60-day FRN

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the Commission Web site for a 30-day
public comment period. A derivatives
clearing organization that wishes to
request confidential treatment for
portions of its submission may do so in
accordance with the procedures set out
in § 145.9(d).
(5) The Commission will review the
submission and determine whether the
swap, or group, category, type, or class
of swaps described in the submission is
required to be cleared. The Commission
will make its determination not later
than 90 days after a complete
submission has been received, unless
the submitting derivatives clearing
organization agrees to an extension. The
determination of when such submission
is complete shall be at the sole
discretion of the Commission. In making
a determination that a clearing
requirement shall apply, the
Commission may require such terms
and conditions to the requirement as the
Commission determines to be
appropriate.
(c) Commission-initiated reviews. (1)
The Commission on an ongoing basis
will review swaps that have not been
accepted for clearing by a derivatives
clearing organization to make a
determination as to whether the swaps
should be required to be cleared. In
undertaking such reviews, the
Commission will use information
obtained pursuant to Commission
regulations from swap data repositories,
swap dealers, and major swap
participants, and any other available
information.
(2) Notice regarding any
determination made under paragraph
(c)(1) of this section will be posted on
the Commission Web site for a 30-day
public comment period.
(3) If no derivatives clearing
organization has accepted for clearing a
particular swap, group, category, type,
or class of swaps that the Commission
finds would otherwise be subject to a
clearing requirement, the Commission
will:
(i) Investigate the relevant facts and
circumstances;
(ii) Within 30 days of the completion
of its investigation, issue a public report
containing the results of the
investigation; and
(iii) Take such actions as the
Commission determines to be necessary
and in the public interest, which may
include requiring the retaining of
adequate margin or capital by parties to
the swap, group, category, type, or class
of swaps.
(d) Stay of clearing requirement. (1)
After making a determination that a
swap, or group, category, type, or class
of swaps is required to be cleared, the

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Commission, on application of a
counterparty to a swap or on its own
initiative, may stay the clearing
requirement until the Commission
completes a review of the terms of the
swap, or group, category, type, or class
of swaps and the clearing arrangement.
(2) A counterparty to a swap that
wishes to apply for a stay of the clearing
requirement for that swap shall submit
a written request to the Secretary of the
Commission that includes:
(i) The identity and contact
information of the counterparty to the
swap;
(ii) The terms of the swap subject to
the clearing requirement;
(iii) The name of the derivatives
clearing organization clearing the swap;
(iv) A description of the clearing
arrangement; and
(v) A statement explaining why the
swap should not be subject to a clearing
requirement.
(3) A derivatives clearing organization
that has accepted for clearing a swap, or
group, category, type, or class of swaps
that is subject to a stay of the clearing
requirement shall provide any
information requested by the
Commission in the course of its review.
(4) The Commission will complete its
review not later than 90 days after
issuance of the stay, unless the
derivatives clearing organization that
clears the swap, or group, category,
type, or class of swaps agrees to an
extension.
(5) Upon completion of its review, the
Commission may:
(i) Determine, subject to any terms
and conditions as the Commission
determines to be appropriate, that the
swap, or group, category, type, or class
of swaps must be cleared; or
(ii) Determine that the clearing
requirement will not apply to the swap,
or group, category, type, or class of
swaps, but clearing may continue on a
non-mandatory basis.
PART 140—ORGANIZATION,
FUNCTIONS, AND PROCEDURES OF
THE COMMISSION
3. The authority citation for part 140
continues to read as follows:
Authority: 7 U.S.C. 2 and 12a.

§ 140.94 Delegation of authority to the
Director of the Division of Clearing and
Intermediary Oversight.

(a) * * *
(5) All functions reserved to the
Commission in § 5.14 of this chapter;

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Issued in Washington, DC, on October 26,
2010, by the Commission.
David A. Stawick,
Secretary of the Commission.
Note: The following attachment will not
appear in the Code of Federal Regulations:

Statement of Chairman Gary Gensler
Process for Review of Swaps for
Mandatory Clearing October 26, 2010
I support the proposed rulemaking to
establish a process for the review and
designation of swaps for mandatory
clearing. One of the primary goals of the
Dodd-Frank Act was to lower risk by
requiring standardized swaps to be
centrally cleared. The process set out in
the proposed rule is consistent with the
Congressional requirement that
derivatives clearing organizations
(DCOs) be eligible to clear the swaps
and that before a swap becomes subject
to mandatory clearing the public get to
provide input on the contract or class of
contracts. Though we have until July to
finalize this rulemaking, it is my hope
that we can finish by April. This would
allow us to begin reviewing the
contracts that are already being cleared
by DCOs and under Dodd-Frank have
already been deemed submitted to the
Commission for consideration.
[FR Doc. 2010–27532 Filed 11–1–10; 8:45 am]
BILLING CODE 6351–01–P

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

Provisions Common to Registered
Entities
Commodity Futures Trading
Commission.
ACTION: Notice of proposed rulemaking.
AGENCY:

The Commodity Futures
Trading Commission (‘‘Commission’’ or
‘‘CFTC’’) is proposing rules to
implement new statutory provisions
enacted under Title VII of the DoddFrank Wall Street Reform and Consumer
Protection Act (‘‘Dodd-Frank Act’’) and
amend existing rules affected by the
passage of the Dodd-Frank Act. These
proposed rules apply to designated
contract markets (‘‘DCMs’’), derivatives

SUMMARY:

4. In § 140.94, revise paragraph (a)(5)
and add new paragraphs (a)(6) and (a)(7)
to read as follows:

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(6) All functions reserved to the
Commission in §§ 39.5(b)(2) and (d)(3)
of this chapter; and
(7) All functions reserved to the
Commission in §§ 39.11 (b)(1)(vi),
(b)(2)(ii), (c)(1), (c)(2), (f)(1), and (f)(4) of
this chapter.
*
*
*
*
*

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clearing organizations (‘‘DCOs’’), swap
execution facilities (‘‘SEFs’’) and swap
data repositories (‘‘SDRs’’). The
proposed rules implement the new
statutory framework for certification and
approval for new products, new rules
and rule amendments submitted to the
Commission by registered entities.
Furthermore, the proposed rules
prohibit event contracts based on
certain excluded commodities, establish
special procedures for certain rule
changes proposed by systemically
important derivatives clearing
organizations (‘‘SIDCOs’’), and provide
for the tolling of review periods for
certain novel derivative products
pending the resolution of jurisdictional
determinations.
DATES: Submit comments on or before
January 3, 2011.
ADDRESSES: You may submit comments,
identified by RIN number, by any of the
following methods:
• Agency Web site, via its Comments
Online process: http://
comments.cftc.gov. Follow the
instructions for submitting comments
through the Web site.
• Mail: David A. Stawick, Secretary of
the Commission, Commodity Futures
Trading Commission, Three Lafayette
Centre, 1155 21st Street, NW.,
Washington, DC 20581
• Hand Delivery/Courier: Same as
mail above.
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow
instructions for submitting comments.
All comments must be submitted in
English, or if not, accompanied by an
English translation. Comments will be
posted as received to http://
www.cftc.gov. You should submit only
information that you wish to make
available publicly. If you wish the
Commission to consider information
that is exempt from disclosure under the
Freedom of Information Act, a petition
for confidential treatment of the exempt
information may be submitted according
to the procedures established in CFTC
Regulation 145.9.1 The Commission
reserves the right, but shall have no
obligation, to review, pre-screen, filter,
redact, refuse or remove any or all of
your submission from http://
www.cftc.gov that it may deem to be
inappropriate for publication, such as
obscene language. All submissions that
have been redacted or removed that
contain comments on the merits of the
rulemaking will be retained in the
public comment file and will be
considered as required under the
Administrative Procedure Act and other
1 17

CFR 145.9.

