and to enhance the
Commission’s administration of the
Commodity Exchange Act (‘‘Act’’).
The Commission’s final regulations
implement, among other provisions,
Section 745 of the Dodd-Frank Act,
which, effective July 16, 2011, amended
Section 5c of the Act to provide new
procedures for the submission of rules
and rule amendments by DCMs, SEFs,
DCOs, and SDRs.2 The final regulations
also amend existing requirements for
the submission of new products and
prohibit the listing and clearing of
products based upon certain excluded
commodities, if such products involve
statutorily-specified activities or similar
activities determined, by rule or
regulation, to be contrary to the public
interest. In addition, the Commission is
adopting special submission procedures
for certain risk-related rules proposed

Table of Contents
I. Background
II. Amendments to Part 40 of the
Commission’s Regulations
a. Definitions (§ 40.1)
b. Listing Products for Trading by
Certification (§ 40.2)

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1 17 CFR part 40 Provisions Common to
Registered Entities, 75 FR 67282 (Nov. 2, 2010).
2 Sections 728 and 733 of the Dodd-Frank Act
created two new categories of registered entities,
SEFs and SDRs. Provisions related to the regulation
of these entities will be promulgated in other
Commission rulemakings.

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Federal Register / Vol. 76, No. 144 / Wednesday, July 27, 2011 / Rules and Regulations
by SIDCOs.3 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. Finally, the
Commission is adopting previously
proposed regulations to stay
certifications and toll approval review
periods for novel derivative products
subject to jurisdictional determinations
by the Commission or the Securities and
Exchange Commission (‘‘SEC’’).
Part 40 of the Commission’s
regulations, as amended herein, will
become effective sixty days after
publication in the Federal Register.

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II. Amendments to Part 40 of the
Commission’s Regulations
The Commission received nine
comment letters during the 60-day
public comment period following the
publication of its notice of proposed
rulemaking. Seven of these comment
letters were submitted by registered
entities subject to the proposed
regulations. Five comments were
submitted on behalf of DCMs—the CME
Group, Inc. (‘‘CME’’), ICE Futures U.S.,
Inc. (‘‘ICE’’), the Kansas City Board of
Trade (‘‘KCBOT’’), the Minneapolis
Grain Exchange, Inc. (‘‘MGEX’’), and
OneChicago LLC Futures Exchange
(‘‘OCX’’)—and two comments were
submitted on behalf of registered
DCOs—the Options Clearing
Corporation (‘‘OCC’’) and LCH.Clearnet
Ltd (‘‘LCH’’).4 The Commission also
received comments from the Futures
Industry Association (‘‘FIA’’), an
organization representing futures
commission merchants, and the
American Benefits Council (‘‘ABC’’), an
organization representing pension funds
and other buy-side swaps users.
Many of the comments received by
the Commission offered specific
recommendations for clarification or
modification of proposed regulations;
other comments generally objected to
certain aspects of the proposal. The
Commission, in consideration of these
comments and as detailed below, is
modifying its proposed rules to clarify
3 A SIDCO is a DCO that has been designated as
a systematically important financial market utility
by the Financial Stability Oversight Council
pursuant to Section 804 of the Dodd-Frank Act and
for which the Commission is the Supervisory
Agency. See below section II.i. (discussing § 40.10).
4 CME also submitted a comment on the
Commission’s cost-benefit analysis subsequent to
the close of the public comment public for the
proposed rulemaking. The Commission has
addressed CME’s comments in its cost-benefit
analysis, below. CME, KCBOT, and MGEX are also
registered DCOs and they commented on clearingrelated issues.

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regulatory obligations under certain
provisions of part 40. The Commission
has otherwise determined to implement
its regulations as originally published
on November 2, 2010.
a. Definitions (§ 40.1)
Three registered entities submitted
comments concerning the proposed
definitions of ‘‘rule’’ and ‘‘terms and
conditions’’ in § 40.1 of the
Commission’s regulations. The
Commission has determined to revise
both definitions to address these
comments. In addition, the Commission
is adopting revised language in the
definition of ‘‘terms and conditions’’ to
provide specific examples of terms and
conditions frequently included in
swaps.
The FIA asked the Commission to
consider whether an amendment to the
§ 40.1 definition of ‘‘rule’’ might be
appropriate to ensure that the
Commission’s regulations captured
advisories, interpretations, and less
formal means of communicating
policies to market participants. The FIA
noted that registered entities, including
DCMs, may be able to circumvent
regulatory obligations by issuing
communications under a category not
enumerated in the proposed definition
of ‘‘rule.’’ The Commission notes that
‘‘interpretations’’ and ‘‘stated policies’’
are explicitly included in the present
definition of ‘‘rule’’ and that the nonexclusive categories enumerated in that
definition are merely examples of the
types of actions that are subject to
Commission review. The Commission’s
position has always been that the
definition of ‘‘rule’’ turns more on
substance than form; that is, a registered
entity cannot avoid regulatory
obligations by adopting what is in
substance a policy or interpretation by
formally issuing the communication
under a category that is not enumerated
in the definition of ‘‘rule.’’
The Commission nevertheless has
determined to add the term ‘‘advisory’’
to the list of categories constituting
‘‘rules’’ under § 40.1, which should
ensure that registered entities issue
advisories in compliance with all
regulations applicable to ‘‘rules.’’ In
consideration of the FIA’s comments,
the Commission also has determined to
move the phrase ‘‘in whatever form
adopted’’ to ensure that an addition or
deletion to a communication constitutes
a ‘‘rule’’ under § 40.1, without regard to
the particular form in which a registered
entity adopts such an amendment. In
this regard, the Commission is clarifying
that the language ‘‘in whatever form
adopted’’ applies to all non-exclusive
categories of ‘‘rules’’ enumerated in

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§ 40.1 and that the enumeration of
particular examples of ‘‘rules’’ does not
imply the exclusion of others.
MGEX commented on the proposed
definition of ‘‘rule’’ as well. In its
comments, MGEX suggested that the
Commission may be exceeding its
authority by requiring DCMs to submit
market maker and trading incentive
programs as ‘‘rules’’ subject to the
provisions of part 40. MGEX also
commented that the terms and
conditions of such programs should not
be submitted to the Commission for
approval, because, as a policy matter,
the Commission should not substitute
its judgment for ‘‘the business judgment
of the registered entities.’’ Moreover, in
MGEX’s view, the publication of
program terms and conditions could
inhibit negotiations with market
participants. The Commission disagrees
with MGEX and, for the reasons
discussed below, has determined to
continue requiring registered entities to
submit the complete terms and
conditions of market maker and trading
incentive programs to the Commission,
with an appropriate request for
confidential treatment.5
A DCM’s rules implementing market
maker and trading incentive programs
fall within the Commission’s oversight
authority. Indeed, a number of core
principles touch upon trading issues
that may be implicated by the design of
such programs. Core Principle 9, for
example, establishes the Commission’s
framework for regulating the execution
of transactions, requiring DCMs, like
MGEX, to provide a competitive, open,
and efficient market and mechanism for
execution. The newly-amended Core
Principle 12 also requires DCMs to
establish and enforce rules to protect
markets and market participants from
abusive practices and to promote fair
and equitable trading on designated
contract markets. In addition, market
maker and trading incentive programs
frequently touch upon Core Principle
19, which requires that DCMs avoid
adopting any rules or taking any actions
that result in unreasonable restraints of
trade.
It is not always clear in the first
instance whether the rules
implementing market maker and trading
incentive programs have implications
for a DCM’s compliance with these core
principles. Consequently, for many
years, the Commission has required
registered entities to submit the terms
and conditions of all market maker and
5 Pursuant to § 145.9 of the Commission’s
regulation, registered entities requesting
confidential treatment for program terms and
conditions must, among other things, file a written
justification for the confidential treatment request.

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Federal Register / Vol. 76, No. 144 / Wednesday, July 27, 2011 / Rules and Regulations

trading incentive programs to ensure
that, among other things, they do not
incentivize manipulative activities,
unreasonably restrain competition on or
between exchanges, or otherwise
interfere with the fair and efficient
functioning of the marketplace.
Reviewing program rules for compliance
with applicable law is not tantamount to
substituting the Commission’s judgment
for the business judgment of the
registered entity.
The Commission continues to view
such programs as ‘‘agreements * * *
corresponding’’ to a ‘‘trading protocol’’
within the § 40.1 definition of ‘‘rule’’
and, as such, all market maker and
trading incentive programs must be
submitted to the Commission in
accordance with procedures established
in part 40. In addition, to further clarify
submission obligations, the Commission
intends to continue reminding each
newly-designated contract market, in its
designation letter, that such programs
are considered ‘‘rules’’ under § 40.1. The
Commission would like to emphasize,
however, that such programs need not
be submitted to the Commission for
approval, as suggested in MGEX’s
comment. Market maker and trading
incentive programs may be submitted
for approval under § 40.5, but they also
may be certified and submitted in
accordance with the provisions of
§ 40.6, which has been the favored
process for submission of market maker
and trading incentive programs to date.
In a similar comment concerning the
Commission’s authority to amend rules
relating to margin, MGEX stated that
‘‘DCMs and DCOs are best qualified to
set margins’’ in light of their ‘‘extensive
historical record for doing this well.’’
MGEX recommended that the
Commission provide DCOs ‘‘the
broadest latitude possible’’ to establish
appropriate margin rules. The
Commission believes that the final
definition of ‘‘rule,’’ as adopted herein—
and which does not restrict the
Commission’s review of rules relating to
margin levels—is not inconsistent with
the comment submitted by MGEX. As
discussed in the proposed rulemaking,
Section 736 of the Dodd-Frank Act
amends Section 8a(7) of the Act to
permit the Commission to alter or
supplement the rules of a registered
DCO by issuing rules, regulations or
orders regarding margin requirements.
To ascertain whether or not and under
what conditions to issue such rules,
regulations, or orders, the Commission
must be able to review rules ‘‘relating to
the setting of levels of margin’’ in the
first instance, although the Commission
is not authorized to ‘‘set specific margin
amounts’’ under Section 8a(7)(D)(iii) of

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the Act. The Commission’s review of
such rules is an appropriate exercise of
its DCO oversight responsibilities and
may not result in the Commission taking
action under Section 8(a)(7).
Finally, OCC recommended that the
Commission reconsider certain language
within the proposed definition of
‘‘terms and conditions’’ in § 40.1(j).
Specifically, OCC suggested that the
Commission delete language that would
have required ‘‘proposed swap or
contract terms and conditions * * * [to]
conform to industry standards or those
terms and conditions adopted by
comparable contracts.’’ In OCC’s view,
novel products, by their nature, contain
provisions that deviate somewhat from
those in comparable contracts. The
Commission, as suggested by OCC,
intended to prevent registered entities
from designing products that are
economically identical to existing
products but that have ‘‘one or more
unique features that serve no apparent
purpose but to prevent fungibility.’’
Given the potential adverse effect on
innovation and other proposed
regulatory provisions, the Commission
has determined to revise the definition
of ‘‘terms and conditions’’ to delete the
above-cited language.
To further clarify the definition of
‘‘terms and conditions,’’ the
Commission is revising § 40.1(j) to
differentiate between the ‘‘terms and
conditions’’ generally applicable to a
contract for the purchase or sale of a
commodity for future delivery, or an
option on such a contract or an option
on a commodity—not including an
option on a commodity that falls within
the definition of a swap—(‘‘commodity
futures and options contracts’’) in
paragraph (j)(1) and the ‘‘terms and
conditions’’ generally applicable to a
swap in paragraph (j)(2). Some of the
‘‘terms and conditions’’ associated with
commodity futures and options
contracts are different from those
associated with swaps and, accordingly,
the revised format for identifying
particular examples of ‘‘terms and
conditions’’ applicable to each product
type may clarify certain submission
requirements that are dependent on this
definition. For example, the
Commission has determined to revise
the introductory paragraph to the
definition of ‘‘terms and conditions’’ to
include language that describes a swap’s
underlying ‘‘trading unit’’ or
‘‘commodity’’ as a ‘‘description of the
payments to be exchanged under a
swap.’’
The examples of ‘‘terms and
conditions’’ generally applicable to
commodity futures and options
contracts and contained in paragraph

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(j)(1) are being adopted as proposed,
except that the Commission has
determined to amend the definition to
include ‘‘no cancellation ranges’’ within
subparagraph (vi). However, as
discussed above, the Commission also
has determined to amend and clarify the
definition of ‘‘terms and conditions’’ by
separating those terms and conditions
generally applicable to commodity
futures and options contracts from those
generally applicable to swaps.6
Accordingly, the new and final
§ 40.1(j)(2) provides examples of ‘‘terms
and conditions’’ frequently associated
with swaps,7 which the Commission has
determined to clarify and/or renumber
as follows:
• Paragraph (j)(2)(i) defines as a
‘‘term’’ or ‘‘condition’’ the
‘‘identification of the major group,
category, type or class in which the
swap falls’’ and ‘‘any further sub-group,
category, type or class that further
describes the swap.’’ 8 To clarify the
meaning of this phrase, a parenthetical
lists ‘‘interest rate, commodity, credit, or
equity’’ swaps as non-exclusive
examples of major swap groups. This is
equivalent to a description of the
‘‘quality and other standards that define
the commodity or instrument
underlying the contract’’ applied to
commodity futures and options
contracts in § 40.1(j)(1)(i);
• Paragraph (j)(2)(ii) refers to
‘‘[n]otional amounts, quantity standards,
or other unit size characteristics.’’ This
provision, as proposed in paragraph
(j)(15)(i), previously referred only to
‘‘notional values.’’ The revision clarifies
that there may be more than one way to
state the size of a swap;
• Paragraphs (j)(2)(iii) (any applicable
premiums or discounts for delivery of
nonpar products) and (iv) (trading hours
and the listing of swaps) are parallel to
paragraphs (j)(1)(iii) and (iv), which are
applicable to commodity futures and
options contracts;
• Paragraph (j)(2)(v) for swaps, like
paragraph (j)(1)(v) for commodity
6 The examples of terms and conditions proposed
as paragraphs (j)(1)–(14) are being renumbered as
paragraphs (j)(1)(i) through (xiv) to reflect the
inclusion of paragraph (j)(2) for swaps.
7 The Commission notes that the definition of
‘‘swap’’ in Section 1a(47)(A)(i) of the Act includes
an option (‘‘any agreement, contract or transaction
(i) that is a put, call, cap, floor, collar, or similar
option of any kind that is for the purchase or sale,
or based on the value of 1, or more interest or other
rates, currencies. * * *’’
8 The terminolory used in this provision, i.e.,
‘‘group, category, type, or class,’’ is used to describe
swaps in section 723 of the Dodd-Frank Act,
codified in section 2(h)(2) of the Act, regarding the
review of swaps for a mandatory clearing
determination. See also proposed § 39.5 (process for
review of swaps for mandatory clearing; 75 FR
67277 (Nov. 2, 2010)).

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Federal Register / Vol. 76, No. 144 / Wednesday, July 27, 2011 / Rules and Regulations
futures and options contracts, addresses
the pricing basis of the instrument. It
refers to ‘‘pricing basis for establishing
the payment obligations under, and
mark-to-market value of, the swap
including, as applicable, the accrual
start dates, termination or maturity
dates, and, for each leg of the swap, the
initial cash flow components, spreads,
and points, and the relevant indexes,
prices, rates, coupons, or other price
reference measures.’’ This incorporates
the provisions of proposed paragraphs
(j)(15)(iii) (indexes), (iv) (relevant prices,
rates or coupons), (vi) (initial cash flow
components), and (x) (spreads and
points). The Commission notes that
other ‘‘price reference measures’’ could
include any factor that might have a
bearing on the price of a swap,
including pricing curves, reference
prices, reference entities or obligations,
reference currencies, disruption
fallbacks, or, given the variety of
existing and potential swap products,
any other term or condition that affects
the pricing basis of the swap;
• Paragraphs (j)(2)(vi) (any price
limits, trading halts, or circuit breaker
provisions, and procedures for the
establishment of daily settlement prices)
and (vii) (position limits, position
accountability standards, and position
reporting requirements) for swaps are
the same as paragraphs (j)(1)(vi) and
(vii), respectively, as applied to
commodity futures and options
contracts;
• Paragraph (j)(2)(viii) refers to
‘‘payment and reset frequency, day
count conventions, business calendars,
and accrual features.’’ It incorporates
proposed paragraphs (j)(15)(ii) (relevant
dates, tenor and day count conventions),
(vii) (payment and reset frequency),
(viii) (business calendars), and (ix)
(accrual type). Included within this
category are such specifications as
payment, delivery, pricing and reset
dates, day count fractions, holiday
calendars, and accrual features such as
compounding;
• Paragraph (j)(2)(ix) addresses
specifications related to physical
delivery, if physical delivery applies.
The enumerated features are the same as
those listed for commodity futures and
options contracts in paragraph (j)(1)(ix);
• Paragraph (j)(2)(x) relates to cash
settlement and provides ‘‘[i]f cash
settled, the definition, composition,
calculation and revision of the cash
settlement price, and the settlement
currency.’’ This is the same as
paragraph (j)(1)(x) for commodity
futures and options contracts, except
that the new paragraph contains an
additional reference to settlement

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currency that incorporates proposed
paragraph (j)(15)(v) (currency);
• Paragraphs (j)(2)(xi), (xii), (xiii) and
(xiv), relating to swaps that are options,
parallel paragraphs (j)(1)(xi), (xii), (xiii)
and (xiv) relating to commodity options
contracts;
• Paragraph (j)(2)(xv) lists ‘‘[l]ife cycle
events’’ as a term or condition.
Originally included in proposed
paragraph (j)(15)(vi), this encompasses
provisions relating to such attributes as
special assignment, novation, exchange
or other transfer rights or limitations,
special termination events, amendment
provisions, rights to extinguish
obligations under the swap, and special
notice requirements.
The Commission would like to clarify
that these ‘‘terms and conditions’’ apply
to the submission of products for listing
or trading by DCMs and SEFs. The
Commission’s proposed swap-related
examples referenced ‘‘swaps cleared by
a derivatives clearing organization,’’
which may have suggested that the
examples were relevant only in
connection with rules submitted by
DCOs. The ‘‘terms and conditions’’ of a
swap are relevant to rules that may be
submitted by DCMs and SEFs, as well
as DCOs, and the reference to swaps
cleared by DCOs therefore has been
removed.
b. Listing Products for Trading by
Certification (§ 40.2)
The Commission previously proposed
to amend § 40.2(a) to require registered
entities to accompany their submissions
with the documentation relied upon to
establish the basis for compliance with
the Act and the Commission’s
regulations. The Commission received a
number of comments regarding the
proposed documentation requirement in
§ 40.2(a)(3)(v). Two registered entities,
ICE Futures and CME, commented that
the Commission may not have the
authority to require the submission of
documentation with newly-certified
products. A number of registered
entities also found the proposed
provision unclear or overly prescriptive.
The Commission, in consideration of
these comments, has determined to
amend its regulations to clarify the
filing obligations of registered entities
and to ameliorate the perceived burdens
associated with the proposal.
ICE Futures and CME suggested that
the Commission may not have the
authority to amend the product
submission requirements, because the
Dodd-Frank Act, while substantially
amending statutory provisions relevant
to the submission of rules and rule
amendments, did not amend the Act’s
provisions governing the certification