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applicable laws, and may be accessible
under the Freedom of Information Act.
FOR FURTHER INFORMATION CONTACT:
Bella Rozenberg, Special Counsel,
Division of Market Oversight (‘‘DMO’’),
at 202–418–5119 or
[email protected], Riva Spear
Adriance, Associate Director for Market
Review, DMO at 202–418–5494 or
[email protected], in each case, also at
the Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street, NW., Washington, DC
20581.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. The Proposed Amendments to Part 40 of
the Commission’s Regulations
a. Definitions
b. Listing and accepting products for
trading or clearing by certification
c. Voluntary submission of new products
for Commission review and approval
d. Amendments to terms or conditions of
enumerated agricultural contracts
e. Voluntary submission of rules for
Commission review and approval
f. Self-certification of rules
g. Delegations
h. Availability of public information
i. Special certification procedures for
submission of rules by systemically
important derivatives clearing
organizations
j. Review of event contracts based on
certain excluded commodities
k. Tolling of review period pending
jurisdictional determination
III. Related Matters
a. Regulatory Flexibility Act
b. Paperwork Reduction Act
c. Cost Benefit Analysis

I. Background
On July 21, 2010, President Obama
signed the Dodd-Frank Act.2 Title VII of
the Dodd-Frank Act 3 amended the
Commodity Exchange Act (‘‘Act’’) 4 to
establish a comprehensive new
regulatory framework for swaps and
security-based swaps. The legislation
was enacted to reduce risk, increase
transparency, and promote market
integrity within the financial system by,
among other things: (1) Providing for the
registration and comprehensive
regulation of swap dealers and major
swap participants; (2) imposing clearing
and trade execution requirements on
standardized derivative products; (3)
creating robust recordkeeping and real2 See

Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law 111–203, 124
Stat. 1376 (2010). The text of the Dodd-Frank Act
may be accessed at http://www.cftc.gov/
LawRegulation/OTCDERIVATIVES/index.htm.
3 Pursuant to Section 701 of the Dodd-Frank Act,
Title VII may be cited as the ‘‘Wall Street
Transparency and Accountability Act of 2010.’’
4 7 U.S.C. 1 et seq.

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time reporting regimes; and (4)
enhancing the Commission’s
rulemaking and enforcement authorities
with respect to, among others, all
registered entities and intermediaries
subject to the Commission’s oversight.
Section 745 of the Dodd-Frank Act
amends Section 5c of the Act to provide
for new rule, rule amendment and
product certification and approval
procedures, which are applicable to
DCMs and DCOs, as well as new
registered entities, SEFs and SDRs.5
Section 745 of the Dodd-Frank Act also
authorizes the Commission to prohibit
the listing of event contracts based on
certain excluded commodities if such
contracts involve one or more activities
enumerated in the Dodd-Frank Act.
Furthermore, Section 745 of the DoddFrank Act authorizes the Commission to
prohibit contracts based on similar
activities if they are determined by rule
or regulation to be contrary to the public
interest. Section 806(e)(1) of the DoddFrank Act requires that a SIDCO 6
provide the Commission with 60 days
advance notice of any proposed changes
to rules, procedures or operations that
could materially affect the nature or
level of risk presented by a SIDCO.
Finally, the Commission proposes to toll
the review period of novel derivative
products pending a determination as to
whether the Commission or the
Securities and Exchange Commission
(‘‘SEC’’) has jurisdiction over novel
derivative products.
The Commission proposes a number
of changes in order to enhance its ability
to administer the Act, as amended,
ensure consistency with various new
requirements of the Dodd-Frank Act and
clarify the regulatory obligations
imposed on market participants.
Specifically, the Commission proposes
to amend sections 40.1 through 40.8 and
adopt new sections 40.10 through
40.12 7 to amend the definitions,
establish certification and approval
procedures for the rules and products of
registered entities, including SIDCOs,
prohibit event contracts based on
certain excluded commodities, and
codify statutory requirements relating to
tolling of the review period pending
SEC and CFTC jurisdictional
determinations.
5 The Dodd-Frank Act created new registered
entities, including SEFs and SDRs. Issues related to
the regulation of these entities will be addressed in
other rulemakings issued by the Commission.
6 A SIDCO is a DCO that has been designated as
a systemically important financial market utility by
the Financial Stability Oversight Council pursuant
to Section 804 of the Dodd-Frank Act.
7 Commission regulations referred to herein are
found at 17 CFR 1.

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Although Section 745 of the DoddFrank Act does not provide a statutory
deadline for promulgation of final rules,
Part 40 of the Commission’s regulations
currently is inconsistent with certain
provisions of Section 745. In addition,
since, as noted, the Dodd-Frank Act
created new registered entities, SEFs
and SDRs, the rule certification
procedures for these new registered
entities must be in place by the time
these entities begin operating.
Therefore, Part 40 should be amended
by July 15, 2011, the date when relevant
provisions of the Dodd-Frank Act
become effective.
The Commission requests comment
on all aspects of the proposed rules, as
well as comment on the specific
provisions and issues highlighted in the
discussion below.
II. The Proposed Amendments to Part
40 of the Commission’s Regulations
a. Section 40.1

Definitions

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To implement the requirements of the
Dodd-Frank Act and to ensure the
Commission’s ability to administer Part
40, the Commission proposes a number
of amendments to the definitions found
in § 40.1. The Commission proposes to
add definitions for ‘‘dormant swap
execution facilities’’ and ‘‘dormant swap
data repositories’’ to provide consistency
with the extant § 40.1definitions for
dormant DCMs and dormant DCOs.
Also, the Commission proposes to
delete the definition of a ‘‘dormant
derivatives trading execution facility’’
since this entity was eliminated by the
Dodd-Frank Act.
Further, the Commission proposes to
revise the definition of ‘‘emergency’’ to
include an occurrence or circumstance
that threatens the timely collection and
payment of funds in connection with
clearing and settlement by a derivatives
clearing organization. In addition, the
Commission proposes to incorporate
references to swap transactions where
appropriate to ensure consistency in
application of Part 40 to both current
and new registered entities. The
Commission also proposes to delete the
existing restriction on Commission
review of rules relating to margin levels
currently included in the definition of
rule.8 The restriction is no longer
8 The restriction in the current regulations reflects
an ambiguity in the Act as modified by the
Commodity Futures Modernization Act (‘‘CFMA’’).
Prior to enactment of the CFMA in 2000, Section
5a(a)(12)(A) of the Act required that all changes to
contract terms and conditions be submitted to the
Commission for approval ‘‘except those rules
relating to the setting of levels of margin.’’ In
Section 113 of the CFMA, Congress removed
Section 5a(a)(12)(A), allowing registered entities to
amend their rules by self-certification. The new

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appropriate as Section 736 of the DoddFrank Act amends Section 8a(7) of the
Act to permit the Commission to alter or
supplement the rules of a registered
entity by issuing rules, regulations or
orders regarding margin requirements.
By necessity, such action requires the
Commission to be able to review a
DCO’s rules ‘‘relating to the setting of
levels of margin’’ in the first instance,
even though the Commission itself is
not authorized to ‘‘set specific margin
amounts’’ under Section 8(a)(7). Finally,
the Commission proposes to revise the
definition of ‘‘terms and conditions’’ to
add a new paragraph (j)(15) to include
specific information relating to swaps
proposed to be cleared by a DCO. By
supplementing other provisions of
paragraph (j) that are relevant to swaps,
the Commission seeks to clarify the
types of information that may
differentiate swaps from futures
contracts. These include, for example,
the following: notional value; relevant
dates, tenor, and day count conventions;
stub, premium, or initial cash flow
components; and payment and reset
frequency.
b. Section 40.2 Listing and accepting
products for trading or clearing by
certification
Section 5c(c) of the Act permits
registered entities to list for trading or
accept for clearing any new product by
providing to the Commission a written
certification that the new product, rule,
or rule amendment complies with the
Act and Commission regulations. Under
current § 40.2, prior to listing or
accepting products for trading or
clearing by certification, the
Commission requires, among other
things, that registered entities provide
the terms and conditions of their
products and certify that submitted
products comply with the Act and
Commission regulations. The
Commission also requires that registered
provision did not retain any reference to margin
rules. However, Section 8(a)(7) was not amended by
the CFMA, and retained a provision that allowed
the Commission to alter or supplement the rules of
a registered entity, except for rules relating to ‘‘the
setting of levels of margin,’’ thereby creating
uncertainty as to whether registered entities could
adopt or change margin rules without certifying
those rules to the Commission. Because there was
no indication that Congress intended to alter the
special status of rules relating to the setting of
margin levels, the Commission resolved this
ambiguity by excluding the setting of margin levels
from the definition of ‘‘rule.’’ Section 8(a)(7)(D) now
permits the Commission to require the changes with
respect to margin requirements provided that the
Commission’s rules, regulations or orders (i) are
limited to protecting the financial integrity of a
DCO, (ii) are designed for risk management
purposes to protect the financial integrity of
transactions, and (iii) do not set specific margin
amounts.