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and approval of products. The
Commission would like to clarify that
its proposed rulemaking concerned not
only Dodd-Frank related amendments
but also certain amendments that
facilitate the Commission’s
administration of the Act. Thus,
although the Dodd-Frank Act did not
substantively change the product
certification provisions in Section 5c(c)
of the Act, the Commission proposed
the documentation requirement in
§ 40.2, as well as other provisions,9 to
expedite the submission review process
and to ensure adequate consideration is
given to legal and financial issues
arising from new product and rule
submissions.
In this regard, the Commission
continues to view its product
submission requirements as a logical
adjunct to the certification provisions of
Section 5c(c)(1) of the Act. To argue that
the Commission’s proposal exceeds
statutory authority, the product
submission provisions of the Act would
need to be read strictly to require that
registered entities merely make—and
not support—certifications of
compliance with the Act and
regulations thereunder. This
interpretation ignores the Commission’s
product oversight function and its duty
to examine support for certifications of
compliance with core principles,
including certifications that new
products are not susceptible to
manipulation. The Commission has long
recognized ‘‘the need to balance the
flexibility’’ that the Act, as amended by
the Commodity Futures Modernization
Act (‘‘CFMA’’), gives ‘‘a DCM in being
able to [quickly] self-certify new
products * * * against the obligations
of both the DCM and the Commission to
assure themselves that the certification
is accurate—i.e., that the product or rule
does indeed comply with applicable
* * * core principles.’’ 10
The Commission nevertheless agrees
with ICE Futures that it might be ‘‘more
useful’’ for staff to have ‘‘a written
explanation’’ of the newly-certified
product than to receive ‘‘pages of
reports, data and other records.’’ The
Commission therefore has determined to
substantially revise § 40.2(a)(3)(v) to
require product certifications be
supported by a ‘‘concise explanation
and analysis’’ of the certified product
9 See proposed §§ 40.3, 40.5, 40.6, and 40.10, 17
CFR part 40 Provisions Common to Registered
Entities, 75 FR 57282 (Nov. 2, 2010).
10 See Technical Clarifying Amendmens to Rules
for Exempt Markets, Derivatives Transaction
Executiion Facilities and Designated Contract
Markets, and Procedural Changes for Derivatives
Clearing Organization Registration Applications, 71
FR 1953, 1956 (Jan. 12, 2006).

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and its compliance with applicable law.
This ‘‘explanation and analysis’’ must
either (1) be accompanied by supporting
documentation, or (2) incorporate the
information contained in such
documentation, with appropriate
citations to data sources.11 Thus, under
final § 40.2(a)(3)(v), registered entities
certifying new products with an
appropriately detailed and cited
‘‘explanation and analysis’’ do not have
to submit supporting documentation.
The submission of an explanation and
analysis is necessary for the
Commission’s review of a new product
certification. The Commission has
encountered numerous instances in
which registered entities provided only
cursory supporting analyses for their
product submissions or, in certain cases,
failed to document the evidentiary basis
for their certifications altogether. The
Commission also has experienced
undue delays in receiving certain
requested information, suggesting that
supporting analyses had not been
prepared by the registered entities as of
the time of request.12 Without prompt
receipt of supporting information, the
staff must expend significant resources
and time to replicate existing analyses
or to otherwise independently establish
a product’s compliance with applicable
law. In addition, the staff frequently has
found it necessary to contact registered
entities for additional guidance on
product submissions. To address these
problems, final § 40.2(a)(3)(v) facilitates
the staff’s review of new products
subsequent to certification while
discouraging unsupported certification
of products in the first instance.13 The
more flexible and substantially revised
provision permits registered entities to
support product certifications in a
manner that may be most effective and
least costly under the circumstances.
The Commission notes that the
explanation and analysis supporting a
product certification requires the
incorporation of information that, in
many cases, is already collected or
reviewed by registered entities. For
11 For example, registered entities could
incorporate a summarized record in the product
explanation and analysis with reference to a Web
site link containing the information relied upon to
establish compliance with applicable law.
12 Staff recently received a number of selfcertified submissions containing insufficient
information for several products, implicating a
number of core principles. Each submission’s
deficiencies were corrected only after numerous
discussions with the Commission’s staff, a process
that exhausted significant resources and time.
13 Moreover, the Dodd-Frank Act’s elimination of
certain exemptions and exclusions relied upon by
currently operating exempt entities may encourage
these entities to register with the Commission,
thereby increasing the number of product
certifications subject to staff review.

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example, registered entities complying
with the guidance and acceptable
practices in the Guideline No. 1
Appendix to part 40 presently must
review and, if necessary, develop the
evidentiary basis for certain
certifications prior to submitting new
products for Commission review.
Moreover, under existing § 40.2(b),
registered entities must, upon receipt of
a staff request, submit this or other
supporting information to substantiate
product submissions. The routine
provision of a concise explanation and
analysis should be no more burdensome
than compliance with existing
regulations requiring registered entities
to collect supporting information and to
further explain and submit such
information upon request.
To further address comments
concerning the perceived burdens of the
product submission requirements, the
Commission also has determined to
streamline the product certification
process for a significant percentage of
swap contracts 14 by permitting DCMs
and SEFs to certify, within a single
submission, one or more swaps without
submitting each swap and its supporting
information to the Commission. To list
a particular swap or a particular number
of swaps through the class certification
provisions of new § 40.2(d), the DCM or
SEF must certify that each of the
individual contracts within the certified
class complies with certain conditions.
A DCM or SEF may submit a class
certification only if each swap within
the certified class of swaps complies
with the conditions specified in
§ 40.2(d)(1)(i)–(iv). First, each swap
within the certified class of swaps must
be based upon an ‘‘excluded
commodity,’’ as defined in § 40.2(d)(1);
these swaps include, for example,
interest rate swaps, swaps on widelyheld and liquid currencies, and swaps
based upon the occurrence or nonoccurrence of certain events or
contingencies. Second, if more than one
swap is included in a single filing under
§ 40.2(d), each particular swap within
the certified class of swaps must be
based upon an excluded commodity
with an identical pricing source and
methodology for calculating reference
prices and payment obligations. This
ensures that DCMs and SEFs
simultaneously certify, for example,
14 According to a recently published report by the
International Organization of Securities
Commissions (‘‘IOSCO’’), interest rate swaps
comprised approximately 77.5% of the total
outstanding notional value of over-the-counter
swaps. Foreign exchange swaps accounted for
another 9.1%. See Technical Committee of IOSCO,
Report on Trading of OTC Derivatives, 1, 6 (Feb. 3,
2011).

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only those interest rate swaps with a
common pricing source—such as
Thomson Reuters on behalf of the
British Bankers’ Association (‘‘BBA’’)—
and a common methodology for
calculating the reference rates for swaps
with varying maturities—such as the
contributor averaging methodology used
to calculate each of the BBA’s fifteen
London Interbank Offer Rates (‘‘LIBOR’’)
for a particular currency. Thus, a DCM
or SEF may class certify (i.e., include in
a single submission under § 40.2) a
number of LIBOR-based interest rate
swaps for a particular currency
notwithstanding the varying underlying
maturities or varying tenors of swaps
within the certified class.
Third, the regulation limits class
certifications to swaps based upon
sources and methodologies that the
Commission previously reviewed in
connection with a certified or approved
futures or swap contract. This ensures
that the Commission had an opportunity
to review the particular pricing source
and methodology used in each of the
swaps within the certified class of
swaps.15 Fourth and finally, each
particular swap within the certified
class of swaps must be based upon an
excluded commodity involving an
identical currency or identical
currencies. For example, a swap based
upon 3-month LIBOR for U.S. Dollars
may not be submitted in the same
submission as a swap based upon the
3-month LIBOR rate for any of the other
9 currencies presently included in the
BBA survey.
To further streamline the new product
submission process, the Commission
also has determined to permit DCOs to
submit products accepted for clearing
under the forthcoming provisions of
§ 39.5. As proposed, the second
provision of § 40.2(a) would have
retained the existing requirement that,
prior to accepting any over-the-counter
product for clearing, a DCO must submit
the new product pursuant to the
provisions of part 40. Comments
submitted in connection with the
proposed process for review of swaps
for mandatory clearing indicated some
confusion about the interplay between
the § 40.2 product submission process
and the § 39.5 submission process for a
mandatory clearing determination. In
light of the introduction of procedures
for a DCO to submit swap products for
a mandatory clearing determination
under § 39.5 and the potential for
confusion as to the interaction between
15 Based upon its experience with § 40.2(d), the
Commission may consider expanding the classes of
commodities eligible for class certification in a
future rulemaking.

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Federal Register / Vol. 76, No. 144 / Wednesday, July 27, 2011 / Rules and Regulations
the two regulatory provisions, the
Commission has reconsidered what
would have been a dual submission
requirement. The Commission therefore
is deleting from § 40.2 the provision
requiring submission of new products
by a DCO.16 A DCO may submit a single
filing in accordance with § 39.5 instead
of submitting two filings—one under
§ 40.2 and one under § 39.5—and the
information required for the § 39.5
submission encompasses the
information that would otherwise be
required under § 40.2. The Commission
believes that this revision will facilitate
the product submission process without
adversely affecting the supervisory
purpose of regulations requiring the
submission of products for Commission
review.
In other comments related to product
certification requirements, registered
entities stated that the price certification
provision in proposed § 40.2(a)(3)(vi)
required unclear or vague certifications
concerning matters unrelated to the
Commission’s core regulatory functions.
CME commented that registered entities
already have sufficient incentives—for
example, avoiding possible litigation—
to ensure that products meet applicable
legal standards. In addition, ICE Futures
commented that the Commission’s
proposal ‘‘exceed[ed] the requirements
contained in [the] Dodd-Frank [Act]’’
and ‘‘inappropriately inject[ed] the
Commission into the commercial and
business practices of registered
entities.’’ In its view, the Commission
should not be the ‘‘business and legal
sounding board for each registered
entity in the area of intellectual property
and other legal conditions.’’ Moreover,
ICE Futures questioned ‘‘whether the
Commission would be properly
positioned to make * * * complex
[intellectual property] determinations’’
as part of the product review process.
The OCC did not object to the price
certification requirement but questioned
whether it served a ‘‘useful purpose.’’
The OCC correctly stated that registered
entities are required to abide by the Act
and the Commission’s regulations,
which contemplate appropriate due
diligence concerning intellectual
property and pricing issues, ‘‘whether or
not [they] give[] * * * a [special]
certification’’ to that effect.
The Commission, in consideration of
these comments, has determined not to
adopt proposed § 40.2(a)(3)(vi). The
Commission recognizes that registered
entities should, and generally are,
sensitive to intellectual property issues
16 DCOs voluntarily seeking prior approval to
clear a new product under § 40.3 may still submit
two filings—one under § 40.3 and one under § 39.5.

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that might arise in the course of
developing a new product and that the
general certification provision in
§ 40.2(a)(3)(iv) captures the more
specific settlement price certification
proposed in § 40.2(a)(3)(vi).17 However,
in light of recent experience, the
Commission disagrees with the
assertion that registered entities,
without exception, sufficiently account
for intellectual property issues when
listing new products for trading. In fact,
a DCM was recently involved in a legal
dispute concerning the use of certain
published third-party prices. Although
the DCM had been facilitating trading in
contracts referencing these prices,
another entity obtained an exclusive
license to use the third party’s prices
and, accordingly, threatened to seek
legal action to enjoin the DCM from
further referencing those prices to cash
settle its products. The DCM ultimately
found an alternative means for
settlement of its existing contracts but
not without some disruption to the
market. The episode highlights the
relevance and necessity of appropriate
due diligence in referencing third-party
prices for purposes of cash settlement.
Market participants should be able to
enter into positions in a newly-certified
contract without concerns that the
registered entity’s use of a particular
price may be subject to legal challenge.
Legal challenges or disputes can be not
only disruptive to the marketplace but
also may undermine confidence in the
futures and derivatives markets.
Moreover, such challenges or disputes
can affect the value of positions taken in
contracts subject to the controversy.
Thus, although the Commission has
determined not to adopt the proposed
pricing certification provisions, it notes
that the staff, in its discretion and as
part of its due diligence reviews of new
product submissions, may request
information under § 40.2(b) concerning
whether a registered entity has obtained
the legal rights to use or reference
proprietary prices, including third-party
index prices, in connection with the
listing or trading of a product.
Registered entities submitting a product
that uses prices published by another
market or that references third-party
prices should include all information
relevant to the cash settlement of the
product with its accompanying
explanation and analysis. In this regard,
a simple statement that the registered
entity has the legal rights to use or
17 Accordingly, implicit in any certification that
a product complies with the Act and the
Commission’s regulations is an assertion that the
submitting entity has the rights to use or reference
a particular price. Filing a false certification could
result in a Commission action under § 40.2(c).

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reference a particular price could
expedite Commission staff review
without imposing a material burden on
either the Commission or registered
entities.
Finally, the Commission notes that
registered entities frequently submit
product ‘‘terms and conditions’’ with
accompanying rules—for example, rules
establishing block trade thresholds—
that, upon the effective date of these
regulations, will be subject to a new rule
certification review process. Such
‘‘rules’’ or ‘‘rule amendments’’
submitted in connection with the listing
or trading of a product, if not included
in the definition of ‘‘terms and
conditions,’’ will not be effective and
cannot be implemented until properly
submitted for Commission review under
§§ 40.5 or 40.6. The Commission also
notes that the ‘‘terms and conditions’’ of
a product, as defined in § 40.1(j), must
be submitted in connection with the
listing or trading of a product and
therefore would become effective one
full business day after the business day
of submission. However, if ‘‘terms and
conditions’’ submitted in connection
with the listing or trading of a particular
contract would amend the existing
terms or conditions of a previously
certified or approved product, such
‘‘terms and conditions’’ must be
certified under § 40.6 or submitted for
approval under § 40.5 as well.
c. Voluntary Submission of New
Products for Commission Review and
Approval (§ 40.3)
For the reasons noted in its
explanation of amendments to § 40.2,
the Commission has determined to
revise its documentation provisions in
proposed § 40.3(a)(4) and to eliminate
the price certification provisions in
proposed § 40.3(a)(9). The amendments
parallel those adopted with respect to
product certifications under § 40.2.
Final § 40.3(a)(4) requires that products
submitted for Commission approval be
accompanied by an explanation and
analysis of the product and its
compliance with applicable law and
either (1) the documentation relied
upon to establish the basis for
compliance with applicable law, or (2)
the information contained within such
documentation, with appropriate
citations to data sources.
The Commission received a comment
concerning its existing regulation
governing staff requests for additional
information under final § 40.3(a)(10).
The OCC commented that the two-day
deadline for responses to requests for
additional information may be
insufficient and impractical in certain
circumstances. It reasoned that

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registered entities generally seek to
provide ‘‘additional materials as soon as
possible in order to expedite the staff’s
review of the new product’’ and that the
regulation’s inflexible deadline
therefore was unnecessary. The OCC
also suggested that the Commission
adopt alternative language to permit
registered entities to ‘‘notify the
Commission’’ that additional time is
‘‘reasonably required to provide the
requested evidence’’ and, in such cases,
to require the submission of this
information no later than ten business
days subsequent to the request, or at the
completion of a longer period specified
by staff.
The Commission has determined that
a longer response period is not
appropriate for the submission of
additional information. The
Commission 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.
In light of the OCC’s comment, however,
the Commission has determined to
amend the final § 40.3(a)(10) to permit,
at the discretion of its staff and upon
receipt of a written request from the
registered entity, an extension of time
for the submission of additional
information.

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d. Amendments to Terms or Conditions
of Enumerated Agricultural Contracts
(§ 40.4)
The Commission has determined to
adopt technical amendments to
§ 40.4(b)(3) to permit registered entities
to implement ‘‘[c]hanges in no
cancellation ranges’’ for enumerated
agricultural contracts without prior
approval, provided these rules are
properly submitted to the Commission
pursuant to § 40.6. Newly-certified
products frequently include terms and
conditions related to ‘‘no cancellation
ranges’’ and the Commission does not
believe it appropriate to delay
implementation of a no cancellation
range for products involving
enumerated agricultural commodities,
especially when those products may be
actively trading through a registered
entity.
e. Voluntary Submission of Rules for
Commission Review and Approval
(§ 40.5)
For the reasons noted below, the
Commission has determined to
eliminate the documentation provision
previously proposed in § 40.5(a)(7), to
revise existing § 40.5(a)(5) to be similar
to final § 40.6(a)(7)(v), and to eliminate
proposed § 40.5(a)(10). The Commission

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notes that the ‘‘explanation and
analysis’’ requirement in final
§ 40.5(a)(5) does not include the
qualifier that the submission be
‘‘concise.’’ The Commission requires
registered entities to provide a more
detailed explanation and analysis of
rules voluntarily submitted for
Commission approval under the
provisions of § 40.5.
f. Self-Certification of Rules (§ 40.6)
The Commission received a number
of comments concerning the proposed
documentation requirement in
§ 40.6(a)(7)(v) and its application to
routine rules and rule amendments. The
OCC, for example, commented that it is
frequently ‘‘obvious’’ that a routine rule
submission complies with applicable
statutory and regulatory provisions and
that the documentation requirement
failed to account for the fact that many
rules warrant the submission of
minimal, if any, supporting
documentation. Similarly, KCBOT
commented that many rule submissions
need be supported only by a ‘‘cursory
review of the rule or rule change in
relation to Commission regulations,’’
with little or no ‘‘significant benefit’’ to
be gained from the collection or
provision of supporting documentation.
Like comments concerning the
submission of documentation in §§ 40.2
and 40.3, a number of comments also
stated that the submission of
documentation in connection with all
new rules and rule amendments would
be burdensome and unlikely to yield
benefits that outweighed costs.
The Commission has determined, in
consideration of these comments, to
eliminate its proposed documentation
requirement in § 40.6(a)(7)(v) and to
insert in its place a requirement that
registered entities provide a ‘‘concise
explanation and analysis’’ of the
‘‘operation, purpose, and effect’’ of
certified rules, consistent with the
existing requirement in § 40.5(a)(5).
Unlike the certification provisions
applicable to new products, the rule
certification provisions of the Act
provide the staff ten-business days to
review new rules and rule amendments
and, if necessary, to prevent them from
becoming effective until staff receives
adequate information from the
submitting entity.18 Registered entities
18 Pursuant to Section 745 of the Dodd-Frank Act,
the Commission has ten-business days to review
rule certifications and to determine whether to stay
certain submissions—including those submitted
with inadequate information—for as many as 90
additional days. Moreover, the Commission’s staff
may request additional information at any time
during the applicable rule review period pursuant
to existing § 40.6(a)(8).

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therefore should have sufficient
incentives to provide adequate
explanations of new submissions under
§ 40.6 without the provision of actual
documentation.19
The ‘‘concise explanation and
analysis’’ will facilitate the
Commission’s review of newly-certified
rules and rule amendments. Registered
entities recently have submitted rule
submissions with only a cursory
explanation of the rule change and a
conclusory statement concerning the
submission’s compliance with core
principles. As a consequence, the staff
frequently has found it necessary to
contact registered entities for additional
guidance on submissions and the
potential implications for compliance
with core principles. The Commission’s
review of the explanation and analysis
will be less burdensome—both for the
Commission and registered entities—
than the current practice of contacting
registered entities to request
explanations and analyses subsequent to
each rule submission.20 Like the
explanation and analysis required for
new product submissions, the
explanation and analysis of certified
rules or rule amendments should be a
19 CME commented that the extended review
period should not be ‘‘mandatorily invoked in the
event a rule submission [is] stayed due to the
provision of inadequate information.’’ In its view,
the public comment period associated with stayed
rules is designed to solicit external perspectives
regarding only ‘‘controversial’’ submissions. The
Commission does not, however, have the authority
to prevent a stayed submission from being subject
to the extended review and public comment
requirements. Section 745 of the Dodd-Frank Act
provides that the Commission’s issuance of a
notification ‘‘shall stay the certification of the new
rule or rule amendment’’ and that ‘‘[t]he
Commission shall provide a not less than 30-day
public comment period.’’ However, the Commission
acknowledges that its authority to issue a
notification of stay in the first instance is
discretionary rather than mandatory. Under
§ 40.6(c), the Commission ‘‘may stay the
certification of a new rule or rule amendment’’ for
the enumerated reasons, but it may also request a
revised submission that would render a notice of
stay unnecessary. Accordingly, the Commission’s
regulations permit—but do not require—a stay of
any submission that omits information that could
‘‘reasonably be deemed important by the
Commission,’’ as noted by FIA.
20 The Commission believes that its final
regulations will conserve both Commission and
registered entity resources. Subsequent to the
effective date of the Dodd-Frank, the Commission
anticipates an increase in the number of new and
amendatory rule submissions implementing the
Dodd-Frank Act and forthcoming regulations, as
well as an increase in the number of registered
entities submitting such rules. Concise explanations
and analyses will assist the Commission’s staff in
conducting its due diligence within the initial 10business-day review period, thereby minimizing
potential delays for registered entities. Moreover,
registered entities presently submit a large number
of rules and rule amendments throughout the year;
CME, for example, noted that it submitted more
than 342 rules in the last calendar year alone.

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Federal Register / Vol. 76, No. 144 / Wednesday, July 27, 2011 / Rules and Regulations
clear and informative—but not
necessarily lengthy—discussion of the
submission, the factors leading to the
adoption of the rule or rule amendment,
and the expected impact of the rule or
rule amendment on the public and
market participants.
In another comment concerning
proposed § 40.6, the FIA encouraged the
Commission to adopt regulations that
would maximize the transparency of the
rule submission process, as well as
account for the expertise of market
participants. The Commission, in
consideration of the FIA’s comment,
intends to continue its practice of
publishing all incoming submissions on
its Web site and will continue
developing a Web portal at cftc.gov that,
once completed, should expedite both
Commission and public review of
submissions.21 The Commission also
intends to facilitate public comment by
enabling interested parties to submit
comments directly from the submissions
page on the Commission’s Web site. As
noted in the notice of proposed
rulemaking, the Commission presently
is working on enhancements to its Web
site and information technology systems
that will, among other things, enable the
Commission to promptly inform the
public of rule submissions and stays of
rule submissions. The Commission also
intends to continue using its current
ability to provide notice through e-mail
notifications and RSS feeds to those
who choose to sign-up for them.
The Commission would like to note
that the ‘‘industry filings’’ tab on the
Commission’s Web site currently
consolidates all filings onto a single
Web page and posts them for public
review with a brief explanation of the
rule or rule amendment. Market
participants and the public can click on
a link within this Web page and access
all rule filings by registered entities.
Thus, although the Commission does
not intend to publish a ‘‘daily rule
digest,’’ as suggested by the FIA, all
market participants currently have and
will continue to have access to
submissions in an organized format,
which will be complemented by the
‘‘concise explanation and analysis’’
accompanying each submission.
The FIA also commented that, with
respect to rules submitted in response to
an emergency pursuant to § 40.6(a)(6),
the Commission should not limit the
ability of registered entities ‘‘to respond
as may be necessary to the unforeseen
21 Given the short time period for the
Commission’s review, the Commission agrees with
FIA that immediate Web site notice is ‘‘a far
superior alternative to waiting several days for
Federal Register publication of the rule or product
filing.’’

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circumstances of an emergency
situation.’’ The FIA expressed concerns,
however, that a registered entity could
potentially ‘‘cite an emergency event as
the grounds for a fundamental
recasting’’ of regulatory responsibilities.
The Commission agrees that registered
entities must be able to respond flexibly
and decisively to emergencies. In
addition, the Commission acknowledges
the possibility that a registered entity
could attempt to immediately
implement a rule and bypass the rule
certification process by asserting that
the rule is in response to an emergency.
The final regulations accordingly clarify
that registered entities are required to
certify any rule implemented in
response to an emergency under the
procedures set forth in § 40.6. The staff
will review such certifications for
compliance with applicable law in
situations where the rule, by necessity,
has been implemented and in situations
where the rule is intended for
implementation prior to the completion
of the 10-business-day review period. In
either situation, the staff may permit the
registered entity’s rule to remain
effective or it may determine that the
implemented rule should be stayed for
an extended review.22
The Commission is adopting three
revisions to its proposed regulations in
§ 40.6. First, the price certification in
proposed § 40.6(a)(7)(viii) has been
eliminated for the reasons discussed in
connection with revisions to proposed
§§ 40.2(a)(3)(vi), 40.3(a)(9), and
40.5(a)(10). Second, the Commission, in
consideration of comments from both
CME and OCX, has determined to
amend § 40.6(a) to make rules delisting
or withdrawing the certification of
products effective upon submission to
the Commission. The Commission
agrees that such submissions should be
exempt from the 10-business-day review
period in order to avoid complicating
the delisting of the product by providing
market participants an opportunity to
enter into contracts between the time
period of submission and the effective
date of the rule.23 Finally, the
22 The Commission’s staff may stay a rule or rule
amendment implemented in response to an
emergency for the same reasons that it may stay
other rules or rule amendments submitted pursuant
to the procedures in part 40. Specifically, the staff
may stay the rule for an extended review if the
submission insufficiently explains the emergency or
the registered entity’s response, presents novel or
complex issues warranting further consideration, or
is potentially inconsistent with the Act or
regulations thereunder.
23 The Commission has the discretion to permit
certain rules to become effective prior to the
expiration of the 10-business-day rule review
period, provided it establishes the effective date of
such rules by rule or regulation. See Section 5c(c)(2)

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Commission, in response to a comment
from the OCC, is retaining the existing
language in § 40.6(d) that permits
certain non-substantive rules to take
effect without certification to the
Commission.
g. Delegations (§ 40.7)
The Commission is correcting a
typographical error that appeared in
proposed § 40.7(a)(1) by replacing the
reference to ‘‘§ 40.5(c)(1)(B)’’ with a
reference to ‘‘§ 40.5(c)(1)(ii).’’
h. Availability of Public Information
(§ 40.8)
The Commission has determined to
adopt technical amendments to § 40.8 to
reflect possible changes in the
designation or registration application
procedures for DCMs, SEFs, DCOs and
SDRs.24 Specifically, § 40.8(a) will make
public the following: (1) The transmittal
letter and first page of the ‘‘cover sheet’’
of applications; (2) the applicant’s
regulatory ‘‘compliance chart;’’ and (3)
the ‘‘narrative summary’’ of the
applicant’s proposed activities.’’ 25
i. Special Certification Procedures for
Submission of Rules by Systemically
Important Derivatives Clearing
Organizations (§ 40.10)
CME, FIA, LCH, and OCC submitted
comments regarding the Commission’s
proposed regulations to implement
Section 806 of the Dodd-Frank Act.
Section 806 requires a financial market
utility that has been designated by the
Financial Stability Oversight Council
(‘‘FSOC’’) to be systemically important
to provide its Supervisory Agency with
60 days advance notice of any proposed
changes to rules, procedures, or
operations that could materially affect
the nature or level of risks presented by
the financial market utility. Section
40.10 sets forth implementing
requirements for SIDCOs.
Proposed § 40.10(a) required that all
SIDCOs provide 60 days advance notice
to the Commission in accordance with
Section 806 of the Dodd-Frank Act. In
a separate proposed rulemaking, the
Commission proposed to define a
‘‘systemically important derivatives
clearing organization’’ to mean a
‘‘financial market utility that is a
derivatives clearing organization
registered under section 5b of the Act (7
U.S.C. 7a–1), which has been designated
by the FSOC to be systemically
of the Act, as amended by Section 745(b) of the
Dodd-Frank Act.
24 See, e.g., 76 FR 3698 (Jan. 20, 2011) (proposing
revisions to DCO application procedures).
25 See id. at 3718 (proposing a parallel public
information provision in § 39.3(a)(5)).

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important.’’ 26 Under this definition, a
DCO could be a SIDCO even if the
Commission was not its Supervisory
Agency and, as an unintended result,
proposed § 40.10 would require such a
DCO to provide advance notice to the
Commission.
OCC pointed out this issue, noting
that the authority for § 40.10(a) is
Section 806(e)(1)(A) of the Dodd-Frank
Act, which requires a systemically
important financial market utility to
provide 60 days advance notice to ‘‘its
Supervisory Agency.’’ Under Section
803(8)(B) of the Dodd-Frank Act, there
can be only one Supervisory Agency for
a financial market utility designated as
systemically important.27
The Commission recognizes that some
DCOs, like OCC, may be regulated by
more than one Federal agency. In the
case of OCC, if it were designated as a
systemically important financial market
utility, it is possible that it would be so
designated because of its activities as a
securities clearing agency, not because
of its activities as a DCO. Accordingly,
the SEC, not the Commission, would
likely be its Supervisory Agency.
OCC recommended revising the
language in § 40.10(a) to clarify that
advance notice to the Commission
would be required only for DCOs for
which the Commission is the
Supervisory Agency.28 Although the
Commission is adopting § 40.10(a) as
proposed, it intends to act on OCC’s
suggestion by revising the definition of
‘‘systemically important derivatives
clearing organization’’ in a future final
rulemaking to clarify that a SIDCO is a
financial market utility that has been
designated by the FSOC to be
systemically important and for which
the Commission acts as its Supervisory
Agency pursuant to section 803(8) of the
Dodd-Frank Act. This clarification will
address the issue raised by OCC in
connection with § 40.10 and will serve
26 See

75 FR 77576, 77586 (Dec. 13, 2010).
803(8)(B) provides as follows:
‘‘Multiple Agency Jurisdiction: If a designated
financial market is subject to the jurisdictional
supervision of more than 1 agency listed in
subparagraph (A), then such agencies should agree
on 1 agency to act as the Supervisory Agency, and
if such agencies cannot agree on which agency has
primary jurisdiction, the Council shall decide
which agency is the Supervisory Agency for
purposes of this title.’’
28 OCC suggested revising § 40.10(a) to read, in
relevant part: ‘‘A registered derivatives clearing
organization that has been designated by the
Financial Stability Oversight Council as a
systemically important derivatives clearing
organization and for which the Commission acts as
the Supervisory Agency pursuant to Section 803(8)
of the Dodd-Frank Wall Street Reform and
Consumer Protection Act shall provide notice to the
Commission * * *’’ See OCC letter at 7.

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to clarify the scope of any other
regulations relating to SIDCOs.
Proposed § 40.10(a) required a SIDCO
to notify the Commission of a change in
rules, procedures, or operations that
could materially affect the nature or
level of risks presented by the SIDCO.
OCC and CME commented that a SIDCO
would be required to notify the
Commission of proposed changes that
could decrease the nature or level of
risk in addition to changes that could
increase the nature or level of risk. OCC
does not believe that a SIDCO should be
required to report a change that could
materially reduce risk under § 40.10
because the proposed change would be
subject to a 60-day ‘‘waiting period,’’
and the goal of reducing risk is not
served by requiring that such a change
be subject to delay.
Similarly, CME expressed the view
that the Dodd-Frank Act does not
provide the Commission with authority
to impose a 60-day advance notice
requirement for changes in rules,
procedures, or operations that could
improve the operations of a SIDCO, and
it believes the Commission should
exercise its authority over risk-reducing
changes under the certification
procedures of § 40.6.
OCC and CME proposed that the
Commission change § 40.10(a) to cover
only a proposed change in rules,
procedures, or operations that could
have a materially adverse impact on
risk. The Commission has determined
not to adopt this suggested revision for
the reasons discussed below.
As a preliminary matter, the DoddFrank Act does not distinguish between
a change that could materially increase
or decrease the nature or level of risks
presented by a SIDCO. Although
Congress could reasonably have
expected that risk-related changes are
almost always intended to reduce risk,
it required advance notice of ‘‘any’’
change that could ‘‘affect’’ risk and did
not limit Section 806 to only those
instances where a change could increase
risk. Moreover, the purpose of advance
notice is to assist the Commission in
monitoring systemic risk and in seeing
that SIDCOs effectively manage risk in
furtherance of compliance with the core
principles. The Commission
acknowledges that requiring a SIDCO to
notify the Commission under § 40.10 of
a change that could materially reduce
risk could delay the time when that
change becomes effective. However, a
proposed change that could materially
reduce risk in certain respects also
could materially increase risk in other
respects, and a SIDCO and the
Commission might come to different
conclusions when evaluating whether a

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particular change could increase or
decrease risk, overall. For example, a
SIDCO could reduce risk by requiring
heightened membership requirements,
but this might also reduce the number
of clearing members and therefore
increase concentration of risk. As a
practical matter, even for ostensibly
risk-reducing changes, there may be
adverse consequences that the
Commission should have the
opportunity to consider in the time
frame set forth in Section 806 of the
Dodd-Frank Act.
The Commission notes that, as
proposed, § 40.10(g) provides that a
SIDCO may implement a change in less
than 60 days from the date the
Commission receives the notice of
proposed change or the date the
Commission receives any further
information it has requested, if the
Commission notifies the SIDCO in
writing that it does not object to the
proposed change and authorizes
implementation of the change on an
earlier date, subject to any conditions
imposed by the Commission. To further
address the concerns expressed by the
commenters, the Commission is adding
a new paragraph (a)(3) that provides that
a SIDCO may request that the
Commission expedite the review on the
grounds that the change would
materially decrease risk. The
Commission, in its discretion, may
expedite the review and, pursuant to
paragraph (g) of this section, notify the
SIDCO in less than 60 days.
The concern that § 40.10 prevents a
SIDCO from instituting a risk-reducing
change in less than 60 days may be
overstated. Section 40.10(g) allows a
SIDCO to implement a change in less
than 60 days if the Commission notifies
the SIDCO in writing that it does not
object to the change. Moreover, unless
an emergency exists, it is unlikely the
market would be significantly harmed if
implementation of the change were
delayed for more than 10 days, which is
the basic time period for the
Commission’s review of certified rules
under § 40.6.
Proposed § 40.10(h) required a SIDCO
to provide notice to the Commission of
an emergency change no later than 24
hours after implementation of the
change.29 Among other things, the
proposed rule required the notification
to include the information set forth in
proposed § 40.10(a). OCC commented
that it is not practical to require a
SIDCO’s emergency filing to conform to
the requirements of § 40.10(a) within 24
29 This standard is consistent with the 24-hour
requirement for emergency rule certifications under
§ 40.6(a)(6).