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entities provide, only if requested by
Commission staff, additional
information relating to whether the
contract meets the requirements of the
Act or the Commission’s regulations or
policies thereunder.
Further, the Act permits registered
entities to list for trading only those
products that are not susceptible to
manipulation and have appropriate
position limitations or position
accountability for speculators. To assist
registered entities in demonstrating
compliance with these Core Principles
and to better ensure the integrity of
certified products, the Commission
proposes two amendments to § 40.2.
The Commission proposes to amend
§ 40.2 to require registered entities to
include in their submission
documentation relied on to establish the
basis for compliance with the applicable
provisions of the Act and the
Commission’s regulations thereunder,
including the Core Principles for
registered entities. The proposed
amendments to § 40.2 will increase the
timeliness and efficiency of Commission
review. The Commission has always
required that registered entities have
evidence supporting their certification
of compliance with the Act available for
Commission review.9
Based on these experiences, the
Commission proposes to amend
§ 40.2(a) to require a registered entity to
include in its submission any
documentation relied on to establish the
basis for compliance with the Act and
the Commission’s regulations
thereunder, including the applicable
Core Principles. For DCM and SEF
submissions of new products and
product amendments, the Commission
expects submissions to include
documentation demonstrating that the
product is not readily susceptible to
manipulation (Core Principle 3 for
9 For instance, in January 2006, when the
Commission issued Technical and Clarifying
Amendments to Rules for Exempt Markets,
Derivatives Transaction Execution Facilities and
Designated Contract Markets, and Procedural
Changes for Derivatives Clearing Organization
Registration Applications, it required DCMs to
provide documentation demonstrating compliance
with the Act and the Commission’s regulations. It
expressly stated, ‘‘DCMs are responsible in the first
instance, and the Commission is ultimately
responsible in its oversight role, for assuring that
DCM products and rules comply with applicable
designation criteria and Core Principles. When a
DCM self-certifies a product or rule, it is, in effect,
pledging that the product or rule does meet those
standards. Assuming the DCM is acting in good
faith, it must have some reasonable basis for making
that pledge * * * [and therefore] * * * when
reasonable questions arise, it should not be
burdensome for a DCM to share information
regarding the reasonable basis underlying the new
product or a rule with the Commission or its staff.’’
See 71 FR 1956 (Jan. 12, 2006).

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DCMs and SEFs) and that associated
position limits or position
accountability provisions are necessary
and appropriate (Core Principle 5 for
DCMs and Core Principle 4 for SEFs).
Proposed §§ 40.3, 40.5, and 40.6 contain
a similar requirement for submission of
new products, rules and rule
amendments.
The Commission believes that before
self-certifying that a new contract
complies with the Act and the
Commission’s regulations, a registered
entity should conduct an appropriate
due diligence review to support that
assertion. Furthermore, the Commission
believes that any such review should
generate some form of documentation at
the registered entity substantiating the
review, including information used and
sources consulted to reach the
conclusion supporting self-certification.
Therefore, the Commission believes that
the inclusion of such information in the
self-certified submission itself should
not be burdensome for registered
entities that are conducting appropriate
due diligence reviews before making
such submissions.
Further, the Commission proposes a
new § 40.2 requirement that registered
entities examine potential legal issues
associated with the listing of products
and include certain representations with
their submissions. The reason for these
requirements is that certain commodity
futures and option products are based
on measures or linked to information
that may be subject to bona fide
intellectual property rights claims.
Commodity futures and option
contracts, such as those based on
emission credits, can also be based on
underlying markets that are constructs
of Federal or state regulations. In these
and other circumstances, the
Commission has an interest in verifying
that registered entities have an adequate
understanding of the legal conditions
and constraints that may have a material
impact on the trading of these types of
products. Accordingly, the Commission
proposes to add § 40.2(a)(3)(vi) to
require that certified product
submissions be accompanied by a
written statement verifying that the
registered entity has undertaken a due
diligence review of the legal conditions,
including conditions relating to
contractual and intellectual property
rights, that may affect the trading of the
product underlying the contract.
Finally, the Commission proposes in
§ 40.2(a)(3)(vii) to require a registered
entity to certify that the registered entity
has posted a copy of the pending
product certification submission on the
registered entity’s Web site at the time
of the filing. This will permit market

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participants to receive prompt notice of
new rules filed with the Commission.
c. Section 40.3 Voluntary submission
of new products for Commission review
and approval
Although the Dodd-Frank Act does
not specifically require that the
Commission amend § 40.3, the
Commission believes that the
amendments described below are
necessary to enhance the Commission’s
ability to administer the Act. Similar to
its proposed amendments to § 40.2,
described above, the Commission
proposes to amend § 40.3 to require
DCMs, DCOs, and SEFs to include with
their requests for new product approval
all documentation relied upon to
determine that the new product
complies with applicable Core
Principles.
In addition, similar to proposed
§ 40.2(a)(3)(vi), proposed § 40.3(a)(9)
requires registered entities to submit a
written statement that they have
undertaken a due diligence review of
the legal conditions, including
conditions relating to contractual and
intellectual property rights, that may
affect the trading of the product. These
additional requirements should
expedite Commission review. Moreover,
parallel to proposed §§ 40.2(a)(3)(vii)
and 40.6(a)(2), proposed § 40.3(a)(10)
requires a registered entity to certify that
the registered entity has posted a copy
of the pending product certification
submission on the registered entity’s
Web site at the time of the filing. As
mentioned above, this will allow market
participants to receive prompt notice of
pending requests for product approval.
Also, to provide the overall consistency
with the requirements of the DoddFrank Act, proposed § 40.3(d)(1)
authorizes the Commission to extend
the review period if the product raises
novel or complex issues.
Finally, the Commission notes that
the standard for review and approval for
new products remains unchanged; that
is, the Commission shall approve a new
product unless the terms and conditions
of such product would violate the Act
or the Commission’s regulations
thereunder.

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or condition of a contract with open
interest that is based on an agricultural
commodity enumerated in Section 1a(9)
of the Act, must be approved by the
Commission prior to implementation. A
finding of materiality is, by statute, at
the reasonable discretion of the
Commission. Through prior rulemaking,
the Commission has enumerated several
rule categories in § 40.4(b) that are
deemed not to be material for purposes
of Section 5c(c)(2)(B) of the Act and
thus not subject to prior approval. The
Commission has separately enumerated
several categories of registered entities’
rules in § 40.6(d) that need not be
approved by, or certified with, the
Commission prior to implementation.
Exchange rules that come within these
categories typically are limited in scope
and are implemented under enabling
rules that have already been approved
by, or certified with, the Commission.
Since there is substantial overlap
between the categories of rules deemed
not to be material under § 40.4(b) and
the categories of rules enumerated in
§ 40.6(d), the Commission proposes to
amend § 40.4(b) to refer to § 40.6(d) for
the purpose of identifying rules that are
deemed by the Commission not to be
material under Section 5c(c)(2)(B) of the
Act. Such rules would qualify for
implementation under § 40.6 without
prior approval or certification.
In addition, the Commission proposes
to clarify that changes in trading hours
in § 40.4(b)(3) and changes required to
comply with an order of an adjudicative
or regulatory body in § 40.4(b)(4), while
not material for purposes of Section
5c(c)(2)(B) of the Act, must be
implemented through a prior certified
submission under § 40.6(a) because of
their potential effects on the operations
of a DCM.

e. Section 40.5 Voluntary submission
of rules for Commission review and
approval
Section 745 of the Dodd-Frank Act
establishes a new standard for the
review of new rules or rule
amendments. That standard, as codified
in proposed § 40.5(b), requires the
Commission to approve a new rule or
rule amendment unless the rule or rule
amendment is inconsistent with the Act
d. Section 40.4 Amendments to terms
or the Commission’s regulations
or conditions of enumerated agricultural promulgated thereunder. In determining
products
whether a rule is inconsistent with the
Act, the Commission may also consider,
The Commission proposes a number
for example, whether the new rule or
of technical amendments to clarify
rule amendment potentially disrupts
existing regulatory obligations imposed
market integrity, or increases systemic
on the DCMs that trade contracts based
risk.
on an agricultural commodity listed in
The Commission also proposes
Section 1a(9) of the Act.
amendments to the information required
Pursuant to Section 5c(c)(2)(B) of the
to be submitted when requesting
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approval of amendments to the terms
and conditions of a product under
§ 40.5. Consistent with § 40.2 and § 40.3,
the Commission proposes to amend
§ 40.5(a)(7) to require a registered entity
submitting an amendment of a product’s
terms and conditions to include with its
submission the documentation relied
upon to establish the basis for
compliance with the Act and the
Commission’s regulations thereunder,
including the applicable Core
Principles.
Additionally, similar to
§§ 40.2(a)(3)(vii), 40.3(a)(10) and 40.6
(a)(2), the Commission proposes in
§ 40.5(a)(6) to require registered entities
to certify that the registered entity has
posted a copy of the pending product
certification submission on the
registered entity’s Web site at the time
of the filing. This will permit market
participants to receive prompt notice of
new requests for approval filed with the
Commission. The Commission intends
to continue its current practice of
publishing all requests for Commission
review and approval on its Web site.
Finally, proposed § 40.5(a)(11) requires
registered entities, in connection with
the submission of a request for changes
to a product’s terms or conditions, to
submit a written statement that they
have undertaken a due diligence review
of the legal conditions, including
conditions relating to contractual and
intellectual property rights, that may
affect the trading of the product, similar
to the statement required in §§ 40.2 and
40.3.
f. Section 40.6 Self-certification of
rules
Section 745 of the Dodd-Frank Act
amended Section 5c(c) of the Act to
include a new 10-day certification
review period for all rules and rule
amendments submitted to the
Commission by registered entities and
to permit the Commission to stay the
certification of rules or rule
amendments that, among other things,
present novel or complex issues that
require additional time to analyze. The
Commission proposes to codify these
new certification provisions in § 40.6, as
follows.
To implement the amended
procedures for self-certification of rules
described in Section 745 of the DoddFrank Act, the Commission proposes in
§ 40.6(a)(3) to require registered entities
to submit self-certifications at least ten
business days before the projected
effective date. A rule certification will
become effective ten business days after
the Commission receives the
certification, unless the Commission
notifies the registered entity, within 10