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hours of implementing the change. OCC
proposed a two-stage approach whereby
the SIDCO would file an initial notice
within 24 hours of the change and
would submit a more extensive filing
conforming to § 40.10(a) as soon as
reasonably practicable thereafter, but in
any event not more than 30 days after
implementation of the change.
The Commission notes that
§ 40.10(h)(1) codifies Section
806(e)(2)(B) of the Dodd-Frank Act,
which requires that the emergency
notice be provided as soon as
practicable and no later than 24 hours
after implementation of the change.
Section 40.10(h)(2) codifies Section
806(e)(2)(C), which requires that the
notice contain the information that must
be submitted for changes subject to
advance notice, plus a description of the
nature of the emergency and the reason
the change was necessary for the SIDCO
to continue to provide its services in a
safe and sound manner. These
provisions do not provide for partial or
late submissions, as suggested by OCC.
However, the Commission believes that
it can adequately address the concern
expressed by OCC.
As proposed, § 40.10(a) required a
SIDCO to provide the information
required by proposed § 40.6(a)(7) within
24 hours. OCC singled out the
documentation requirement in proposed
§ 40.6(a)(7)(v) as one that would be
difficult to satisfy within 24 hours. As
discussed above, that provision, as
adopted herein, has been revised to
significantly reduce the perceived
burden of the proposed rule, and the
Commission believes that a SIDCO
should be able to provide the required
‘‘concise explanation and analysis,’’ as
well as other required information
within 24 hours.
LCH observed that the Commission
may require modification or rescission
of an emergency change if it finds that
the change is not consistent with the
Act or the Commission’s regulations.
According to LCH, this could lead to
legal uncertainty regarding activities
undertaken while the emergency change
is in effect. As a result, LCH proposed
that the Commission revise § 40.10(h)(3)
by adding a provision to immunize from
legal challenge any action taken by a
SIDCO pursuant to an emergency
change that is later modified or
rescinded by the Commission.30 The
30 LCH proposed that the Commission add the
following language adapted from Section 739 of the
Dodd-Frank Act (regarding swaps): ‘‘* * *
However, no modification or rescission shall
retroactively affect the enforceability of any power
exercised by the SIDCO, nor shall any agreement,
contract or transaction entered into by the SIDCO
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Commission is not taking further action
on LCH’s suggestion because it believes
that the existing enforceability
provisions in § 39.6 of the Commission’s
regulations adequately address the
concern expressed by LCH.31
In the notice of proposed rulemaking,
the Commission solicited comment as to
whether there are any changes a SIDCO
should be prohibited from adopting on
an emergency basis. FIA and CME did
not favor imposing any restrictions on a
SIDCO’s response to an emergency.
CME also noted that a DCO does not
have unfettered discretion to act in an
emergency situation. Rather, a DCO’s
ability to act is limited by the
emergency rules and procedures that
have been vetted previously by the
Commission.32 The Commission agrees
that there should not be any express
limitation on the type of actions that a
SIDCO can take in responding to an
emergency, primarily because it is
difficult to pre-judge the permissibility
of an emergency action taken in the
context of particular circumstances.
Finally, the Commission is making a
technical revision to the proposed
§ 40.10(a)(2) requirement that
concurrent with providing the
Commission with the advance notice or
any request or other information related
to the advance notice, the SIDCO
provide the Board of Governors of the
Federal Reserve System (‘‘Board’’) with
a copy of the submission. The
Commission is adding the instruction
that such notice, request or other
information must be filed in the same
format and manner as the Board
requires for those designated financial
SIDCO of any emergency change, be void, voidable,
or unenforceable, and no party to such agreement,
contract, or transaction shall be entitled to rescind,
or recover, any payment made with respect to, the
agreement, contract, or transaction under this
section or any other provision of Federal or State
law.’’
31 Section 39.6 provides as follows:
An agreement, contract or transaction submitted
to a derivatives clearing organization for clearance
shall not be void, voidable, subject to rescission, or
otherwise invalidated or rendered unenforceable as
a result of:
(a) A violation by the derivatives clearing
organization of the provisions of the Act or of
Commission regulations; or
(b) Any Commission proceeding to alter or
supplement a rule under section 8a(7) of the Act,
to declare an emergency under section 8a(9) of the
Act, or any other proceeding the effect of which is
to alter, supplement, or require a derivatives
clearing organization to adopt a specific rule or
procedure, or to take or refrain from taking a
specific action. See also § 38.6 (comparable
enforceability provisions for DCMs); and proposed
§ 37.6, 76 FR 1214, 1240 (Jan. 7, 2011) (comparable
enforceability provisions for SEFs).
32 Under proposed § 40.6(a)(6), new rules or rule
amendments that establish standards for responding
to an emergency must be submitted pursuant to
§ 40.6.

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44785

market utilities for which it is the
Supervisory Agency pursuant to section
803(8) of the Dodd-Frank Act.
j. Review of Event Contracts Based Upon
Certain Excluded Commodities (§ 40.11)
Pursuant to Section 745(b) of the
Dodd-Frank Act, the Commission
proposed § 40.11(a)(1) to prohibit the
listing of certain contracts involving
terrorism, assassination, war, gaming, or
activities that are unlawful under any
State or Federal law. The CME
commented that the term ‘‘gaming’’
should be further defined to ensure that
registered entities do not confront
difficult legal questions with respect to
the applicability of the ‘‘gaming’’
prohibition in § 40.11(a)(1). In this
regard, the CME noted that the courts
have struggled to arrive at an
appropriate legal definition for
‘‘gaming’’ for many years and that the
Commission’s prohibition on contracts
involving ‘‘gaming’’ could introduce
uncertainty into the markets.
The Commission agrees that the term
‘‘gaming’’ requires further clarification
and that the term is not susceptible to
easy definition. Indeed, in its ‘‘Concept
Release on the Appropriate Regulatory
Treatment of Event Contracts,’’ the
Commission solicited public comments
on the best approach for addressing the
‘‘the potential gaming aspects of some
event contracts and the potential preemption of state laws.’’ 33 The
Commission received a number of
responses to its concept release,
including several comments articulating
bases for distinguishing trading in
contracts linked to the occurrence (or
non-occurrence) of events and
participation in traditional ‘‘gaming’’
activities. The Commission continues to
consider these comments and may issue
a future rulemaking concerning the
appropriate regulatory treatment of
‘‘event contracts,’’ including those
involving ‘‘gaming.’’ In the meantime,
the Commission has determined to
prohibit contracts based upon the
activities enumerated in Section 745 of
the Dodd-Frank Act and to consider
individual product submissions on a
case-by-case basis under § 40.2 or § 40.3.
The Commission would like to note
that registered entities may receive a
definitive resolution of any questions
concerning the applicability of
§ 40.11(a)(1) by submitting a particular
product for Commission approval under
to § 40.3. If the submitted product is
approved, the registered entity may list
it for trading or clearing with an
33 Concept Release on the Appropriate Regulatory
Treatment of Event Contracts, 73 FR 25669, 25670
(May 7, 2008).

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assurance that the Commission
reviewed and did not object to the
submission based on the prohibitions in
§ 40.11(a). In addition, registered
entities may always certify products
pursuant to the procedures in § 40.2. If
the Commission determines during its
review of a product that the submission
may violate the prohibitions in
§ 40.11(a)(1)–(2), the Commission may
request that the registered entity
suspend the trading or clearing of the
contract pending the completion of a 90day extended review. Upon the
completion of that review, the
Commission must issue an order,
pursuant to Section 745(b) of the DoddFrank Act, finding either that the
product violates or does not violate the
prohibitions in § 40.11(a)(1)–(2).
The Commission’s staff also may, at
its discretion and upon a request from
a registered entity, review a draft
product submission or proposal and
provide guidance concerning the
product’s compliance with core
principles and § 40.11(a). The
Commission would like to note,
however, that the staff’s guidance
concerning drafts and proposals is
preliminary and non-binding. The staff
formally reviews products only at such
time as a compliant submission is
provided to the Commission pursuant to
§ 40.2 or § 40.3.
Finally, the Commission would like to
note that its prohibition of certain
‘‘gaming’’ contracts is consistent with
Congress’s intent to ‘‘prevent gambling
through the futures markets’’ 34 and to
‘‘protect the public interest from gaming
and other events contracts.’’ 35 The
Commission may, at some future time,
adopt regulations that prohibit products
that are based upon activities ‘‘similar
to’’ those enumerated in Section 745 of
the Dodd-Frank Act. It has determined
not to propose such regulations at this
time.

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k. Staying of Certification and Tolling of
Review Period Pending Jurisdictional
Determination (§ 40.12)
The OCC objected to the
Commission’s use of the term
‘‘derivative’’ in proposed § 40.12(a)(1),
which, the Commission agrees, is an
undefined term encompassing products
within the jurisdiction of both the SEC
and the Commission. The Commission
therefore has determined to delete the
34 Congressional Record—Senate, S5906 (July 15,
2010).
35 Id. Senator Lincoln, in a colloquy with Senator
Feinstein, emphasized that the Commission ‘‘needs
the power to, and should, prevent derivatives
contracts that are contrary to the public interest
because they exist predominantly to enable
gambling through supposed event contracts.’’

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word ‘‘a derivative’’ from § 40.12(a)(1)
and to insert in its place ‘‘a contract for
the sale of a commodity for future
delivery (or an option on such contract
or an option on a commodity).’’ The
final regulation thereby codifies the
Dodd-Frank Act’s provisions concerning
‘‘novel derivative products having
elements of both securities and
contracts for the sale of a commodity for
future delivery (or options on such
contracts or options on commodities).’’
In addition, the Commission has
determined to limit the application of
§ 40.12 to only those novel agreements,
transactions, or contracts that are not
subject to a separate process for
requesting interpretations of the
characterization of swaps, securitybased swaps, and mixed swaps pursuant
to § 1.8 of this chapter.36
The Commission also is amending
proposed § 40.12(b) to clarify that the
receipt of a request for a jurisdictional
determination ‘‘tolls’’ both the
applicable product certification and the
applicable approval review period until
the issuance of a final determination. In
this regard, the Commission has
determined to insert ‘‘shall be stayed’’
after ‘‘the product certification,’’ which
more appropriately characterizes the
Commission’s action with respect to
certified products and distinguishes that
action from the suspension of the
approval review period under § 40.3.37
Similarly, in § 40.12(b)(2), the
Commission has determined to clarify
that the stay shall be withdrawn and
that the submission review period shall
resume upon the issuance of a final
determination order finding that the
Commission has jurisdiction over the
submission.
36 See Further Definition of ‘‘Swap,’’ ‘‘SecurityBased Swap,’’ and ‘‘Security-Based Swap
Agreement;’’ Mixed Swaps; Security-Based Swap
Agreement Recordkeeping, 76 FR 29818 (May 23,
2011).
37 Section 717(d) of the Dodd-Frank Act amended
Section 5c(c)(1) of the Act to ‘‘stay the certification
of a product pending a determination by the
Commission upon a request of the Securities and
Exchange Commission * * * that the Commission
issue a determination as to whether’’ a novel
derivative product is within the jurisdiction of the
Commission. However, Section 745 of the DoddFrank Act amended the Act by striking Section 5c
in its entirety and inserting language that did not
include the stay provision in Section 717(d) of the
Dodd-Frank Act. The Commission would like to
clarify that the stay provisions adopted in final
§ 40.12 of its regulations do not give effect to the
stay provisions in Section 717(d) of the Dodd-Frank
Act, given inconsistent amendments to Section
5c(c). The Commission is adopting its stay
provisions pursuant to its Section 8a(5) authority to
‘‘make and promulgate such rules and regulations
as, in the judgment of the Commission, are
reasonably necessary to effectuate any of the
provisions or to accomplish any purposes of the
Act.’’

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The Commission would like to note
that the suspension of a product’s
certification would permit continued
trading for liquidation purposes. That is,
the stay of certification under § 40.12
would not prevent market participants
from entering into positions that offset
others taken while the product
certification remained in effect. The
Commission will provide to the
registered entity a written notice of stay
pending issuance of a final
determination order by the
Commission.38
Finally, the Commission notes that
Section 718(a)(2) of the Dodd-Frank Act
provides the Commission explicit
authority to request a jurisdictional
determination concerning a novel
derivative product 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) at any time
subsequent to the effective date of a
product containing such elements,
provided no notice of a novel derivative
product filing has been received from
the SEC pursuant to Section 718(a)(1) of
the Dodd-Frank Act.
III. Cost-Benefit Considerations
Section 15(a) of the Act requires the
Commission to ‘‘consider the costs and
benefits’’ of its actions before
promulgating a regulation.39 In
particular, these costs and benefits must
be evaluated in light of five broad areas
of market and public concern: (1)
Protection of market participants and
the public; (2) efficiency,
competitiveness, and financial integrity
of futures markets; (3) price discovery;
(4) sound risk management practices;
and (5) other public interest
considerations. In conducting its
analysis, the Commission may, in its
discretion, give greater weight to any
one of the five enumerated areas and it
may determine that, notwithstanding
costs, a particular rule is necessary to
protect the public interest or to
effectuate any of the provisions or to
accomplish any of the purposes of the
Act.40
Certain of the regulations
promulgated in this final rule are
mandated by the Act, as amended by the
Dodd-Frank Act, and, for those
38 A final determination, for purposes of
§ 40.12(b) of this part, shall be a determination
order issued pursuant to Section 718(a)(3) of the
Dodd-Frank Act.
39 7 U.S.C. 19(a).
40 See, e.g., Fisherman’s Doc Co-op., Inc v. Brown,
75 F.3d 164 (4th Cir. 1996); Center for Auto Safety
v. Peck, 751 F.2d 1336 (DC Cir. 1985) (noting that
an agency has discretion to weigh factors in
undertaking cost-benefit analysis).

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Federal Register / Vol. 76, No. 144 / Wednesday, July 27, 2011 / Rules and Regulations
provisions, the Commission does not
have the authority to consider
alternatives to the statute’s prescribed
procedures. For example, the final
regulations implement, among other
provisions, Section 745 of the DoddFrank Act, which specifies new
procedures for the submission of certain
rules and rule amendments and new
default timelines for the Commission’s
review of rule submissions. Many of
these new procedures—for example, the
30-day public comment period
following the stay of a submitted rule—
are statutorily mandated and the
Commission’s final regulations have
been drafted to remain within the
confines of the enabling language.
Similarly, the Commission’s SIDCO
provisions, in large part, codify the
procedures established by Section 806
of the Dodd-Frank Act. For those final
regulations not mandated by the DoddFrank Act, the Commission has adopted
the least-cost alternative consistent with
achieving the purposes of the Act.
The Commission invited but did not
receive public comments specific to its
cost-benefit discussion within the initial
comment period following the
Commission’s proposal. 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 general comments
on the ‘‘burden’’ associated with the
documentation and pricing source
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. However, none of these comments
suggested feasible alternatives to the
statutory mandate. Nor did such
comments show how and to what extent
those burdens would be increased by
the implementing proposal.
In a comment concerning the
Commission’s cost-benefit analysis, the
CME stated that the CFMA streamlined
the product and rule submission process
to eliminate the ‘‘substantial
unnecessary paperwork’’ previously
required to be submitted to the
Commission. In the CME’s view, the
documentation and pricing source
certification requirements effectively
reinstated the pre-CFMA submission
process by mandating that registered
entities submit ‘‘massive amounts of
documentation’’ for Commission

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review. In addition, CME stated that the
part 40 proposal’s cost-benefit
discussion did not ‘‘acknowledge that a
fully-functional and less costly system
of self-certification is already in place’’
and that the Commission failed to
justify what CME characterized as
‘‘onerous requirements’’ with few public
benefits. CME also stated that the
Commission’s proposal did not ‘‘address
any actual costs’’ to industry, including
‘‘the cost of compiling all
documentation relied upon to determine
whether a new product, new rule or rule
amendment complies with the Core
Principles’’ and the costs of ‘‘enabl[ing]
foreign competitors’’ to introduce
products that compete with domestic
DCM product innovations.
The Commission, after consideration
of the public interest factors specified in
section 15(a) of the Act, has determined,
as set forth below, that the costs
associated with its final regulations will
not have a material effect on the
efficiency, competitiveness, and
financial integrity of the futures and
swaps markets and should substantially
benefit registered entities by facilitating
and expediting the Commission’s
review of product and rule submissions.
The Commission has considered the
costs and benefits of its regulations
throughout the preamble and generally
views the related matters section of this
final rulemaking to be an extension of
that discussion. Estimates pursuant to
the Paperwork Reduction Act are a
subset of and incorporated into the
overall compliance costs associated
with final part 40.
The Commission’s final regulations
address the relevant areas of market and
public concern specified in section 15(a)
of the Act. Specifically, the
Commission’s certification and approval
procedures ensure that registered
entities do not enact rules that, among
other things, harm market participants
or the public, result in unreasonable
restraints of trade or material
anticompetitive burdens on trading, or
have other effects that are detrimental to
the public interest. In addition, the
special certification procedures for
SIDCOs and certain event contracts
implement Sections 806 and 745 of the
Dodd-Frank Act, respectively, and
ensure that the Commission has
adequate time and information to
analyze certain risk-related rules and
novel products based upon certain
excluded commodities. The SIDCO
notice requirement is important to the
Commission’s oversight of sound risk
management practices and to its efforts
to monitor and mitigate systemic risks.
The proposed event contract provisions,
consistent with the intent of Congress,

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prevent individuals from speculating on
activities that are potentially harmful to
national security or detrimental to the
stability of the futures markets. Finally,
the ‘‘concise explanation and analysis’’
required for the submission of new
products is a less-costly alternative to
the Commission’s proposed
documentation requirement and will
assist the Commission in protecting the
price discovery function of the markets.
The final certification and approval
procedures are necessary to fulfill the
requirements of the Dodd-Frank Act, to
protect market participants, to enhance
the Commission’s administration of the
Act, and to ensure the continued
competitiveness and financial integrity
of the futures and swaps markets.
Moreover, in response to public
comments and after consultations with
market participants and prudential
regulators, the proposed rules have been
amended to implement, where possible,
a less costly alternative that achieves the
statutory objectives of the Act, as
amended by the Dodd-Frank Act.
With respect to costs, the Commission
recognizes that its final regulations may
increase compliance costs by requiring
the submission of a ‘‘concise
explanation and analysis’’ and by
requiring registered entities to certify
that they posted the complete
submission on the registered entity’s
Web site at the time of filing. The
Commission believes that these costs
will be de minimis. A ‘‘concise
explanation and analysis’’ should be a
clear and informative—but not
necessarily lengthy—description of the
product or rule and its implications for
compliance with applicable law.
Moreover, the explanation and analysis
incorporates information that is, in
many cases, already required to be
reviewed or collected by registered
entities. A concise description and
examination of the submission should
impose minimal costs on registered
entities, because it requires the
registered entity merely to memorialize
its due diligence in certifying
compliance with applicable law. Posting
this information on the registered
entity’s Web site should be as simple as
providing an electronic copy of the
submission to appropriate personnel.
All current registered entities maintain
a Web site and therefore this new
requirement may increase the overall
cost, if at all, by only a negligible
margin.
In addition, the proposed price
certification provisions are not being
adopted and the proposed
documentation provisions have been
revised—and, in some cases, removed
from the final regulations—to permit