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business days, that it is staying the
certification pursuant to § 40.6(c).
Parallel to proposed § 40.5(a),
proposed § 40.6(a) requires a registered
entity to certify that the registered entity
has posted a copy of the pending
product certification submission on the
registered entity’s Web site at the time
of the filing. This will permit market
participants to receive prompt notice of
new rules or rule amendments filed
with the Commission. The Commission
intends to continue its current practice
of publishing the self-certified rules on
its Web site.
Further, in proposed § 40.6(a)(6), the
Commission clarifies the distinction
between rules that establish standards
and authorize appropriate parties to
respond to an emergency—which must
be submitted to the Commission prior to
implementation—and rules that
implement a response to a particular
emergency—which, in certain
circumstances, may be submitted to the
Commission after implementation.
Similar to §§ 40.2, 40.3 and 40.5,
proposed § 40.6(a)(7)(v) requires that
amendments to the terms and
conditions of a product be accompanied
by documentation relied upon to
establish the basis for compliance with
the Act and the regulations thereunder,
including the applicable Core
Principles.
As is proposed for §§ 40.2, 40.3 and
40.5 and discussed above, the
Commission proposes to amend
§ 40.6(a)(7)(viii) to require registered
entities to include with their
certification of any changes to a
product’s terms and conditions, a
written statement that they have
undertaken a due diligence review of
legal conditions relating to futures or
options trading based on the underlying
product or instrument.
Under proposed § 40.6(b), a new rule
or rule amendment will become
effective ten business days after the
certified rule or rule amendment is
received by the Commission, unless the
Commission notifies the registered
entity that it is staying the certification.
Generally, a DCM seeking to adopt a
program (such as a program to address
conflicts of interest), which is in
substance the same as a program
previously approved by the
Commission, or an exchange seeking to
change a rule establishing trading hours
or seeking to modify the terms and
conditions of a listed contract for which
it has provided sufficient evidence of
compliance with Core Principles, may
self-certify and, without Commission
action, implement the proposed rule or
rule amendment after ten business days.

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Proposed § 40.6(c)(1) stays the
certification of a rule if the Commission
determines that the new rule or rule
amendment presents novel or complex
issues, is certified with an inadequate
explanation, or is potentially
inconsistent with the Act or the
Commission’s regulations thereunder.
Once the Commission issues a
notification of stay to the registered
entity, the Commission will have 90
days to conduct a review. The rule will
be certified upon expiration of the 90day review period unless the
Commission objects to the certification.
If the Commission decides to lift the
stay prior to the expiration of the 90-day
review period, the Commission will
notify the registered entity of its action.
The Commission also notes that the
new stay provision in proposed
§ 40.6(c)(1) is distinct from the stay
provision presently in effect under
current § 40.6(b), which the Commission
proposes to move to § 40.6(c)(4). The
latter provision, which implements
Commission authority under section
8a(7) of the Act, permits the
Commission to stay the effectiveness of
a rule or rule amendment that already
has been implemented pursuant to the
self-certification procedures in § 40.6(a).
Conversely, the new stay provision in
proposed § 40.6(c)(1), pursuant to the
Commission’s new authority in Section
745 of the Dodd-Frank Act, authorizes a
stay of the certification itself and would
be issued during the review process,
thereby possibly preventing the certified
rule or rule amendment from ever
becoming effective in the first instance.
A stay of a rule certification may be
appropriate, for example, where a
registered entity certifies a rule that
raises unique issues not previously
reviewed by Commission staff. In
addition, the Commission believes that
new rules or rule amendments may raise
a number of complex issues if they
appear to have a material impact on the
futures market or the underlying cash
market. Thus such rules are more likely
to be subject to an extended review
period to allow the Commission to
adequately identify and address
complex regulatory issues. For example,
the Commission may need more than
ten business days to determine whether
a proposed market maker incentive
program appropriately encourages
market liquidity and does not have
unnecessary anticompetitive effects.
Staff might also need more than ten
business days to analyze whether
deliverable supplies of an underlying
commodity are sufficient to support a
proposed change to a spot month
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examples of submissions often raise a
number of complex issues that may
require an extended review period.
Proposed § 40.6(c)(2) provides for a
30-day public comment period, within
the 90-day review period, whenever the
Commission determines to stay a new
rule or rule amendment and take it
under further review. Under proposed
§ 40.6(c)(2), the Commission would
provide notice of the comment period
by posting the notice and the new rule
or rule amendment submission on the
Commission’s Web site.10
The Commission believes that
publication of the notice of the 30-day
comment period on the Commission’s
Web site, www.cftc.gov, will provide the
public and market participants with the
timely opportunity to comment on new
rules or rule amendment submissions.
The Commission routinely uses its Web
site to disseminate information
regarding Commission activities and
industry filings.11 Web site publication
would facilitate public comment while
allowing Commission staff adequate
time to assess comments and complete
a substantive analysis within the
statutory 90-day time frame. Finally, the
Commission anticipates enhancements
to its Web site publication procedures to
promptly inform interested members of
the public of stayed rules through email
notifications on the Commission’s Web
site.
The Commission is also exploring the
possibility of having registered entities
file rule certifications, as well as other
types of submissions, through a portal
located at www.cftc.gov. The
Commission believes that allowing
registered entities to file rule
certifications in this manner will
simplify the filing process and also
provide the public with close to realtime access to new rules and rule
amendments submitted to the
Commission for review. The
Commission is determining the
technological requirements necessary to
implement this filing process. Once the
Commission has formulated a process
for submitting certifications through the
Commission’s Web site, the Commission
10 It is the Commission’s intention to promptly
post the notice and new rule or rule amendment in
order to commence the public comment period as
soon as possible within the 90-day review period.
This will maximize the amount of time after the
comment period closes for the submitter to respond
to public comments and possibly revise its
proposed rule or rule amendment and for the
Commission to thoroughly consider the issues
raised by the new rule or rule amendment.
11 In addition, the Commission’s Web site
provides a link for signing up to receive press
releases issued by the Office of Public Affairs. This
service enables members of the public to be
apprised of the opening of comment periods in a
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will notify the public and establish a
timeline to implement new electronic
filing procedures.
The Commission proposes several
amendments to § 40.6(d). Specifically,
the Commission proposes to permit
registered entities to implement
reductions to a contract’s minimum tick
size without approval by or certification
to the Commission, in order to maintain
consistency between §§ 40.4(b) and
40.6(d). The Commission in proposed
§ 40.6(d)(2)(v), requires that fee changes
associated with market making or other
incentive programs be submitted for
Commission review under § 40.6(a).
Finally, the Commission also proposes
that changes to the terms of all options,
including options on agricultural
products, options on futures, and
options on physicals, that relate to the
strike price listing procedures, strike
price intervals, and the listing of strike
price on a discretionary basis, be
implemented without certification or
notice under § 40.6(d)(3).
g. Section 40.7 Delegations
To ensure that the review process is
conducted in an efficient manner, the
Commission proposes to amend § 40.7
to delegate to the Director of the
Division of Clearing and Intermediary
Oversight and, separately, to the
Director of the Division of Market
Oversight, after consultation with the
General Counsel or the General
Counsel’s designee, the authority to
extend the review of new contracts,
rules and rule amendments submitted to
the Commission pursuant to § 40.3(d)
and § 40.5(d) and the authority to stay
the certification of new rules or rule
amendments pursuant to § 40.6(c), when
the submission raises novel or complex
issues that require additional time to
analyze, is of major economic
significance or is potentially
inconsistent with the Act or
Commission Regulations.
Furthermore, the Commission
proposes to delegate to the Director of
the Division of Clearing and
Intermediary Oversight and, separately,
to the Director of the Division of Market
Oversight the authority to stay or to
extend the review of new products, new
rules and rule amendments pursuant to
§ 40.3 (d) or § 40.5(d) or § 40.6(c), when
the submission is incomplete or
accompanied by an inadequate
explanation.
Finally, proposed § 40.7(a)(1)(iii)
delegates to the Director of the Division
of Clearing and Intermediary Oversight
or the Director’s designee, subject to the
concurrence of the General Counsel or
the General Counsel’s designee, all
determinations under proposed § 40.10

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with respect to a SIDCO’s proposed
change in rules, procedures or
operations that could materially affect
the nature or level of risks presented by
the SIDCO. This includes a
determination that the proposed change
is consistent with the Act and the
Commission’s regulations, and the
purposes of the Dodd-Frank Act and any
applicable rules, orders or standards
prescribed under Section 805(a) of the
Dodd-Frank Act.
h. Section 40.8 Availability of public
information
This section describes information
that the Commission will make public
and provides for procedures for
requesting confidential treatment of part
40 submissions to the Commission. The
Commission proposes to retain
reference to an electronic trading facility
on which significant price discovery
contracts are traded or executed in
§ 40.8 until July 20, 2012. Although the
Dodd-Frank Act eliminated these
entities, they are allowed to continue
operation until July 20, 2012, pursuant
to grandfather relief issued by the
Commission.12
In addition, the Commission proposes
to amend § 40.8 to include new
registered entities, SEFs and SDRs.
Confidential treatment requests will be
considered pursuant to part 145 of the
Commission’s regulations.13
i. Section 40.10 Special certification
procedures for submission of rules by
systemically important derivatives
clearing organizations
To implement the provisions of
Section 806(e) of the Dodd-Frank Act,
proposed § 40.10(a) would require a
SIDCO to provide the Commission with
advance notice of any proposed change
to its rules, procedures or operations
that could ‘‘materially affect the nature
or level of risks’’ presented by the
SIDCO. The SIDCO would be required
to provide the notice not less than 60
days in advance of the proposed change.
Submission of proposed changes would
be subject to the filing requirements of
§ 40.6(a)(1), as well as the Web site
publication requirements under
§ 40.6(a)(2). In addition to providing
information required under § 40.6(a)(7),
the notice would have to describe the
nature of the change, the expected
effects on risks to the SIDCO, its
clearing members, and the market, and
how the SIDCO planned to manage
those risks. Under proposed 40.10(a)(2),
concurrent with providing the
Commission with the advance notice or
12 See
13 17

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any request or other information related
to the advance notice, the SIDCO would
be required to provide the Board of
Governors of the Federal Reserve
System with a copy of such notice,
request or other information.
Under proposed § 40.10(b), changes
that could materially affect the nature or
level of risks would be defined as those
as to which there is a reasonable
possibility that the changes could
substantially affect the performance of
essential clearing and settlement
functions or the overall nature or level
of risk presented by the SIDCO. Such
changes could include, but would not
be limited to, changes that materially
affect financial resources, participant
and product eligibility, risk
management (including matters relating
to margin and stress testing), daily or
intraday settlement procedures, default
procedures, system safeguards (business
continuity and disaster recovery), and
governance. Materiality would be
determined on a case-by-case basis. If a
SIDCO were to determine that a
proposed change was not material and
it did not file an advance notice, but the
Commission determined that the change
was material, the Commission could
require the SIDCO to withdraw the
proposed change and provide advance
notice pursuant to § 40.10.
The Commission requests comment
on the proposed materiality standard in
general and, more specifically, whether
another approach to defining materiality
would be more effective. The
Commission further requests comment
on whether, as an alternative to the
proposed approach, the standard in
proposed paragraph (b) should set forth
examples of changes that would be
considered to be non-material and could
be treated in accordance with the
provisions of § 40.6. The Commission
solicits recommendations regarding
what types of changes might be
identified as non-material. At a
minimum, the Commission would
consider deeming to be non-material
changes those listed in § 40.6(c)
(proposed to be redesignated as
§ 40.6(d)) and that are relevant to
SIDCOs.14 The Commission notes that
while this list of non-material changes
is useful in the broader context of all
rule changes that could be submitted
under the certification procedures of
§ 40.6, the fact that the Dodd-Frank Act
and § 40.10 already establish a
14 Non-material changes include, for example,
corrections of typographical errors, renumbering,
periodic updates to identifying information about
approved entities and other such non-substantive
revisions of a product’s terms and conditions that
have no effect on the economic characteristics of
the product. See § 40.6(c)(2)(i).

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materiality threshold makes the existing
list of non-material changes less
meaningful for purposes of § 40.10. The
Commission believes that any further
refinement of what might be considered
non-material for purposes of § 40.10
would have to be appropriately
circumscribed so as to be specific
enough to provide useful guidance for
SIDCOs, while remaining broad enough
so as not to inappropriately limit the
types of changes that the Commission
would consider material and subject to
the procedures of § 40.10.
Under proposed § 40.10(c), the
Commission may require a SIDCO to
provide further information to assess the
nature or level of any risks associated
with the proposed change and the
sufficiency of any proposed risk
management technique.
Further, under proposed § 40.10(d),
within 60 days from the date the
Commission received a notice of a
proposed change, the Commission
would inform a SIDCO if it objects to
the proposed change on the grounds
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. If the
Commission were to require further
information, the Commission would
have an additional 60 days after the date
the Commission received the requested
information, to inform the SIDCO of any
objection to the proposed change. The
Commission may ask for additional
information more than once. In such
case, the review period would be
extended 60 days from the date that the
information pertaining to the last
request was received.
Proposed § 40.10(e) would allow a
SIDCO to implement a proposed rule
change if the review period lapsed
without Commission action.
Proposed § 40.10(f) would allow the
Commission, during the 60-day review
period, to extend the review period for
an additional 60 days if the proposed
change raised novel or complex issues.
For example, if the Commission does
not request additional information but
extends the review period 60 days upon
receiving the advance notice, the
maximum review period would be 120
days after receipt of the advance notice.
On the other hand, if the Commission
requests and obtains additional
information 30 days after receiving the
notice and then extends the review
period 60 days in order to consider
complex or novel issues, then the
Commission would have a maximum of
150 days to reach a determination after
receipt of the advance notice.

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Proposed § 40.10(g) would permit a
SIDCO to implement a proposed change
prior to the expiration of the review
period if it received a notification in
writing from the Commission that the
Commission does not object to the
proposed change and authorizes the
SIDCO to implement the change. Such
authorization may be subject to
conditions imposed by the Commission.
Proposed § 40.10(h) would permit a
SIDCO to implement a change without
providing 60 days advance notice to the
Commission if the SIDCO determined
that an emergency exists and immediate
implementation of the change was
necessary for the SIDCO to continue to
provide its services in a safe and sound
manner. The SIDCO would be required
to notify the Commission of the
emergency change as soon as
practicable, but no later than 24 hours
after implementation of the change. The
notification must provide the
information required in an advance
notice, as well as describe the nature of
the emergency and explain why the
emergency change was necessary for the
SIDCO to continue to provide its
services in a safe and sound manner.
Under the proposed regulation, the
Commission could require modification
or rescission of the emergency change if
the Commission determined that the
change was 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.
Finally, the Commission requests
comment on whether there are any
substantive changes to rules,
procedures, or operations that should
not be permitted to be adopted under
emergency circumstances without prior
notice to the Commission. For example,
should there be restrictions on a
SIDCO’s ability to demand significantly
higher assessments from clearing
members on an emergency basis?
j. Section 40.11 Review of event
contracts based on certain excluded
commodities
Section 745(b) of the Dodd-Frank Act
authorizes the Commission to prohibit
the listing, trading, or clearing of
agreements, contracts, transactions or
swaps that are based upon an
occurrence, extent of a concurrence, or
contingency (other than a change in the
price, rate, value, or level of a
commodity not described in Section
1a(19)(i) of the Act) that is beyond the
control of the parties to the relevant
contract, agreement, or transaction and
associated with financial, commercial,
or economic consequence, as defined in