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registered entities more flexibility in
complying with the Act and
Commission’s regulations, to reduce
potential administrative and compliance
costs, and to adopt, where possible, less
burdensome alternatives to the
Commission’s proposal. For example,
under the Commission’s final product
submission regulations, registered
entities, including CME, are not
required to submit ‘‘massive amounts of
documentation’’ with their new product
submissions. Instead, as suggested by
ICE Futures, the Commission will allow
registered entities to submit an
explanation and analysis of the product
with the information contained in such
documentation and citations to relevant
data sources. Moreover, the Commission
finds that the submission of an
explanation and analysis is necessary
for its review of product and rule
certifications. Although CME correctly
notes that self-certification regime has
been retained under the Act, as
amended by the Dodd-Frank Act, the
Commission has encountered numerous
instances in which registered entities
provided only cursory supporting
analyses for their product submissions
or, in certain cases, failed to document
the evidentiary basis for their
certifications altogether. As discussed in
the preamble, the staff must expend
significant resources and time to
replicate existing analyses or to
otherwise independently establish a
product’s compliance with applicable
law when submissions are not
adequately explained or supported by
registered entities.
With respect to the new SIDCO
provisions in § 40.10, the cost of
creating the advance notice will not be
substantial. A SIDCO should have this
information prior to determining
whether to implement a change and,
consequently, the marginal cost of
drafting and submitting the notice will
be small. On the other hand, the
Commission believes that the benefit of
this information is significant because it
is necessary to assess the effect that the
proposed change would have on the
nature or level of risks. The final
provisions of § 40.10 parallel the
requirements of the Dodd-Frank Act.
The Commission’s proposal effectively
mirrors the enabling provisions of the
statute and, accordingly, the
Commission’s ability to revise the
proposed requirements is limited.
As discussed above, advance notice of
all changes that materially impact risk—
increasing or decreasing risk—is
necessary for the Commission to
monitor systemic risk and to see that
SIDCOs effectively manage risk in
furtherance of compliance with the core

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principles. The Commission
acknowledges that requiring a SIDCO to
notify the Commission under § 40.10 of
a change that could materially reduce
risk could delay the time when that
change becomes effective. However,
even for ostensibly risk-reducing
changes, there may be adverse
consequences that the Commission
should have the opportunity to consider
in the time frame set forth in Section
806 of the Dodd-Frank Act.
Moreover, the Commission and the
Board have statutory obligations to
review proposed changes to SIDCO
rules, procedures and operations that
materially impact risks and Section 806
of the Dodd-Frank Act mandates the
time period for review. The Commission
also notes that, in appropriate cases, the
staff may permit a risk-related rule to
become effective prior to the expiration
of the 60-day notice period.
The costs associated with the
emergency notice required in § 40.10(h)
are similarly minimal and include the
cost of drafting and submitting the
notice and any cost associated with the
possibility that the Commission could
rescind or modify the emergency
change. There also may be a cost of
requiring notice within 24 hours;
however, section 806(e)(2)(B) of the
Dodd-Frank Act mandates notices be
provided within this timeframe. The
substantive requirements of the notice
provisions also are outlined by section
806(e)(2)(C) of the Dodd-Frank Act and,
as explained above, the Commission
believes that the cost of providing the
information required for an advance
notice will be small. The marginal cost
of providing additional information
concerning an emergency notice should
be similarly small because a SIDCO will
already know the nature of the
emergency and will have determined
that the change was necessary for the
SIDCO to continue to provide its
services in a safe and sound manner
prior to implementing the emergency
change. The Commission believes that
the information is necessary for it to
review an emergency change.
Having considered the costs of its
proposal, the Commission is adopting
these final regulations, including
changes to the proposed regulations as
summarized below, to further reduce
the information collection burdens on
and associated costs for registered
entities as follows:
• The Commission is revising 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;

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• The Commission is amending § 40.2
to apply only to DCMs and SEFs and
intends to implement new product
clearing submission requirements in a
new § 39.5 (in a separate rulemaking);
• The Commission is eliminating the
documentation requirements in § 40.5
and § 40.6;
• The Commission is providing new
provisions for class certifications of
certain swaps;
• The Commission is amending
§ 40.6(a) to make effective upon
submission rules delisting or
withdrawing the certification of
products;
• The Commission is eliminating the
proposed certification requirement
concerning the use of third-party prices;
• The Commission is eliminating 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 is limiting the
application of § 40.12 to novel
derivative products that are not subject
to the forthcoming provisions of § 1.8.
The resulting final rules should
impose significantly lower costs on
registered entities than the proposed
rules. The average annual burden for the
70 anticipated registered entities may be
reduced by more than one-third in
comparison to the initial proposed
requirements—from an estimated 324
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 parttime staff person to handle new
requirements related to product and rule
submissions to the Commission; the
total time cost may be as little as four
hours per week per registered entity.
Thus, the Commission has determined
that these final regulations are necessary
to enable the Commission to perform its
oversight functions and to carry out its
statutory responsibilities under the Act.
IV. Related Matters
a. Regulatory Flexibility Act
The Regulatory Flexibility Act
(‘‘RFA’’) 41 requires agencies to consider
whether final regulations have a
significant economic impact on a
substantial number of small entities
and, where the regulations do so, to
provide a regulatory flexibility analysis
concerning the impact of such
41 5

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Federal Register / Vol. 76, No. 144 / Wednesday, July 27, 2011 / Rules and Regulations
regulations.42 The final rules require
DCOs, DCMs, SEFs, and SDRs to submit
to the Commission new products, rules,
and rule amendments, before they
become effective, with either a request
for Commission approval or a
certification that the products or rules
comply with the Act and Commission
regulations. In addition, the
Commission’s new regulations require
product submissions be accompanied by
a concise explanation and analysis that
incorporates information contained in
supporting documents, whereas the new
requirements for rule certifications
simply require the submission of a
concise explanation and analysis of the
purpose, operation, and effect of the
filing. Accordingly, these product and
rule approval and self-certification
regulations are not complex and do not
impose a significant economic impact
on any registered entity.
Moreover, the Commission previously
determined that DCMs, DCOs, SEFs, and
SDRs are not ‘‘small entities’’ for
purposes of the RFA.43 In determining
that these registered entities are not
‘‘small entities,’’ the Commission
reasoned that it designates a contract
market or registers a DCO, SEF, or SDR
only if the entity meets a number of
specific criteria, including the
expenditure of sufficient resources to
establish and maintain an adequate selfregulatory program.44 Because DCMs,
DCOs, SEFs and SDRs are required to
demonstrate compliance with Core
Principles, including principles
concerning the maintenance or
expenditure of financial resources, the
Commission previously determined that
SEFs and SDRs, like DCMs and DCOs,
are not ‘‘small entities’’ for the purposes
of the RFA.
The Chairman, on behalf of the
Commission, hereby certifies pursuant
to 5 U.S.C. 605(b) that these regulations
do not have a significant impact on a
substantial number of small entities.

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b. Paperwork Reduction Act
The Commission may not conduct or
sponsor, and a registered entity is not
required to respond to, a collection of
information unless it displays a
currently valid Office of Management
and Budget (‘‘OMB’’) control number.
Amendments to §§ 40.2, 40.3, 40.5, 40.6,
and 40.10 impose new information
42 5

U.S.C. 601 et seq.
17 CFR part 40 Provisions Common to
Registered Entities, 75 FR 67282 (November 2,
2010); see also 47 FR 18618, 18619 (April 30, 1982)
and 66 FR 45604, 45609 (August 29, 2001).
44 See, e.g., Core Principle 2 applicable to SEFs
under Section 733 of the Dodd-Frank Act and Core
Principles 1–3 applicable to SDRs under Section
728 of the Dodd-Frank Act.
43 See

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collection requirements on registered
entities within the meaning of the
Paperwork Reduction Act.45
Accordingly, the Commission requested
and OMB assigned a control number for
the required collections of information.
The Commission has submitted this
notice of final rulemaking along with
supporting documentation for OMB’s
review in accordance with 44 U.S.C.
3507(d) and 5 CFR 1320.11. The title for
this collection of information is ‘‘Part
40, Provisions Common to Registered
Entities, OMB control number 3038–
D07.’’ Many of the responses to this new
collection of information are mandatory.
The Commission protects proprietary
information according to the Freedom of
Information Act and 17 CFR part 145,
‘‘Commission Records and
Information.’’ In addition, section
8(a)(1) of the Act 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.’’ The Commission also is
required to protect certain information
contained in a government system of
records according to the Privacy Act of
1974, 5 U.S.C. 552a.
1. Information Provided by Reporting
Entities/Persons
These rules require DCMs, DCOs, and
new registered entities, SEFs and SDRs,
to collect and submit to the Commission
information concerning new products,
rules, and rule amendments pursuant to
the procedures outlined in §§ 40.2, 40.3,
40.5, 40.6, and 40.10. The Commission
is adopting these information collection
requirements in order to give effect to
various notice, rule certification, and
rule approval provisions of the DoddFrank Act, to expedite the staff’s review
of newly-certified and submitted
products, and to improve the
Commission’s administration of the Act.
The Commission estimated the final
information collection burdens on
registered entities below. These
estimates account for the following: (1)
The number of respondents; (2) the
number of responses required of each
respondent; (3) the average hours
required to produce each response; and
(4) the aggregate annual reporting
burden. The Commission estimates that
the effect of final §§ 40.2, 40.3, 40.5,
40.6, 40.10, and 40.12 will be to
increase the information collection
burden by approximately 202 hours per
year per registered entity, resulting
mostly from the preparation of the

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44789

concise explanation and analysis to be
filed with the Commission in
connection with the listing of products
or the certification or approval of rules.
The Commission estimates that 70
registered entities will be required to
file their new product and rule
submissions.
The Commission previously estimated
the aggregate number of hours that it
expected registered entities to spend
complying with part 40. Upon further
consideration, the Commission has
determined to revise the hours
attributable to the new provisions of
part 40. The newly-revised and final
regulations require each registered
entity to spend an estimated and
additional 202 hours per year
complying with part 40. Due to a
calculation error in the proposed
rulemaking, the estimated information
collection burden in the proposed part
40 rulemaking was quoted as 8,300
hours; the estimated information
collection burden should have been
22,664. Based on the 22,664 estimate,
the estimated average hours per
registered entity would have been
323.771 hours. Thus, under the
Commission’s current analysis and in
light of the regulatory changes below,
each registered entity may expect to
spend approximately 121 fewer hours
per year complying with part 40 than
would have been required under the
Commission’s proposal. The substantial
reduction in the estimated annual time
that each registered entity may spend
complying with part 40 results from
revisions to the documentation
requirements in §§ 40.2 and 40.3, the
elimination of the documentation
requirements in §§ 40.5 and 40.6, the
elimination of the price certification
requirements in §§ 40.2, 40.3, 40.5, and
40.6, and the addition of the class
certification provisions for certain
swaps in § 40.2(d).
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. However,
in consideration of comments
concerning proposed §§ 40.2, 40.3, 40.5
and 40.6, the Commission has
determined to amend its proposal to
reduce the information collection
burden on the registered entities.
Specifically, the Commission’s final
§ 40.2(d) streamlines the product
certification process for a significant
percentage of swap contracts by
permitting a DCM or SEF to class
certify, within a single submission, one

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or more swaps with similar, specified
characteristics.
In addition, the Commission has
determined to amend its proposal to do
the following: (1) Substantially revise
§ 40.2 and § 40.3 to reduce the
document collection burden for newlysubmitted products, and (2) eliminate
the previously proposed documentation
provisions in § 40.5 and § 40.6. The
Commission has determined to maintain
§§ 40.2(a)(3)(vii), 40.3(a)(10), 40.5(a)(6),
and 40.6(a)(2) requiring registered
entities to state that they posted a copy
of the certification or request for
approval on the registered entity’s Web
site at the time of the filing with the
Commission.
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: 70.
Annual responses by each
respondent: 100.
Estimated average hours per response:
2.00.
Aggregate annual reporting burden
hours (for all respondents): 14,000.
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 upon the number of registered
and exempt entities at the time of
proposal. The Commission has
determined to increase its previous
estimate to account for an increased
number of anticipated registered
entities, a few of which do not currently
operate a registered or exempt entity.
The 70 registered entity figure, above,
only minimally alters the per registered
entity estimate of time that will be
required to comply with part 40.
In addition, 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. The Commission also
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.
§ 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.

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Estimated average hours per response:
5.
Aggregate annual reporting burden
hours (for all respondents): 40.
Finally, § 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 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 certain novel product
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
hours (for all respondents): 80.64.
List of Subjects in 17 CFR Part 40
Commodity futures, Contract markets,
Designation application, Reporting and
recordkeeping requirements, Swap
execution facility, Swap data repository,
Systemically important derivatives
clearing organization, Rule approval,
Rule certification, Review of certain
event contracts.
In light of the foregoing, and pursuant
to authority in the Act, and, in
particular, Sections 3, 5, 5c(c) and 8a(5)
of the Act, the Commission hereby
revises part 40 of Title 17 of the Code
of Federal Regulations to read as
follows:
PART 40—PROVISIONS COMMON TO
REGISTERED ENTITIES
Sec.
40.1
40.2

Definitions.
Listing products for trading by
certification.
40.3 Voluntary submission of new products
for Commission review and approval.
40.4 Amendments to terms or conditions of
enumerated agricultural products.
40.5 Voluntary submission of rules for
Commission review and approval.
40.6 Self-certification of rules.
40.7 Delegations.
40.8 Availability of public information.
40.9 [Reserved]
40.10 Special certification procedures for
submission of rules by systemically

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important derivatives clearing
organizations.
40.11 Review of event contracts based upon
certain excluded commodities.
40.12 Staying of certification and tolling of
review period pending jurisdictional
determination.

Appendix A to Part 40—Schedule of
Fees
Appendix B to Part 40—[Reserved]
Appendix C to Part 40—[Reserved]
Appendix D to Part 40—Submission
Cover Sheet and Instructions
Authority: 7 U.S.C. 1a, 2, 5, 6, 7, 7a, 8 and
12, as amended by Titles VII and VIII of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Pub. L.
111–203, 124 Stat. 1376 (2010).
§ 40.1

Definitions.

As used in this part:
(a) Business day means the intraday
period of time starting at the business
hour of 8:15 a.m. and ending at the
business hour of 4:45 p.m.; business
hour means any hour between 8:15 a.m.
and 4:45 p.m. Business day and
business hour are Eastern Standard
Time or Eastern Daylight Savings Time,
whichever is currently in effect in
Washington, DC, on all days except
Saturdays, Sundays, and Federal
holidays in Washington, DC.
(b) Dormant contract or dormant
product means:
(1) Any agreement, contract,
transaction, instrument, swap or any
such commodity futures or option
contract with respect to all future or
option expiries, listed on a designated
contract market, a swap execution
facility or cleared by a registered
derivatives clearing organization, that
has no open interest and in which no
trading has occurred for a period of
twelve complete calendar months
following a certification to, or approval
by, the Commission; provided, however,
that no contract or instrument under
this paragraph (b)(1) initially and
originally certified to, or approved by,
the Commission within the preceding
36 complete calendar months shall be
considered to be dormant; or
(2) Any commodity futures or option
contract, swap or other agreement,
contract, transaction or instrument of a
dormant designated contract market,
dormant swap execution facility or a
dormant derivatives clearing
organization; or
(3) Any commodity futures or option
contract or other agreement, contract,
swap, transaction or instrument not
otherwise dormant that a designated
contract market, a swap execution
facility or a derivatives clearing

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organization self-declares through
certification to be dormant.
(c) Dormant designated contract
market means any designated contract
market on which no trading has
occurred during the period of twelve
consecutive calendar months, preceding
the first day of the most recent calendar
month; provided, however, no
designated contract market shall be
considered to be dormant if its initial
and original Commission order of
designation was issued within the
preceding 36 consecutive calendar
months.
(d) Dormant derivatives clearing
organization means any derivatives
clearing organization registered
pursuant to Section 5b of the Act that
has not accepted for clearing any
agreement, contract or transaction that
is required or permitted to be cleared by
a derivatives clearing organization
under Sections 5b(a) and 5b(b) of the
Act, respectively, for a period of twelve
complete calendar months; provided,
however, no derivatives clearing
organization shall be considered to be
dormant if its initial and original
Commission order of registration was
issued within the preceding 36
complete calendar months.
(e) Dormant swap data repository
means any registered swap data
repository on which no data has resided
for a period of twelve consecutive
calendar months, preceding the most
recent calendar month.
(f) Dormant swap execution facility
means any swap execution facility on
which no trading has occurred for a
period of twelve consecutive calendar
months, preceding the first day of the
most recent calendar month; provided,
however, no swap execution facility
shall be considered to be dormant if its
initial and original Commission order of
registration was issued within the
preceding 36 consecutive calendar
months.
(g) Dormant rule means:
(1) Any registered entity rule which
remains unimplemented for twelve
consecutive calendar months following
a certification with, or an approval by,
the Commission; or
(2) Any rule or rule amendment of a
dormant designated contract market,
dormant swap execution facility,
dormant swap data repository or
dormant derivatives clearing
organization.
(h) Emergency means any occurrence
or circumstance that, in the opinion of
the governing board of a registered
entity, or a person or persons duly
authorized to issue such an opinion on
behalf of the governing board of a
registered entity under circumstances

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and pursuant to procedures that are
specified by rule, requires immediate
action and threatens or may threaten
such things as the fair and orderly
trading in, or the liquidation of or
delivery pursuant to, any agreements,
contracts, swaps or transactions or the
timely collection and payment of funds
in connection with clearing and
settlement by a derivatives clearing
organization, including:
(1) Any manipulative or attempted
manipulative activity;
(2) Any actual, attempted, or
threatened corner, squeeze, congestion,
or undue concentration of positions;
(3) Any circumstances which may
materially affect the performance of
agreements, contracts, swaps or
transactions, including failure of the
payment system or the bankruptcy or
insolvency of any participant;
(4) Any action taken by any
governmental body, or any other
registered entity, board of trade, market
or facility which may have a direct
impact on trading or clearing and
settlement; and
(5) Any other circumstance which
may have a severe, adverse effect upon
the functioning of a registered entity.
(i) Rule means any constitutional
provision, article of incorporation,
bylaw, rule, regulation, resolution,
interpretation, stated policy, advisory,
terms and conditions, trading protocol,
agreement or instrument corresponding
thereto, including those that authorize a
response or establish standards for
responding to a specific emergency, and
any amendment or addition thereto or
repeal thereof, made or issued by a
registered entity or by the governing
board thereof or any committee thereof,
in whatever form adopted.
(j) Terms and conditions means any
definition of the trading unit or the
specific commodity underlying a
contract for the future delivery of a
commodity or commodity option
contract, description of the payments to
be exchanged under a swap,
specification of cash settlement or
delivery standards and procedures, and
establishment of buyers’ and sellers’
rights and obligations under the swap or
contract. Terms and conditions include
provisions relating to the following:
(1) For a contract for the purchase or
sale of a commodity for future delivery
or an option on such a contract or an
option on a commodity (other than a
swap):
(i) Quality and other standards that
define the commodity or instrument
underlying the contract;
(ii) Quantity standards or other
provisions related to contract size;