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Section 1a(19)(iv) of the Act, if the
contract involves terrorism,
assassination, war, gaming, an activity
that is unlawful under any Federal or
State law, or any similar activity that the
Commission determines, by rule or
regulation, to be contrary to the public
interest.
Pursuant to this authority, the
Commission proposes new § 40.11(a)(1)
to prohibit the listing, trading, or
clearing of any above mentioned
agreements, contracts, transactions or
swaps. In addition, the Commission
proposes new § 40.11(a)(2) to prohibit
the listing, trading, or clearing of any
agreements, contracts, transactions or
swaps involving activities similar to
those enumerated in § 40.11(a)(1) and
that the Commission determines, by rule
or regulation, to be contrary to the
public interest.
If during the review process for a
product submitted under § 40.2 or
§ 40.3, the Commission determines that
such product may involve an activity
that is enumerated in § 40.11(a), the
Commission will request that the
registered entity suspend the listing or
trading of the contract and will conduct
a 90-day review to determine whether
the product violates § 40.11(a). Upon
completion of its review, the
Commission will issue an order, as
required by Section 745(b) of the DoddFrank Act, finding either that the
product violates or does not violate the
prohibitions in proposed § 40.11(a).
k. Section 40.12 Tolling of review
period pending jurisdictional
determination
Under Section 718(a) of the DoddFrank Act, a registered entity certifying,
submitting for approval, or otherwise
filing a proposal to list a product having
elements of both a security and a
derivative may provide notice of its
proposal both to the Commission and
the Securities and Exchange
Commission. However, under Section
718(a)(1)(B) of the Dodd-Frank Act, if
the registered entity chooses not to
provide such notice, then the
Commission must notify the Securities
and Exchange Commission of the
submission and accompany such notice
with a copy of the registered entity’s
complete filing if it determines that the
proposal has elements of both securities
and futures. If either Commission
requests a jurisdictional determination
pursuant to Section 718 of the DoddFrank Act, the Commission will toll the
applicable product certification or
approval review period until the
issuance of a final determination order.
If the Commission or the Securities
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judicial review of a jurisdictional
determination, proposed § 40.12 stays
the challenged order, as well as the
review period for the product, until the
United States Court of Appeals for the
District of Columbia Circuit issues a
final determination pursuant to Section
718(b) of the Dodd-Frank Act, or until
there is resolution of an appeal of that
determination. The submission review
period will resume only upon a finding
that the Commission has jurisdiction
over the submission.
l. Revision of Appendices to Part 40
The Commission proposes to revise
the appendices to Part 40 to clarify the
new regulatory requirements and to
provide consistency with the overall
requirements of the Act, as amended by
the Dodd-Frank Act. The present
content of Appendix A relates solely to
the listing of certain futures contracts by
DCMs and not to the listing of contracts
by registered entities generally.
Accordingly, the Commission proposes
to delete the content of Appendix A,
currently titled ‘‘Guideline No. 1,’’ from
part 40. The substance of the appendix
will be incorporated into part 38 as part
of a separate rulemaking.
In addition, the Commission proposes
to move and incorporate the current
language in Appendix B, currently
titled, ‘‘Schedule of Fees,’’ into
Appendix A. The Commission proposes
to reserve Appendix B for a future
rulemaking. Appendix C remains
reserved.
The Commission proposes minor
amendments to the submission cover
sheet and instructions provided in
Appendix D to part 40. The proposed
submission cover sheet has been
modified to include SEFs and SDRs.
The amended cover sheet will be posted
on the Commission’s Web site upon
publication of the final rules. The
Commission also proposes to amend the
instructions in Appendix D to clarify
that registered entities must describe the
substance of the submission with
enough specificity to characterize all
material aspects of the filing. A
description of the submission should
allow a party reading it to ascertain the
subject and effect of the submission. For
example, a description of ‘‘Market
Regulation Advisory’’ does not provide
the reader with sufficient information to
understand what the particular
Advisory addresses or its effect, thereby
rendering the description less useful. A
clear and informative description will
facilitate and expedite the posting of the
submission on the Commission’s Web
site. As noted above, the Commission is
exploring whether an electronic
submission system can be established

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and made available to registered entities
in the near future. The Commission is
seeking the public’s view on whether
automated submission of rules, rule
amendments, and products might be
facilitated by a Web site portal
dedicated to this purpose.
III. Related Matters
a. Regulatory Flexibility Act
The Regulatory Flexibility Act
(‘‘RFA’’) 15 requires that agencies
consider whether the rules they propose
will have a significant economic impact
on a substantial number of small entities
and, if so, provide a regulatory
flexibility analysis respecting the
impact.16 The proposed rules detailed in
this release would require DCOs, DCMs,
SEFs and SDRs to submit to the
Commission, before they become
effective, new products, new rules, and
rule amendments, with a selfcertification that the rules comply with
the Act and Commission regulations.
The requirements for the selfcertification are not complex, and may
be satisfied by the completion of a cover
sheet with a detailed explanation of the
filing. These self-certification rules will
not impose a significant economic
impact on any entity.
Moreover, the Commission previously
determined that DCOs and DCMs are
not ‘‘small entities’’ for purposes of the
RFA.17 The Commission has not
determined whether SEFs and SDRs,
new registered entities created by the
Dodd-Frank Act, are small entities. The
Dodd-Frank Act defines an SDR to mean
any person that collects and maintains
information or records with respect to
transactions or positions in, or the terms
and conditions of, swaps entered into by
third parties for the purpose of
providing a centralized recordkeeping
facility for swaps. The Dodd Frank Act
defines a SEF to mean a trading system
or platform in which multiple
participants have the ability to execute
or trade swaps by accepting bids and
offers made by multiple participants in
the facility or system, through any
means of interstate commerce, including
any trading facility that facilitates the
execution of swaps between persons
and is not a DCM.18
15 5

U.S.C. 601 et seq.
U.S.C. 601 et seq.
17 47 FR 18618, 18619 (April 30, 1982) and 66 FR
45604, 45609 (August 29, 2001).
18 See Section 721 of the Dodd-Frank Act. The
Commission anticipates proposing regulations that
would further specify those entities that must
register as a SEF. The Commission does not believe
that such proposals would alter its determination
that a SEF is not a ‘‘small entity’’ for purposes of
the RFA.
16 5

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The Commission previously
determined that DCMs and DCOs are
not ‘‘small entities’’ for purposes of the
RFA. The Commission’s reasoning
included the fact that the Commission
designates a contract market or a DCO
only when the entity meets specific
criteria, including the expenditure of
sufficient resources to establish and
maintain adequate self-regulatory
programs. Likewise, the Commission
will register an entity such as a SEF or
an SDR only after the entity has met a
number of criteria, including the
expenditure of sufficient resources to
establish and maintain an adequate selfregulatory program.19 Because SEFs and
SDRs will be required to demonstrate
compliance with Core Principles, many
of which are similar to those applicable
to DCMs and DCOs, the Commission
hereby determines that SEFs and SDRs
are not ‘‘small entities’’ for the purposes
of the RFA.
Accordingly, the Chairman, on behalf
of the Commission, hereby certifies
pursuant to 5 U.S.C. § 605(b) that the
proposed rules will not have a
significant impact on a substantial
number of small entities. The
Commission invites the public to
comment on all aspects of this
Regulatory Flexibility Analysis.

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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.
Proposed amendments to §§ 40.2, 40.3,
40.5 and 40.6 will impose new
information collection requirements
within the meaning of the Paperwork
Reduction Act 20 on registered entities,
as will new proposed §§ 40.10 and
40.12. Accordingly, the Commission has
requested that OMB approve and assign
a new control number for the proposed
collections of information. In
connection with its request, the
Commission has submitted this notice
of proposed 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. If adopted, responses to this new
collection of information will be
mandatory.
19 See 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.
20 44 U.S.C. 3501 et seq.

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The Commission will protect
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
The proposed rules require DCMs,
DCOs, and new registered entities, SEFs
and SDRs, to collect and submit to the
Commission new rules, amended rules
and new products pursuant to the
procedures outlined in proposed
§§ 40.2, 40.3, 40.5, 40.6, 40.10, and
40.12. The Commission proposes these
information collection requirements in
order to give effect to various notice,
rule certification, and rule approval
provisions of the Dodd-Frank Act.
The Commission estimated the
proposed information collection
burdens on registered entities below.
These estimates account for (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 aggregate effect of proposed §§ 40.2,
40.3, 40.5, 40.6, 40.10, and 40.12 will be
to increase the overall information
collection burden on registered entities
by approximately 8,300 hours per year,
resulting mostly from the preparation of
materials to be filed with the
Commission in connection with the
listing of products or the certification or
approval of rules and rule amendments.
The Commission estimates that there
will be 70 designated or registered
entities that would be required to file
documentation with the Commission on
a periodic basis.
Proposed §§ 40.5 and 40.6 require
each registered entity to comply with
new certification and approval
requirements when seeking to
implement new rules or rule
amendments, including changes to
product terms or conditions. In
addition, to ensure that market
participants are promptly notified of
product and rule submissions to the
Commission, proposed §§ 40.2(a)(3)(vii),
40.3(a)(10), 40.5(a)(6), and 40.6(a)(2)

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require 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.
Estimated number of respondents: 45.
Annual responses by each
respondent: 120.
Estimated average hours per response:
2.52.
Aggregate annual reporting burden:
13,608.
Proposed § 40.10 requires SIDCOs to
provide to the Commission 60 days
advance notice of proposed changes to
rules, procedures or operations that
could materially affect the nature or
level of risks presented by the SIDCO.
Estimated number of respondents: 4.
Annual responses by each
respondent: 2.
Estimated average hours per response:
5.
Aggregate annual reporting burden:
40.
Proposed § 40.12 requires 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 having
elements of both a security and a
derivative.
Estimated number of respondents: 17.
Annual responses by each
respondent: 34.
Estimated average hours per response:
2.52.
Aggregate annual reporting burden:
1,456.
The Commission invites public
comment on the accuracy of its estimate
of the collection requirements that
would result from the proposed
regulations.
2. Information Collection Comments
The Commission invites the public
and other federal agencies to comment
on the information collection
requirements proposed in this notice.
Pursuant to 44 U.S.C. 3506(c)(2)(B), the
Commission solicits comments to: (1)
Evaluate whether the proposed
collections of information are necessary
for the proper performance of the
functions of the Commission, including
whether the information will have
practical utility; (2) evaluate the
accuracy of the estimated burden of the
proposed information collection
requirements, including the degree to
which the methodology and the
assumptions that the Commission
employed were valid; (3) determine
whether there are ways to enhance the
quality, utility, or clarity of the

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information proposed to be collected;
and (4) minimize the burden of the
proposed collections of information on
DCMs, SEFs, DCOs, and SDRs, for
example through implementation of an
electronic rule and product submission
system.
Comments may be submitted directly
to the Office of Information and
Regulatory Affairs, by fax at (202) 395–
6566 or by e-mail at
[email protected]. Please
provide the Commission with a copy of
submitted comments so that they can be
summarized and addressed in the final
rule. Refer to the Addresses section of
this notice of proposed rulemaking for
comment submission instructions to the
Commission. A copy of the supporting
statements for the collections of
information discussed above may be
obtained by visiting RegInfo.gov. OMB
is required to make a decision
concerning the collection of information
between 30 and 60 days after
publication of this release.
Consequently, a comment to OMB is
best assured of receiving full
consideration only if received by OMB
(and the Commission) within 30 days of
publication of this notice of proposed
rulemaking.
c. Cost-Benefit Analysis
Section 15(a) of the Act requires the
Commission to consider the costs and
benefits of its actions before issuing new
regulations or orders.21 By its terms,
Section 15(a) does not require the
Commission to quantify the costs and
benefits of a new regulation or to
determine whether the benefits of the
proposed regulation outweigh its costs.
Rather, Section 15(a) requires the
Commission to ‘‘consider the costs and
benefits’’ of its proposed regulation.
Section 15(a) further specifies that costs
and benefits shall 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 its 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.22
21 7

U.S.C. 19(a).
e.g., Fisherman’s Doc Co-op., Inc v. Brown,
75 F.3d 164 (4th Cir. 1996); Center for Auto Safety
22 See,

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As discussed above, the proposed
regulations require registered entities,
including DCMs, SEFs, DCOs, and
SDRs, to comply with new certification
and approval procedures when
submitting products and rules for
Commission review. These procedures
are mandatory pursuant to the DoddFrank Act. The Commission has
determined that the costs associated
with the self-certification and
submission for Commission review of
new products, new rules, and rule
amendments will not negatively affect
the efficiency, competitiveness, and
financial integrity of the futures and
swaps markets, particularly because of
the time limits that Congress has
imposed on Commission review. The
Commission will have 10 days to review
new products, new rules, and rule
amendments, and only 90 days if it
stays a rule to issue a rule approval or
disapproval.
The Commission believes that the
benefits of the rulemaking are
significant. The Commission’s
certification and approval procedures
ensure that registered entities do not
enact rules that may be anticompetitive,
unfair to market participants, or
otherwise detrimental to the public
interest. In addition, the special
certification procedures for SIDCOs and
certain event contracts implement
Section 745 of the Dodd-Frank Act and
ensure that the Commission has
adequate time and information to
analyze the registered entity’s proposal
and to consider the broader implications
of permitting the entity to implement
the rule or list the product. The SIDCO
notice requirement, in particular, may
be crucially important to the
Commission’s oversight of sound risk
management practices and to its efforts
to mitigate systemic risks, whereas the
proposed event contract provisions,
consistent with the intent of Congress,
prevent individuals from speculating on
activities that are harmful to national
security and potentially detrimental to
the stability of the futures markets and
their price discovery function. Finally,
the Commission’s notice requirements
with respect to the submission of novel
derivative products promote
cooperation between the Commission
and the SEC and facilitate more effective
and less duplicative regulation of
registered entities.
For these reasons, the Commission
believes that the certification and
approval procedures proposed in this
notice are needed to fulfill the
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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requirements of the Dodd-Frank Act in
order to protect market participants and
to ensure the continued competitiveness
and financial integrity of the futures and
derivative markets.
The Commission invites public
comment on its cost-benefit
considerations. Commenters are also
invited to submit any data or other
information that they may have
quantifying or qualifying the costs and
benefits of the proposal with their
comment letters.
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
proposes to revise 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 and accepting products for
trading or clearing 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 Corporate governance [Reserved]
40.10 Special certification procedures for
submission of rules by systemically
important derivatives clearing
organizations.
40.11 Review of event contracts based on
certain excluded commodities.
40.12 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, 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

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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,
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
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

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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
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

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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, 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, in
whatever form adopted, 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.
(j) Terms and conditions means any
definition of the trading unit or the
specific commodity underlying a swap
or a contract for the future delivery of
a commodity or commodity option
contract, specification of cash
settlement or delivery standards and
procedures, and establishment of
buyers’ and sellers’ rights and
obligations under the swap or contract.
Whenever possible, all proposed swap
or contract terms and conditions should
conform to industry standards or those
terms and conditions adopted by
comparable contracts. Terms and
conditions include provisions relating
to the following:
(1) Quality and other standards that
define the commodity or instrument
underlying the contract;
(2) Quantity standards or other
provisions related to swap or contract
size;
(3) Any applicable premiums or
discounts for delivery of nonpar
products;
(4) Trading hours, trading months and
the listing of swaps or contracts;
(5) The pricing basis, minimum price
fluctuations, and maximum price
fluctuations;
(6) Any price limits, trading halts, or
circuit breaker provisions, and
procedures for the establishment of
daily settlement prices;
(7) Position limits, position
accountability standards, and position
reporting requirements;
(8) Delivery points and locational
price differentials;
(9) 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;
(10) If cash settled; the definition,
composition, calculation and revision of
the cash settlement price or index;

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(11) Payment or collection of
commodity option premiums or
margins;
(12) Option exercise price, if it is
constant, and method for calculating the
exercise price, if it is variable;
(13) Threshold prices for an option
contract, the existence of which is
contingent upon those prices;
(14) Any restrictions or requirements
for exercising an option; and
(15) With respect to swaps cleared by
a derivatives clearing organization,
specifications including but not limited
to:
(i) Notional values;
(ii) Relevant dates, tenor, and day
count conventions;
(iii) Index;
(iv) Relevant prices, rates or coupons;
(v) Currency;
(vi) Stub, premium, or initial cash
flow components along with subsequent
life cycle events;
(vii) Payment and reset frequency;
(viii) Business calendars;
(ix) Accrual type; and
(x) Spread or points.