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(iii) Any applicable premiums or
discounts for delivery of nonpar
products;
(iv) Trading hours, trading months
and the listing of contracts;
(v) The pricing basis, minimum price
fluctuations, and maximum price
fluctuations;
(vi) Any price limits, no cancellation
ranges, trading halts, or circuit breaker
provisions, and procedures for the
establishment of daily settlement prices;
(vii) Position limits, position
accountability standards, and position
reporting requirements;
(viii) Delivery points and locational
price differentials;
(ix) Delivery standards and
procedures, including fees related to
delivery or the delivery process;
alternatives to delivery and applicable
penalties or sanctions for failure to
perform;
(x) If cash settled; the definition,
composition, calculation and revision of
the cash settlement price or index;
(xi) Payment or collection of
commodity option premiums or
margins;
(xii) Option exercise price, if it is
constant, and method for calculating the
exercise price, if it is variable;
(xiii) Threshold prices for an option
contract, the existence of which is
contingent upon those prices; and
(xiv) Any restrictions or requirements
for exercising an option; and
(2) For a swap:
(i) Identification of the major group,
category, type or class in which the
swap falls (such as an interest rate,
commodity, credit or equity swap) and
of any further sub-group, category, type
or class that further describes the swap;
(ii) Notional amounts, quantity
standards, or other unit size
characteristics;
(iii) Any applicable premiums or
discounts for delivery of nonpar
products;
(iv) Trading hours and the listing of
swaps;
(v) Pricing basis for establishing the
payment obligations under, and markto-market value of, the swap including,
as applicable, the accrual start dates,
termination or maturity dates, and, for
each leg of the swap, the initial cash
flow components, spreads, and points,
and the relevant indexes, prices, rates,
coupons, or other price reference
measures;
(vi) Any price limits, trading halts, or
circuit breaker provisions, and
procedures for the establishment of
daily settlement prices;
(vii) Position limits, position
accountability standards, and position
reporting requirements;

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(viii) Payment and reset frequency,
day count conventions, business
calendars, and accrual features;
(ix) If physical delivery applies,
delivery standards and procedures,
including fees related to delivery or the
delivery process, alternatives to delivery
and applicable penalties or sanctions for
failure to perform;
(x) If cash settled, the definition,
composition, calculation and revision of
the cash settlement price, and the
settlement currency;
(xi) Payment or collection of option
premiums or margins;
(xii) Option exercise price, if it is
constant, and method for calculating the
exercise price, if it is variable;
(xiii) Threshold prices for an option,
the existence of which is contingent
upon those prices;
(xiv) Any restrictions or requirements
for exercising an option; and
(xv) Life cycle events.

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§ 40.2 Listing products for trading by
certification.

(a) A designated contract market or a
swap execution facility must comply
with the submission requirements of
this section prior to listing a product for
trading that has not been approved
under § 40.3 of this part or that remains
dormant subsequent to being submitted
under this section or approved under
§ 40.3 of this part. A submission shall
comply with the following conditions:
(1) The designated contract market or
the swap execution facility has filed its
submission electronically in a format
and manner specified by the Secretary
of the Commission with the Secretary of
the Commission;
(2) The Commission has received the
submission by the open of business on
the business day preceding the
product’s listing; and
(3) The submission includes:
(i) A copy of the submission cover
sheet in accordance with the
instructions in Appendix D to this part;
(ii) A copy of the product’s rules,
including all rules related to its terms
and conditions;
(iii) The intended listing date;
(iv) A certification by the designated
contract market or the swap execution
facility that the product to be listed
complies with the Act and Commission
regulations thereunder;
(v) A concise explanation and
analysis of the product and its
compliance with applicable provisions
of the Act, including core principles,
and the Commission’s regulations
thereunder. This explanation and
analysis shall either be accompanied by
the documentation relied upon to
establish the basis for compliance with

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applicable law, or incorporate
information contained in such
documentation, with appropriate
citations to data sources;
(vi) A certification that the registered
entity posted a notice of pending
product certification with the
Commission and a copy of the
submission, concurrent with the filing
of a submission with the Commission,
on the registered entity’s Web site.
Information that the registered entity
seeks to keep confidential may be
redacted from the documents published
on the registered entity’s Web site but
must be republished consistent with any
determination made pursuant to
§ 40.8(c)(4);
(vii) A request for confidential
treatment, if appropriate, as permitted
under § 40.8.
(b) Additional information. If
requested by Commission staff, a
registered entity shall provide any
additional evidence, information or data
that demonstrates that the contract
meets, initially or on a continuing basis,
the requirements of the Act or the
Commission’s regulations or policies
thereunder.
(c) Stay. The Commission may stay
the listing of a contract pursuant to
paragraph (a) of this section during the
pendency of Commission proceedings
for filing a false certification or during
the pendency of a petition to alter or
amend the contract terms and
conditions pursuant to Section 8a(7) of
the Act. The decision to stay the listing
of a contract in such circumstances shall
not be delegable to any employee of the
Commission.
(d) Class certification of swaps. (1) A
designated contract market or swap
execution facility may list or facilitate
trading in any swap or number of swaps
based upon an ‘‘excluded commodity,’’
as defined in Section 1a(19)(i) of the
Act, not including any security, security
index, and currency other than the
United States Dollar and a ‘‘major
foreign currency,’’ as defined in
§ 15.03(a), or an ‘‘excluded commodity,’’
as defined in Section 1a(19)(ii)–(iv) of
the Act, provided the designated
contract market or swap execution
facility certifies, under § 40.2(a)(1)–(2),
§ 40.2(a)(3)(i), § 40.2(a)(3)(iv), and
§ 40.2(a)(3)(vi), each of the following:
(i) That each particular swap within
the certified class of swaps is based
upon an excluded commodity specified
in § 40.2(d)(1); and
(ii) That each particular swap within
the certified class of swaps is based
upon an excluded commodity with an
identical pricing source, formula,
procedure, and methodology for

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calculating reference prices and
payment obligations; and
(iii) That the pricing source, formula,
procedure, and methodology for
calculating reference prices and
payment obligations in each particular
swap within the certified class of swaps
is identical to a pricing source, formula,
procedure, and methodology for
calculating reference prices and
payment obligations in a product
previously submitted to the Commission
and certified or approved pursuant to
§ 40.2 or § 40.3;
(iv) That each particular swap within
the certified class of swaps is based
upon an excluded commodity involving
an identical currency or identical
currencies.
(2) The Commission may in its
discretion require a registered entity to
withdraw its certification under
§ 40.2(d)(1) and to submit each
individual swap or certain individual
swaps within the submission for
Commission review pursuant to § 40.2
or § 40.3
§ 40.3 Voluntary submission of new
products for Commission review and
approval.

(a) Request for approval. Pursuant to
Section 5c(c) of the Act, a designated
contract market, a swap execution
facility, or a derivatives clearing
organization may request that the
Commission approve a new or dormant
product prior to listing the product for
trading or accepting the product for
clearing, or if a product was initially
submitted under § 40.2 of this part or
§ 39.5 of this chapter, subsequent to
listing the product for trading or
accepting the product for clearing. A
submission requesting approval shall:
(1) Be filed electronically in a format
and manner specified by the Secretary
of the Commission with the Secretary of
the Commission;
(2) Include a copy of the submission
cover sheet in accordance with the
instructions in Appendix D to this part;
(3) Include a copy of the rules that set
forth the contract’s terms and
conditions;
(4) Include an explanation and
analysis of the product and its
compliance with applicable provisions
of the Act, including core principles,
and the Commission’s regulations
thereunder. This explanation and
analysis shall either be accompanied by
the documentation relied upon to
establish the basis for compliance with
the applicable law, or incorporate
information contained in such
documentation, with appropriate
citations to data sources;

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(5) Describe any agreements or
contracts entered into with other parties
that enable the registered entity to carry
out its responsibilities;
(6) Include the certifications required
in § 41.22 for product approval of a
commodity that is a security future or a
security futures product as defined in
Sections 1a(44) or 1a(45) of the Act,
respectively;
(7) Include, if appropriate, a request
for confidential treatment as permitted
under § 40.8;
(8) Include the filing fee required
under Appendix A to this part;
(9) Certify that the registered entity
posted a notice of its request for
Commission approval of the new
product and a copy of the submission,
concurrent with the filing of a
submission with the Commission, on
the registered entity’s Web site.
Information that the registered entity
seeks to keep confidential may be
redacted from the documents published
on the registered entity’s Web site but
must be republished consistent with any
determination made pursuant to
§ 40.8(c)(4);
(10) Include, if requested by
Commission staff, additional evidence,
information or data demonstrating that
the contract meets, initially or on a
continuing basis, the requirements of
the Act, or other requirement for
designation or registration under the
Act, or the Commission’s regulations or
policies thereunder. The registered
entity shall submit the requested
information by the open of business on
the date that is two business days from
the date of request by Commission staff,
or at the conclusion of such extended
period agreed to by Commission staff
after timely receipt of a written request
from the registered entity.
(b) Standard for review and approval.
The Commission shall approve a new
product unless the terms and conditions
of the product violate the Act or the
Commission’s regulations.
(c) Forty-five day review. All products
submitted for Commission approval
under this paragraph shall be deemed
approved by the Commission 45 days
after receipt by the Commission, or at
the conclusion of an extended period as
provided under paragraph (d) of this
section, unless notified otherwise
within the applicable period, if:
(1) The submission complies with the
requirements of paragraph (a) of this
section; and
(2) The submitting entity does not
amend the terms or conditions of the
product or supplement the request for
approval, except as requested by the
Commission or for correction of
typographical errors, renumbering or

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other non-substantive revisions, during
that period. Any voluntary, substantive
amendment by the submitting entity
will be treated as a new submission
under this section.
(d) Extension of time. The
Commission may extend the 45 day
review period in paragraph (c) of this
section for:
(1) An additional 45 days, if the
product raises novel or complex issues
that require additional time to analyze,
in which case the Commission shall
notify the registered entity within the
initial 45 day review period and shall
briefly describe the nature of the
specific issues for which additional time
for review is required; or
(2) Any extended review period to
which the registered entity agrees in
writing.
(e) Notice of non-approval. The
Commission at any time during its
review under this section may notify the
registered entity that it will not, or is
unable to, approve the product. This
notification will briefly specify the
nature of the issues raised and the
specific provision of the Act or the
Commission’s regulations, including the
form or content requirements of
paragraph (a) of this section, that the
product violates, appears to violate or
potentially violates but which cannot be
ascertained from the submission.
(f) Effect of non-approval. (1)
Notification to a registered entity under
paragraph (e) of this section of the
Commission’s determination not to
approve a product does not prejudice
the entity from subsequently submitting
a revised version of the product for
Commission approval or from
submitting the product as initially
proposed pursuant to a supplemented
submission.
(2) Notification to a registered entity
under paragraph (e) of this section of the
Commission’s refusal to approve a
product shall be presumptive evidence
that the entity may not truthfully certify
under § 40.2 that the same, or
substantially the same, product does not
violate the Act or the Commission’s
regulations thereunder.
§ 40.4 Amendments to terms or conditions
of enumerated agricultural products.

(a) Notwithstanding the provisions of
this part, a designated contract market
must submit for Commission approval
under the procedures of § 40.5, prior to
its implementation, any rule or dormant
rule that, for a delivery month having
open interest, would materially change
a term or condition, as defined in
§ 40.1(j), of a contract for future delivery
in an agricultural commodity
enumerated in Section 1a(9) of the Act,

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or of an option on such a contract or
commodity.
(b) The following rules or rule
amendments are not material and
should not be submitted under this
section:
(1) Changes that are enumerated in
§ 40.6(d)(2) may be implemented
without prior approval or certification if
implemented pursuant to the
notification procedures of § 40.6(d);
(2) Changes that are enumerated in
§ 40.6(d)(3)(ii) may be implemented
without prior approval or certification
or notification as permitted pursuant to
§ 40.6(d)(3);
(3) Changes in no cancellation ranges
and trading hours may be implemented
without prior approval if implemented
pursuant to the procedures of § 40.6(a);
(4) Changes required to comply with
a binding order of a court of competent
jurisdiction, or a rule, regulation or
order of the Commission or of another
Federal regulatory authority, may be
implemented without prior approval if
implemented pursuant to the
procedures of § 40.6(a);or
(5) Any other rule:
(i) The text of which has been
submitted for review at least ten
business days prior to its
implementation and that has been
labeled ‘‘Non-Material Agricultural Rule
Change;’’
(ii) For which the designated contract
market has provided an explanation as
to why it considers the rule ‘‘nonmaterial,’’ and any other information
that may be beneficial to the
Commission in analyzing the merits of
the entity’s claim of non-materiality;
and
(iii) With respect to which the
Commission has not notified the
contract market during the review
period that the rule appears to require
or does require prior approval under
this section, may be implemented
without prior approval if implemented
under the procedures of § 40.6(a).
§ 40.5 Voluntary submission of rules for
Commission review and approval.

(a) Request for approval of rules.
Pursuant to Section 5c(c) of the Act, a
registered entity may request that the
Commission approve a new rule, rule
amendment or dormant rule prior to
implementation of the rule, or if the
request was initially submitted under
§§ 40.2 or 40.6 of this part, subsequent
to implementation of the rule. A request
for approval shall:
(1) Be filed electronically in a format
and manner specified by the Secretary
of the Commission with the Secretary of
the Commission;

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(2) Include a copy of the submission
cover sheet in accordance with the
instructions in Appendix D to this part;
(3) Set forth the text of the rule or rule
amendment (in the case of a rule
amendment, deletions and additions
must be indicated);
(4) Describe the proposed effective
date of the rule or rule amendment and
any action taken or anticipated to be
taken to adopt the proposed rule by the
registered entity or by its governing
board or by any committee thereof, and
cite the rules of the entity that authorize
the adoption of the proposed rule;
(5) Provide an explanation and
analysis of the operation, purpose, and
effect of the proposed rule or rule
amendment and its compliance with
applicable provisions of the Act,
including core principles, and the
Commission’s regulations thereunder,
including, as applicable, a description
of the anticipated benefits to market
participants or others, any potential
anticompetitive effects on market
participants or others, and how the rule
fits into the registered entity’s
framework of self-regulation;
(6) Certify that the registered entity
posted a notice of pending rule with the
Commission and a copy of the
submission, concurrent with the filing
of a submission with the Commission,
on the registered entity’s Web site.
Information which the registered entity
seeks to keep confidential may be
redacted from the documents published
on the registered entity’s Web site but
must be republished consistent with any
determination made pursuant to
§ 40.8(c)(4);
(7) Provide additional information
which may be beneficial to the
Commission in analyzing the new rule
or rule amendment. If a proposed rule
affects, directly or indirectly, the
application of any other rule of the
registered entity, the pertinent text of
any such rule must be set forth and the
anticipated effect described;
(8) Provide a brief explanation of any
substantive opposing views expressed to
the registered entity by governing board
or committee members, members of the
entity or market participants that were
not incorporated into the rule, or a
statement that no such opposing views
were expressed;
(9) Identify any Commission
regulation that the Commission may
need to amend, or sections of the Act or
the Commission’s regulations that the
Commission may need to interpret, in
order to approve the new rule or rule
amendment. To the extent that such an
amendment or interpretation is
necessary to accommodate a new rule or
rule amendment, the submission should

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include a reasoned analysis supporting
the amendment to the Commission’s
regulation or the interpretation;
(10) As appropriate, include a request
for confidential treatment as permitted
under the procedures of § 40.8.
(b) Standard for review and approval.
The Commission shall approve a new
rule or rule amendment unless the rule
or rule amendment is inconsistent with
the Act or the Commission’s regulations.
(c) Forty-five day review. (1) All rules
submitted for Commission approval
under paragraph (a) of this section shall
be deemed approved by the Commission
under section 5c(c) of the Act 45 days
after receipt by the Commission, or at
the conclusion of such extended period
as provided under paragraph (d) of this
section, unless the registered entity is
notified otherwise within the applicable
period, if:
(i) The submission complies with the
requirements of paragraph (a) of this
section;
(ii) The registered entity does not
amend the proposed rule or supplement
the submission, except as requested by
the Commission, during the pendency
of the review period other than for
correction of typographical errors,
renumbering or other non-substantive
revisions. Any amendment or
supplementation not requested by the
Commission will be treated as the
submission of a new filing under this
section.
(2) The Commission shall commence
the review period in paragraph (c) of
this section for a compliant submission
under § 40.4(b)(5) ten business days
after its receipt.
(d) Commencement and extension of
time for review. The Commission may
further extend the review period in
paragraph (c) of this section for any
approval request for:
(1) An additional 45 days, if the
proposed rule raises novel or complex
issues that require additional time for
review or is of major economic
significance, the submission is
incomplete or the requestor does not
respond completely to Commission
questions in a timely manner, in which
case the Commission shall notify the
submitting registered entity within the
initial forty-five day review period and
shall briefly describe the nature of the
specific issues for which additional time
for review shall be required; or
(2) Any period, beyond the additional
45 days provided in § 40.5(d)(1), to
which the registered entity agrees in
writing.
(e) Notice of non-approval. Any time
during its review under this section, the
Commission may notify the registered
entity that it will not, or is unable to,

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approve the new rule or rule
amendment. This notification will
briefly specify the nature of the issues
raised and the specific provision of the
Act or the Commission’s regulations,
including the form or content
requirements of this section, with which
the new rule or rule amendment is
inconsistent or appears to be
inconsistent with the Act or the
Commission’s regulations.
(f) Effect of non-approval. (1)
Notification to a registered entity under
paragraph (e) of this section does not
prevent the registered entity from
subsequently submitting a revised
version of the proposed rule or rule
amendment for Commission review and
approval or from submitting the new
rule or rule amendment as initially
proposed in a supplemented
submission; the revised submission will
be reviewed without prejudice.
(2) Notification to a registered entity
under paragraph (e) of this section of the
Commission’s determination not to
approve a proposed rule or rule
amendment of a registered entity shall
be presumptive evidence that the entity
may not truthfully certify that the same,
or substantially the same, proposed rule
or rule amendment under § 40.6(a) of
this section.
(g) Expedited approval.
Notwithstanding the provisions of
paragraph (c) of this section, changes to
a proposed rule or a rule amendment,
including changes to terms and
conditions of a product that are
consistent with the Act and Commission
regulations and with standards
approved or established by the
Commission may be approved by the
Commission at such time and under
such conditions as the Commission
shall specify in the written notification,
provided, however, that the
Commission may, at any time, alter or
revoke the applicability of such a notice
to any particular product or rule
amendment.
§ 40.6

Self-certification of rules.

(a) Required certification. A registered
entity shall comply with the following
conditions prior to implementing any
rule, other than a rule delisting or
withdrawing the certification of a
product, that has not obtained
Commission approval under § 40.5 of
this part, that remains dormant
subsequent to being submitted under
this section or approved under § 40.5 of
this part, or that is submitted under
§ 40.10 of this part, except as otherwise
provided by § 40.10(a):
(1) The registered entity has filed its
submission electronically in a format
and manner specified by the Secretary

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of the Commission with the Secretary of
the Commission.
(2) The registered entity has provided
a certification that the registered entity
posted a notice of pending certification
with the Commission and a copy of the
submission, concurrent with the filing
of a submission with the Commission,
on the registered entity’s Web site.
Information that the registered entity
seeks to keep confidential may be
redacted from the documents published
on the registered entity’s Web site but it
must be republished consistent with any
determination made pursuant to
§ 40.8(c)(4).
(3) The Commission has received the
submission not later than the open of
business on the business day that is 10
business days prior to the registered
entity’s implementation of the rule or
rule amendment.
(4) The Commission has not stayed
the submission pursuant to § 40.6(c).
(5) The rule or rule amendment is not
a rule or rule amendment of a
designated contract market that
materially changes a term or condition
of a contract for future delivery of an
agricultural commodity enumerated in
section 1a(4) of the Act or an option on
such a contract or commodity in a
delivery month having open interest.
(6) Emergency rule certifications. (i)
New rules or rule amendments that
establish standards for responding to an
emergency must be submitted pursuant
to § 40.6(a);
(ii) Rules or rule amendments
implemented under procedures of the
governing board to respond to an
emergency as defined in § 40.1, shall, if
practicable, be filed with the
Commission prior to the
implementation or, if not practicable, be
filed with the Commission at the earliest
possible time after implementation, but
in no event more than twenty-four hours
after implementation. Such rules shall
be subject to the certification and stay
provisions of paragraphs (b) and (c) of
this section.
(7). The rule submission shall
include:
(i) A copy of the submission cover
sheet in accordance with the
instructions in Appendix D to this part
(in the case of a rule or rule amendment
that responds to an emergency,
‘‘Emergency Rule Certification’’ should
be noted in the Description section of
the submission coversheet);
(ii) The text of the rule (in the case of
a rule amendment, deletions and
additions must be indicated);
(iii) The date of intended
implementation;
(iv) A certification by the registered
entity that the rule complies with the

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Act and the Commission’s regulations
thereunder;
(v) A concise explanation and
analysis of the operation, purpose, and
effect of the proposed rule or rule
amendment and its compliance with
applicable provisions of the Act,
including core principles, and the
Commission’s regulations thereunder;
(vi) A brief explanation of any
substantive opposing views expressed to
the registered entity by governing board
or committee members, members of the
entity or market participants, that were
not incorporated into the rule, or a
statement that no such opposing views
were expressed;
(vii) As appropriate, a request for
confidential treatment pursuant to the
procedures provided in § 40.8; and
(8) The registered entity shall provide,
if requested by Commission staff,
additional evidence, information or data
that may be beneficial to the
Commission in conducting a due
diligence assessment of the filing and
the registered entity’s compliance with
any of the requirements of the Act or the
Commission’s regulations or policies
thereunder.
(b) Review by the Commission. The
Commission shall have 10 business days
to review the new rule or rule
amendment before the new rule or rule
amendment is deemed certified and can
be made effective, unless the
Commission notifies the registered
entity during the 10-business day
review period that it intends to issue a
stay of the certification under paragraph
(c) of this section.
(c) Stay (1) Stay of certification of new
rule or rule amendment. The
Commission may stay the certification
of a new rule or rule amendment
submitted pursuant to paragraph (a) of
this section by issuing a notification
informing the registered entity that the
Commission is staying the certification
of the rule or rule amendment on the
grounds that the rule or rule amendment
presents novel or complex issues that
require additional time to analyze, the
rule or rule amendment is accompanied
by an inadequate explanation or the rule
or rule amendment is potentially
inconsistent with the Act or the
Commission’s regulations thereunder.
The Commission will have an
additional 90 days from the date of the
notification to conduct the review. The
decision to stay the certification of a
rule in such circumstances shall be
delegable pursuant to § 40.7 of this part.
(2) Public comment. The Commission
shall provide a 30-day comment period
within the 90-day period in which the
stay is in effect as described in
paragraph (c)(1) of this section. The

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Commission shall publish a notice of
the 30-day comment period on the
Commission Web site. Comments from
the public shall be submitted as
specified in that notice.
(3) Expiration of a stay of certification
of new rule or rule amendment. A new
rule or rule amendment subject to a stay
pursuant to this paragraph shall become
effective, pursuant to the certification, at
the expiration of the 90-day review
period described in paragraph (c)(1) of
this section unless the Commission
withdraws the stay prior to that time, or
the Commission notifies the registered
entity during the 90-day time period
that it objects to the proposed
certification on the grounds that the
proposed rule or rule amendment is
inconsistent with the Act or the
Commission’s regulations.
(4) Stay of effectiveness of rules or
rule amendments already implemented.
The Commission may stay the
effectiveness of an implemented rule
during the pendency of Commission
proceedings for filing a false
certification or during the pendency of
a petition to alter or amend the rule
pursuant to section 8a(7) of the Act. The
decision to stay the effectiveness of a
rule in such circumstances shall not be
delegable to any employee of the
Commission.
(d) Notification of rule amendments.
Notwithstanding the rule certification
requirement of Section 5c(c)(1) of the
Act and paragraph (a) of this section, a
registered entity may place the
following rules or rule amendments into
effect without certification to the
Commission if the following conditions
are met:
(1) The registered entity provides to
the Commission at least weekly a
summary notice of all rule amendments
made effective pursuant to this
paragraph during the preceding week.
Such notice must be labeled ‘‘Weekly
Notification of Rule Amendments’’ and
need not be filed for weeks during
which no such actions have been taken.
One copy of each such submission shall
be furnished electronically in a format
and manner specified by the Secretary
of the Commission; and
(2) The rule governs:
(i) Non-substantive revisions.
Corrections of typographical errors,
renumbering, periodic routine updates
to identifying information about
registered entities and other such nonsubstantive revisions of a product’s
terms and conditions that have no effect
on the economic characteristics of the
product;
(ii) Delivery standards set by third
parties. Changes to grades or standards
of commodities deliverable on a product

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that are established by an independent
third party and that are incorporated by
reference as product terms, provided
that the grade or standard is not
established, selected or calculated solely
for use in connection with futures or
option trading and such changes do not
affect deliverable supplies or the pricing
basis for the product;
(iii) Index products. Routine changes
in the composition, computation, or
method of selection of component
entities of an index (other than routine
changes to securities indexes to the
extent that such changes are not
described in paragraph (d)(3)(ii)(F) of
this section) referenced and defined in
the product’s terms, that do not affect
the pricing basis of the index, which are
made by an independent third party
whose business relates to the collection
or dissemination of price information
and which was not formed solely for the
purpose of compiling an index for use
in connection with a futures or option
product;
(iv) Option contract terms. Changes to
option contract rules, which may
qualify for implementation without
notice pursuant to paragraph
(d)(3)(ii)(G) of this section, relating to
the strike price listing procedures, strike
price intervals, and the listing of strike
prices on a discretionary basis;
(v) Fees. Fees or fee changes, other
than fees or fee changes associated with
market making or trading incentive
programs, that:
(A) Total $1.00 or more per contract,
and
(B) Are established by an independent
third party or are unrelated to delivery,
trading, clearing or dispute resolution.
(vi) Survey lists. Changes to lists of
banks, brokers, dealers, or other entities
that provide price or cash market
information to an independent third
party and that are incorporated by
reference as product terms;
(vii) Approved brands. Changes in
lists of approved brands or markings
pursuant to previously certified or
Commission approved standards or
criteria;
(viii) Delivery facilities and delivery
service providers. Changes in lists of
approved delivery facilities and delivery
service providers (including weigh
masters, assayers, and inspectors) at a
delivery location, pursuant to
previously certified or Commission
approved standards or criteria;
(ix) Trading months. The initial
listing of trading months, which may
qualify for implementation without
notice pursuant to (d)(3)(ii)(H) of this
section, within the currently established
cycle of trading months; or

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(x) Minimum tick. Reductions in the
minimum price fluctuation (or ‘‘tick’’).
(3) Notification of rule amendments
not required. Notwithstanding the rule
certification requirements of section
5c(c)(1) of the Act and paragraph (a) of
this section, a registered entity may
place the following rules or rule
amendments into effect without
certification or notice to the
Commission if the following conditions
are met:
(i) The registered entity maintains
documentation regarding all changes to
rules; and
(ii) The rule governs:
(A) Transfer of membership or
ownership. Procedures and forms for the
purchase, sale or transfer of membership
or ownership, but not including
qualifications for membership or
ownership, any right or obligation of
membership or ownership or dues or
assessments;
(B) Administrative procedures. The
organization and administrative
procedures of a registered entity
governing bodies such as a Board of
Directors, Officers and Committees, but
not voting requirements, Board of
Directors or Committee composition
requirements or procedures, decision
making procedures, use or disclosure of
material non-public information gained
through the performance of official
duties, or requirements relating to
conflicts of interest;
(C) Administration. The routine, daily
administration, direction and control of
employees, requirements relating to
gratuity and similar funds, but not
guaranty, reserves, or similar funds;
declaration of holidays, and changes to
facilities housing the market, trading
floor or trading area;
(D) Standards of decorum. Standards
of decorum or attire or similar
provisions relating to admission to the
floor, badges, or visitors, but not the
establishment of penalties for violations
of such rules; and
(E) Fees. Fees or fee changes, other
than fees or fee changes associated with
market making or trading incentive
programs, that:
(1) Are less than $1.00; or
(2) Relate to matters such as dues,
badges, telecommunication services,
booth space, real time quotations,
historical information, publications,
software licenses or other matters that
are administrative in nature.
(F) Securities indexes. Routine
changes to the composition,
computation or method of security
selection of an index that is referenced
and defined in the product’s rules, and
which is made by an independent third
party.

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(G) Option contract terms. For
registered entities that are in
compliance with the daily reporting
requirements of § 16.01 of this chapter,
changes to option contract rules relating
to the strike price listing procedures,
strike price intervals, and the listing of
strike prices on a discretionary basis.
(H) Trading months. For registered
entities that are in compliance with the
daily reporting requirements of § 16.01
of this chapter, the initial listing of
trading months which are within the
currently established cycle of trading
months.
§ 40.7

Delegations.

(a) Procedural matters. (1) The
Commission hereby delegates, until it
orders otherwise, to the Director of the
Division of Clearing and Intermediary
Oversight and, separately, to the
Director of the Division of Market
Oversight, to be exercised by either
Director, as appropriate, or by such
employees of the Commission that
either Director may designate from time
to time, the following authorities, with
the concurrence of the General Counsel
or the General Counsel’s delegate:
(i) To request, pursuant to § 40.3(c)(2)
or § 40.5(c)(1)(ii) of this part, that the
registered entity requesting approval
amend the proposed product, rule or
rule amendment, or supplement the
submission to the Commission;
(ii) To notify the registered entity,
pursuant to § 40.3(e) or § 40.5(e) of this
part, that the Commission is not
approving, or is unable to approve, the
proposed product, rule or rule
amendment;
(iii) To make all determinations
reserved to the Commission in § 40.10.
(2) The Commission hereby delegates,
until it orders otherwise, to the Director
of the Division of Clearing and
Intermediary Oversight and, separately,
to the Director of the Division of Market
Oversight, to be exercised by either
Director, as appropriate, or by such
employees of the Commission that
either Director may designate from time
to time, the following authorities, after
consultation with the Office of General
Counsel or the General Counsel’s
delegate to notify a registered entity:
(i) Pursuant to § 40.3(d) of this part,
that the time for review of the
submission has been extended because
the product raises novel or complex
issues that require additional time for
review;
(ii) Pursuant to § 40.5(d) of this part,
that the time for review of the
submission has been extended because
the proposed rule or rule amendment
raises novel or complex issues that

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require additional time for review or is
of major economic significance;
(iii) Pursuant to § 40.6(c) of this part,
that the proposed rule or rule
amendment has been stayed because
there exist novel or complex issues that
require additional time to analyze, or
there is potential inconsistency with the
Act or the Commission’s regulations.
(3) The Commission hereby delegates,
until it orders otherwise, to the Director
of the Division of Clearing and
Intermediary Oversight and, separately,
to the Director of the Division of Market
Oversight, to be exercised by either
Director, as appropriate, or by such
employees of the Commission that
either Director may designate from time
to time, the authority to notify a
registered entity, pursuant to § 40.3(d)
or § 40.5(d) of this part, that the time for
review of the submission has been
extended, or that a rule certified
pursuant to § 40.6(c) has been stayed,
because the submission is incomplete or
provides an inadequate explanation.
(4) Emergency rules. The Commission
hereby delegates to the Director of the
Division of Market Oversight and,
separately, to the Director of the
Division of Clearing and Intermediary
Oversight, to be exercised by either
Director, as appropriate, or by such
other employee or employees of the
Commission that either Director may
designate from time to time, authority to
receive notification of emergency rules
under § 40.6(a)(6)(ii) of this part.
(5) The Commission hereby delegates
to the Director of the Division of Market
Oversight, to be exercised by the
Director or by such employees of the
Commission that the Director may
designate from time to time, with the
concurrence of the General Counsel or
the General Counsel’s delegate, the
authority to determine whether a rule
change submitted by a designated
contract market for a materiality
determination under § 40.4(b)(5) of this
part is not material (in which case it
may be reported pursuant to the
provisions of § 40.6(d) of this part), or is
material, in which case he or she shall
notify the registered entity that the rule
change must be submitted for the
Commission’s prior approval.
(b) Approval authority. The
Commission hereby delegates, until it
orders otherwise, to the Director of the
Division of Clearing and Intermediary
Oversight and, separately, to the
Director of the Division of Market
Oversight, to be exercised by either
Director, as appropriate, or by such
employees of the Commission that
either Director may designate from time
to time, with the concurrence of the
General Counsel or the General

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Counsel’s delegate, the authority to
approve, pursuant to section 5c(c)(3) of
the Act and § 40.5 of this part, rules or
rule amendments of a registered entity
that:
(1) Relate to, but do not substantially
change, the quantity, quality, or other
delivery specifications, procedures, or
obligations for delivery, cash settlement,
or exercise under an agreement, contract
or transaction approved for trading by
the Commission; daily settlement
prices; clearing position limits;
requirements or procedures for
governance of a registered entity;
procedures for transfer trades; trading
hours; minimum price fluctuations; and
maximum price limit and trading
suspension provisions;
(2) Reflect routine modifications that
are required or anticipated by the terms
of the rule of a registered entity;
(3) Establish or amend speculative
limits or position accountability
provisions that are in compliance with
the requirements of the Act and the
Commission’s regulations;
(4) Are in substance the same as a rule
of the same or another registered entity
which has been approved previously by
the Commission pursuant to section
5c(c)(3) of the Act;
(5) Are consistent with a specific,
stated policy or interpretation of the
Commission; or
(6) Relate to the listing of additional
trading months of approved contracts.
(c) Notwithstanding the provisions of
this section, the Director of the Division
of Clearing and Intermediary Oversight
and, separately, the Director of the
Division of Market Oversight may
submit to the Commission for its
consideration any matter that has been
delegated pursuant to this section.
(d) Nothing in this section shall be
deemed to prohibit the Commission, at
its election, from exercising any of the
authority delegated pursuant to this
section.
§ 40.8

Availability of public information.

(a) The following sections of all
applications to become a designated
contract market, swap execution facility,
derivatives clearing organization, or
swap data repository shall be made
publicly available: Transmittal letter
and first page of the application cover
sheet, proposed rules, narrative
summary of the applicant’s proposed
activities and regulatory compliance
chart, documents establishing the
applicant’s legal status, documents
setting forth the applicant’s corporate
and governance structure and any other
part of the application not covered by a
request for confidential treatment.

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(b) The following submissions
provided by an electronic trading
facility on which significant price
discovery contracts are traded or
executed will be public: rulebook, the
facility’s regulatory compliance chart,
documents establishing the facility’s
legal status, documents setting forth the
facility’s governance structure, and any
other parts of the submissions not
covered by a request for confidential
treatment (§ 40.8(b) will be removed on
July 20, 2012).
(c) A registered entity’s filing of new
products pursuant to the selfcertification procedures of § 40.2 of this
part, new products for Commission
review and approval pursuant to § 40.3
of this part, new rules and rule
amendments for Commission review
and approval pursuant to § 40.4 or
§ 40.5 of this part, and new rules and
rule amendments pursuant to the selfcertification procedures of § 40.6 and
§ 40.10 of this part shall be treated as
public information unless accompanied
by a request for confidential treatment.
If a registered entity files a request for
confidential treatment, the following
procedures shall apply:
(1) A detailed written justification of
the confidential treatment request must
be filed simultaneously with the request
for confidential treatment. The form and
content of the detailed written
justification shall be governed by
§ 145.9 of this chapter;
(2) All material for which confidential
treatment is requested must be
segregated in an Appendix to the
submission;
(3) The submission itself must
indicate that material has been
segregated and, as appropriate, an
additional redacted version provided;
(4) Commission staff may make an
initial determination with respect to the
request for confidential treatment
without regard to whether a request for
the information has been sought under
the Freedom of Information Act;
(5) All requests for confidential
treatment shall be subject to the process
provided by § 145.9 of this chapter.
(6) A submitter of information under
this part may appeal an adverse
decision by staff to the Commission’s
Office of General Counsel. The form and
content of such appeal shall be
governed by § 145.9(g) of this chapter.
(7) The grant of any part of a request
for confidential treatment under this
section may be reconsidered if a
subsequent request under the Freedom
of Information Act is made for the
information.
(d) Commission staff will not consider
confidential treatment requests for
information that is required to be made

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in writing that it does not object to the
proposed change and authorizes
implementation of the change on an
earlier date.
(b) Materiality. The term ‘‘materially
affect the nature or level of risks
presented,’’ when used to qualify
§ 40.9 [Reserved]
determinations on a change to rules,
§ 40.10 Special certification procedures for procedures, or operations of a
systemically important derivatives
submission of rules by systemically
clearing organization, means matters as
important derivatives clearing
organizations.
to which there is a reasonable
possibility that the change could affect
(a) Advance notice. A registered
the performance of essential clearing
derivatives clearing organization that
and settlement functions or the overall
has been designated by the Financial
nature or level of risk presented by the
Stability Oversight Council as a
systemically important derivatives
systemically important derivatives
clearing organization. Such changes
clearing organization shall provide
may include, but are not limited to,
notice to the Commission not less than
changes that materially affect financial
60 days in advance of any proposed
resources, participant and product
change to its rules, procedures, or
eligibility, risk management (including
operations that could materially affect
matters relating to margin and stress
the nature or level of risks presented by
testing), daily or intraday settlement
the systemically important derivatives
procedures, default procedures, system
clearing organization. A notice
safeguards (business continuity and
submitted under this section shall be
disaster recovery), and governance. If a
subject to the filing requirements of
§ 40.6(a)(1) and the Web site publication systemically important derivatives
clearing organization determines that a
requirements of § 40.6(a)(2).
proposed change is not material and
(1) The notice of a proposed change
therefore does not file an advance notice
shall provide the information required
under this § 40.10, but the Commission
to be submitted under § 40.6(a)(7) and
determines that the change is material,
shall specifically describe:
(i) The nature of the change and
the Commission may require the
expected effects on risks to the
systemically important derivatives
systemically important derivatives
clearing organization to withdraw the
clearing organization, its clearing
proposed change and provide notice
members, or the market; and
pursuant to this section.
(ii) How the systemically important
(c) Further information. The
derivatives clearing organization plans
Commission may require the
to manage any identified risks.
systemically important derivatives
(2) Concurrent with providing the
clearing organization to provide any
Commission with the advance notice or further information necessary to assess
any request or other information related the effect the proposed change would
to the advance notice, the systemically
have on the nature or level of risks
important derivatives clearing
associated with the systemically
organization shall provide the Board of
important derivatives clearing
Governors of the Federal Reserve
organization’s payment, clearing, or
System with a copy of such notice,
settlement activities and the sufficiency
request or other information in the same of any proposed risk management
format and manner as required by the
techniques.
(d) Notice of objection. A systemically
Board of Governors for those designated
important derivatives clearing
financial market utilities for which it is
organization shall not implement a
the Supervisory Agency pursuant to
change to which the Commission has an
section 803(8) of the Dodd-Frank Wall
Street Reform and Consumer Protection objection on the grounds that the
proposed change is not consistent with
Act.
(3) The systemically important
the Act or the Commission’s regulations,
derivatives clearing organization may
or the purposes of the Dodd-Frank Act
request that the Commission expedite
or any applicable rules, orders, or
the review on the grounds that the
standards prescribed under Section
change would materially decrease risk.
805(a) of the Dodd-Frank Act. The
The Commission, in its discretion, may
Commission will notify the systemically
expedite the review and, pursuant to
important derivatives clearing
paragraph (g) of this section, notify the
organization in writing of any objection
systemically important derivatives
regarding the proposed change within
clearing organization in less than 60
60 days from the later of:
(1) The date that the notice of the
days from the date the Commission
proposed change was received; or
receives the notice of proposed change

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public under the Act. The terms and
conditions of a product submitted to the
Commission pursuant to § 40.2, § 40.3,
§ 40.5 and § 40.6 of this part shall be
made publicly available at the time of
submission.

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(2) The date the Commission received
any further information it had requested
for consideration of the notice.
(e) Implementation of change absent
Commission objection. A systemically
important derivatives clearing
organization may implement a change if
it has not received an objection to the
proposed change within 60 days from
the later of:
(1) The date that the Commission
received the notice of proposed change;
or
(2) The date the Commission received
any further information it had requested
for consideration of the notice.
(f) Extended review. The Commission
may, during the 60-day review period,
extend the review period if the
proposed change raises novel or
complex issues. A notification by the
Commission pursuant to this paragraph
will extend the review for an additional
60 days. Any extension under this
paragraph will extend the time periods
under paragraphs (d) and (e) of this
section for an additional 60 days.
(g) Change allowed earlier if notified
of no objection. A systemically
important derivatives clearing
organization may implement a change
in less than 60 days from the date the
Commission receives the notice of
proposed change or the date the
Commission receives any further
information it has requested, if the
Commission notifies the systemically
important derivatives clearing
organization in writing that it does not
object to the proposed change and
authorizes implementation of the
change on an earlier date, subject to any
conditions imposed by the Commission.
(h) Emergency changes. A
systemically important derivatives
clearing organization may implement a
change that would otherwise require
advance notice under this section if it
determines that an emergency exists and
immediate implementation of the
change is necessary for the systemically
important derivatives clearing
organization to continue to provide its
services in a safe and sound manner.
(1) The systemically important
derivatives clearing organization shall
provide notice of any such emergency
change to the Commission as soon as
practicable, which shall be no later than
24 hours after implementation of the
change.
(2) The notice of an emergency change
shall:
(i) Provide the information required
for advance notice as set forth in
paragraph (a) of this section;
(ii) Describe the nature of the
emergency; and

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(iii) Describe the reason the change
was necessary for the systemically
important derivatives clearing
organization to continue to provide its
services in a safe and sound manner.
(3) The Commission may require
modification or rescission of the
emergency change if it finds that the
change is not consistent with the Act or
the Commission’s regulations, or the
purposes of the Dodd-Frank Act or any
applicable rules, orders, or standards
prescribed under Section 805(a) of the
Dodd-Frank Act.

of the intent to carry out a 90-day
review.
(2) Final determination. The
Commission shall issue an order
approving or disapproving an
agreement, contract, transaction, or
swap that is subject to a 90-day review
under § 40.11(c) not later than 90 days
subsequent to the date that the
Commission commences review, or if
applicable, at the conclusion of such
extended period agreed to or requested
by the registered entity.

§ 40.11 Review of event contracts based
upon certain excluded commodities.

§ 40.12 Staying of certification and tolling
of review period pending jurisdictional
determination.

(a) Prohibition. A registered entity
shall not list for trading or accept for
clearing on or through the registered
entity any of the following:
(1) An agreement, contract,
transaction, or swap based upon an
excluded commodity, as defined in
Section 1a(19)(iv) of the Act, that
involves, relates to, or references
terrorism, assassination, war, gaming, or
an activity that is unlawful under any
State or Federal law; or
(2) An agreement, contract,
transaction, or swap based upon an
excluded commodity, as defined in
Section 1a(19)(iv) of the Act, which
involves, relates to, or references an
activity that is similar to an activity
enumerated in § 40.11(a)(1) of this part,
and that the Commission determines, by
rule or regulation, to be contrary to the
public interest.
(b) [Reserved.]
(c) 90-day review and approval of
certain event contracts. The
Commission may determine, based
upon a review of the terms or conditions
of a submission under § 40.2 or § 40.3,
that an agreement, contract, transaction,
or swap based on an excluded
commodity, as defined in Section
1a(19)(iv) of the Act, which may
involve, relate to, or reference an
activity enumerated in § 40.11(a)(1) or
§ 40.11(a)(2), be subject to a 90-day
review. The 90-day review shall
commence from the date the
Commission notifies the registered
entity of a potential violation of
§ 40.11(a).
(1) The Commission shall request that
a registered entity suspend the listing or
trading of any agreement, contract,
transaction, or swap based on an
excluded commodity, as defined in
Section 1a(19)(iv) of the Act, which may
involve, relate to, or reference an
activity enumerated in § 40.11(a)(1) or
§ 40.11(a)(2), during the Commission’s
90-day review period. The Commission
shall post on the Web site a notification

(a) Notice of novel derivative
products. (1) A registered entity
certifying, submitting for approval, or
otherwise filing a proposal to list, trade,
or clear a novel derivative product
(other than a product subject to the
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)
may provide notice of its proposal to the
Commission and the Securities and
Exchange Commission with a statement
that written notice has been provided to
both agencies through an appropriate
means provided in each Commission’s
regulations.
(2) If concurrent notice is not
provided pursuant to § 40.12(a)(1), the
Commission shall notify the Securities
and Exchange Commission of the
registered entity’s submission of a novel
derivative product described in
§ 40.12(a)(1) and accompany such notice
with a copy of the submission. The
Commission shall determine whether a
particular submission is a novel
derivative product requiring notice to
the Securities and Exchange
Commission not later than five business
days subsequent to the date that the
registered entity submits the product for
Commission review.
(b) Tolling of review period. Upon
receipt of a request for a jurisdictional
determination, pursuant to Section
718(a)(2) of the Dodd-Frank Act, by the
Commission or the Securities and
Exchange Commission, the product
certification shall be stayed or the
approval review period shall be tolled
until a final determination order is
issued.
(1) The Commission will provide the
registered entity with a written notice of
stay pending issuance of a final
determination order by the Commission
or the Securities and Exchange
Commission.
(2) The stay shall be withdrawn or the
approval review period shall resume

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upon the Commission’s or the Securities
and Exchange Commission’s issuance of
a final determination order finding that
the Commission has jurisdiction over
the submission.
(3) Determination order. A final
determination, for purposes of § 40.12(b)
of this part, shall be a determination
order issued by the Commission or the
Securities and Exchange Commission
pursuant to Section 718(a)(3) of the
Dodd-Frank Act.
(c) Judicial review of determination
order. The filing of a petition by a
complaining Commission, pursuant to
Section 718(b) of the Dodd-Frank Act,
shall operate as a stay of the agency
order.
(1) The stay shall remain in effect
until the date on which the United
States Court of Appeals for the District
of Columbia Circuit issues a final
determination pursuant to Section
718(b)(4) of the Dodd-Frank Act, or until
such date that there is a final
disposition of an appeal of that
determination.
(2) The submission review period
shall resume upon issuance of a final
determination, as described in
§ 40.12(c)(1), that the Commission has
jurisdiction over the submission.
Appendix A to Part 40—Schedule of
Fees
(a) Applications for product approval. Each
application for product approval under § 40.3
must be accompanied by a check or money
order made payable to the Commodity
Futures Trading Commission in an amount to
be determined annually by the Commission
and published in the Federal Register.
(b) Checks and applications should be sent
to the attention of the Office of the
Secretariat, Commodity Futures Trading
Commission, Three Lafayette Centre, 1155
21st Street, N.W., Washington, DC 20581. No
checks or money orders may be accepted by
personnel other than those in the Office of
the Secretariat.
(c) Failure to submit the fee with an
application for product approval will result
in return of the application. Fees will not be
returned after receipt.

Appendix B to Part 40—[Reserved]
Appendix C to Part 40—[Reserved]
Appendix D to Part 40—Submission
Cover Sheet and Instructions
(a) A properly completed submission cover
sheet shall accompany all rule and product
submissions submitted electronically by a
registered entity in a format and manner
specified by the Secretary of the Commission
to the Secretary of the Commission. A
properly completed submission cover sheet
shall include all of the following:
1. Identifier Code (optional)—A registered
entity Identifier Code at the top of the cover
sheet, if applicable. Such codes are
commonly generated by registered entities to

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provide an identifier that is unique to each
filing (e.g., NYMEX Submission 03–116).
2. Date—The date of the filing.
3. Organization—The name of the
organization filing the submission (e.g.,
CBOT).
4. Filing as a—Check in the appropriate
box indicating that the rule or product is
being submitted by a designated contract
market (DCM), derivatives clearing
organization (DCO), swap execution facility
(SEF), or swap data repository (SDR),
electronic trading facility with a significant
price discovery contract (the term will be
removed on July 20, 2012).1
5. Type of Filing—An indication as to
whether the filing is a new rule, rule
amendment or new product. The registered
entity should check the appropriate box to
indicate the applicable category under that
heading.
6. Rule Numbers—For rule filings, the rule
number(s) being adopted or modified in the
case of rule amendment filings.
7. Description—For rule or rule
amendment filings, a description of the new
rule or rule amendment, including a
discussion of its expected impact on the
registered entity, market participants, and the
overall market. The narrative should describe
the substance of the submission with enough
specificity to characterize all material aspects
of the filing.
(b) Other Requirements—A submission
shall comply with all applicable filing
requirements for proposed rules, rule
amendments, or products. The filing of the
submission cover sheet does not obviate the
registered entity’s responsibility to comply
with applicable filing requirements (e.g.,
rules submitted for Commission approval
under § 40.5 must be accompanied by an
explanation of the purpose and effect of the
proposed rule along with a description of any
substantive opposing views).
(c) Checking the box marked ‘‘confidential
treatment requested’’ on the Submission
Cover Sheet does not obviate the submitter’s
responsibility to comply with all applicable
requirements for requesting confidential
treatment in § 40.8 and, where appropriate,
§ 145.9 of this chapter, and will not
substitute for notice or full compliance with
such requirements.
Issued in Washington, DC, on July 19,
2011, by the Commission.
David A. Stawick,
Secretary of the Commission.

mstockstill on DSK4VPTVN1PROD with RULES

Appendices to Provisions Common to
Registered Entities—Commission
Voting Summary and Statements of
Commissioners
Note: The following appendices will not
appear in the Code of Federal Regulations.
1 Even though ECM–SPDC was eliminated by the
Dodd-Frank Act, the Commission will retain
references to this entity in the cover sheet since
ECMs may be allowed to operate until July 20,
2012, pursuant to grandfather relief issued by the
Commission. See 75 FR 56513 (Sept. 16, 2010).

VerDate Mar<15>2010

16:06 Jul 26, 2011

Jkt 223001

Appendix 1—Commission Voting
Summary
On this matter, Chairman Gensler and
Commissioners Dunn, Sommers, Chilton and
O’Malia voted in the affirmative; no
Commissioner voted in the negative.

Appendix 2—Statement of Chairman
Gary Gensler
I support the final rulemaking to establish
a process for the certification and approval of
new rules and rule amendments for
designated contract markets, derivatives
clearing organizations, as well as new
registrants, swap execution facilities and
swap data repositories. The Dodd-Frank Wall
Street Reform and Consumer Protection Act
establishes enhanced CFTC review and
certification of new rules and amendments.
Today’s final regulations provide important
procedural guidance to registered entities on
how to comply with Congress’s mandate for
the Commission’s review of new rules and
rule amendments.
[FR Doc. 2011–18661 Filed 7–26–11; 8:45 am]
BILLING CODE 6351–01–P

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9539]
RIN 1545–BI09

Election of Reduced Research Credit
Under Section 280C(c)(3)
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:

This document contains final
regulations that amend the regulations
concerning the election to claim the
reduced research credit. The final
regulations simplify how taxpayers
make the election and affect taxpayers
that claim the reduced research credit.
DATES: Effective Date: These regulations
are effective on July 27, 2011.
Applicability Date: For dates of
applicability, see § 1.280C–4(c).
FOR FURTHER INFORMATION CONTACT:
David Selig, (202) 622–3040 (not a tollfree number).
SUPPLEMENTARY INFORMATION:
SUMMARY:

Background
This document contains amendments
to the Income Tax Regulations (26 CFR
Part 1) relating to the election for
claiming the reduced research credit
under section 280C(c)(3). On July 16,
2009, a notice of proposed rulemaking
(REG–130200–08) was published in the
Federal Register (74 FR 34523). No
public hearing was requested or held.

PO 00000

Frm 00040

Fmt 4700

Sfmt 4700

Written and electronic comments
responding to the notice of proposed
rulemaking were received. After
considering the comments received the
proposed regulations are adopted as
revised by this Treasury decision.
Section 280C(c)(1) provides that no
deduction shall be allowed for that
portion of the qualified research
expenses (as defined in section 41(b)) or
basic research expenses (as defined in
section 41(e)(2)) otherwise allowable as
a deduction for the taxable year which
is equal to the amount of the credit
determined for such taxable year under
section 41(a).
Similarly, section 280C(c)(2) provides
that if the amount of the credit
determined for the taxable year under
section 41(a)(1) exceeds the amount
allowable as a deduction for such
taxable year for qualified research
expenses or basic research expenses
(determined without regard to section
280C(c)(1)), the amount chargeable to
capital account for the taxable year for
such expenses shall be reduced by the
amount of such excess.
Section 280C(c)(3)(A) provides, in
general, that in the case of any taxable
year for which an election is made
under section 280C(c)(3), sections
280C(c)(1) and (c)(2) shall not apply,
and the amount of the credit under
section 41(a) shall be the amount
determined under section 280C(c)(3)(B).
Under section 280C(c)(3)(B), the amount
of credit for any taxable year shall be the
amount equal to the excess of the
amount of credit determined under
section 41(a) without regard to section
280C(c)(3), over the product of the
amount of credit determined under
section 280C(c)(3)(B)(i), and the
maximum rate of tax under section
11(b)(1).
Section 280C(c)(3)(C) provides that an
election under section 280C(c)(3) for
any taxable year shall be made not later
than the time for filing the return of tax
for such year (including extensions),
shall be made on such return, and shall
be made in such manner as the
Secretary may prescribe. Section
1.280C–4(a) provides that the section
280C(c)(3) election to have the
provisions of section 280C(c)(1) and
(c)(2) not apply shall be made by
claiming the reduced credit under
section 41(a) determined by the method
provided in section 280C(c)(3)(B) on an
original return for the taxable year, filed
at any time on or before the due date
(including extensions) for filing the
income tax return for such year. Such an
election, once made, shall be irrevocable
for that taxable year.
Section 280C(c)(4) provides that
section 280C(b)(3) shall apply for

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