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§ 40.2 Listing and accepting products for
trading or clearing 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 derivatives clearing
organization must comply with the
submission requirements of this section
prior to accepting for clearing a product
that is not listed or traded on a
designated contract market, derivatives
clearing organization or a swap
execution facility and has not been
approved for clearing under § 40.3 or
§ 40.5 of this part or that remains
dormant subsequent to being submitted
under this section or approved under
§ 40.5 of this part. A submission shall
comply with the following conditions:
(1) The designated contract market, or
the swap execution facility, or the
derivatives clearing organization has
filed its submission electronically in a
format specified by the Secretary of the
Commission with the Secretary of the
Commission at [email protected],
and with the relevant branch chief at the
regional office having local jurisdiction
over the registered entity;
(2) The Commission has received the
submission at its headquarters by the
open of business on the business day
preceding the product’s listing or
acceptance for clearing; and
(3) The submission includes:

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(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, or the rules establishing
the terms and conditions of the listed
product that make it acceptable for
clearing;
(iii) The intended listing date;
(iv) A certification by the designated
contract market, the swap execution
facility, or the derivatives clearing
organization that the product to be
listed complies with the Act and
Commission regulations thereunder;
(v) The documentation relied on to
establish the basis for compliance with
the applicable provisions of the Act and
the Commission’s regulations
thereunder, including the Core
Principles;
(vi) A written statement verifying that
the registered entity has undertaken a
due diligence review of the legal
conditions, including conditions that
relate to contractual and intellectual
property rights, which may materially
affect the trading of the product;
(vii) 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 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);
(viii) 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,
all of the requirements of the Act and
the Commission’s regulations and
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.

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§ 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 clearing, or if a product was
initially submitted under § 40.2 of this
part, subsequent to listing the product
for trading or clearing. A submission
requesting approval shall:
(1) Be filed electronically with the
Secretary of the Commission at
[email protected], and with the
regional office of the Commission
having local jurisdiction over the
registered entity in a format specified by
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 the documentation relied
on to establish the basis for compliance
with the applicable provisions of the
Act and the Commission’s regulations
thereunder, including the Core
Principles;
(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, and, if applicable, include
the notice required in § 40.12(a) for the
listing of novel derivative products;
(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) Include a written statement
verifying that the registered entity has
undertaken a due diligence review of
the legal conditions, including
conditions relating to contractual and
intellectual property rights, that may
materially affect the trading of the
product;
(10) Certify that the registered entity
posted a notice of pending request for
approval of new product 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

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on the registered entity’s Web site, but
must be republished consistent with any
determination made pursuant to
§ 40.8(c)(4);
(11) Include, if requested by
Commission staff, additional evidence,
information or data demonstrating that
the contract meets, initially or on a
continuing basis, all of the requirements
of the Act, or other requirements 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.
(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
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 for review
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

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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,
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 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:

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(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 with the
Secretary of the Commission at
[email protected], and with the
regional office of the Commission
having local jurisdiction over the
registered entity in a format specified by
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) 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) Explain the operation, purpose,
and effect of the proposed rule,
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

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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) Include the documentation relied
on to establish the basis for compliance
with the applicable provisions of the
Act and the Commission’s regulations
thereunder, including the Core
Principles;
(8) 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;
(9) Describe briefly any substantive
opposing views expressed to the
registered entity by governing board or
committee members, members of the
entity or market participants with
respect to the new rule or rule
amendment that were not incorporated
into the new rule or rule amendment;
(10) 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
include a reasoned analysis supporting
the amendment to the Commission’s
regulation or the interpretation;
(11) Include, for all products, a
written statement verifying that the
registered entity has undertaken a due
diligence review of the legal conditions,
including conditions relating to
contractual and intellectual property
rights, which may materially affect the
trading of such product or products, if
the proposed rule specifically relates to
one or more listed products;
(12) 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

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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,
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

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67295

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 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
specified by the Secretary of the
Commission with the Secretary of the
Commission at [email protected]
and with the relevant branch chief at the
regional office having local jurisdiction
over the registered entity.
(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

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any determination made pursuant to
§ 40.8(c)(4).
(3) The Commission has received the
submission at its headquarters 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; and
(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
Act and the Commission’s regulations
thereunder;
(v) The documentation relied on to
establish the basis for compliance with
the applicable provisions of the Act and
the Commission’s regulations
thereunder, including the Core
Principles;
(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;

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(vii) As appropriate, a request for
confidential treatment pursuant to the
procedures provided in § 40.8;
(viii) For amendments to a product’s
terms or conditions, a written statement
certifying that the registered entity has
undertaken a due diligence review of
the legal conditions, including
conditions relating to contractual and
intellectual property rights, that may
materially affect the trading of the
product.
(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 new rule or rule
amendment presents novel or complex
issues that require additional time to
analyze, the rule is accompanied by an
inadequate explanation or the rule is
potentially inconsistent with the Act or
the Commission’s regulations
thereunder. The Commission will have
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 while the stay
is in effect as described in paragraph
(c)(1) of this section. The 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 paragraph (c) shall become

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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 on the following business day
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
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
approved 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
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;

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(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
(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

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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.
(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

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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)(B) 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
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

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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
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

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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, a swap execution
facility, a derivatives clearing
organization, or a swap data repository
shall be made publicly available:
Transmittal letter, proposed rules, the
applicant’s regulatory compliance
narrative, 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.
(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).

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(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
public under Section 5(d)(7) of the Act.
The terms and conditions of a product
submitted to the Commission pursuant
to § 40.2, § 40.3 or § 40.5 of this part
shall be made publicly available at the
time of submission.

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Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules
proposed change is not material and
therefore does not file an advance notice
§ 40.10 Special certification procedures for
under this § 40.10, but the Commission
submission of rules by systemically
determines that the change is material,
important derivatives clearing
the Commission may require the
organizations.
systemically important derivatives
(a) Advance notice. A registered
clearing organization to withdraw the
derivatives clearing organization that
proposed change and provide notice
has been designated by the Financial
pursuant to this section.
Stability Oversight Council as a
(c) Further information. The
systemically important derivatives
Commission may require the
clearing organization shall provide
systemically important derivatives
notice to the Commission not less than
clearing organization to provide any
60 days in advance of any proposed
further information necessary to assess
change to its rules, procedures, or
the effect the proposed change would
operations that could materially affect
have on the nature or level of risks
the nature or level of risks presented by
associated with the systemically
the systemically important derivatives
important derivatives clearing
clearing organization. A notice
organization’s payment, clearing, or
submitted under this section shall be
settlement activities and the sufficiency
subject to the filing requirements of
of any proposed risk management
§ 40.6(a)(1) and the Web site publication
techniques.
requirements of § 40.6(a)(2).
(d) Notice of objection. A systemically
(1) The notice of a proposed change
important derivatives clearing
shall provide the information required
organization shall not implement a
to be submitted under § 40.6(a)(7) and
change to which the Commission has an
shall specifically describe:
objection on the grounds that the
(i) The nature of the change and
proposed change is not consistent with
expected effects on risks to the
the Act or the Commission’s regulations,
systemically important derivatives
or the purposes of the Dodd-Frank Act
clearing organization, its clearing
or any applicable rules, orders, or
members, or the market; and
standards prescribed under Section
(ii) How the systemically important
805(a) of the Dodd-Frank Act. The
derivatives clearing organization plans
Commission will notify the systemically
to manage any identified risks.
important derivatives clearing
(2) Concurrent with providing the
organization in writing of any objection
Commission with the advance notice or
regarding the proposed change within
any request or other information related
60 days from the later of:
to the advance notice, the systemically
(1) The date that the notice of the
important derivatives clearing
proposed change was received; or
organization shall provide the Board of
(2) The date the Commission received
Governors of the Federal Reserve
any further information it had requested
System with a copy of such notice,
for consideration of the notice.
request or other information.
(e) Implementation of change absent
(b) Materiality. The term ‘‘materially
Commission objection. A systemically
affect the nature or level of risks
important derivatives clearing
presented,’’ when used to qualify
organization may implement a change if
determinations on a change to rules,
it has not received an objection to the
procedures, or operations of a
proposed change within 60 days from
systemically important derivatives
the later of:
clearing organization, means matters as
(1) The date that the Commission
to which there is a reasonable
received the notice of proposed change;
possibility that the change could affect
or
the performance of essential clearing
(2) The date the Commission received
and settlement functions or the overall
any further information it had requested
nature or level of risk presented by the
for consideration of the notice.
systemically important derivatives
(f) Extended review. The Commission
clearing organization. Such changes
may, during the 60-day review period,
may include, but are not limited to,
extend the review period if the
changes that materially affect financial
proposed change raises novel or
resources, participant and product
complex issues. A notification by the
eligibility, risk management (including
Commission pursuant to this paragraph
matters relating to margin and stress
will extend the review for an additional
testing), daily or intraday settlement
60 days. Any extension under this
procedures, default procedures, system
paragraph will extend the time periods
safeguards (business continuity and
under paragraphs (d) and (e) of this
disaster recovery), and governance. If a
section for an additional 60 days.
(g) Change allowed earlier if notified
systemically important derivatives
of no objection. A systemically
clearing organization determines that a

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§ 40.9

Corporate Governance [Reserved]

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67299

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
(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.
§ 40.11 Review of event contracts based
on certain excluded commodities.

(a) Prohibition. A registered entity
shall not list for trading or clearing on
or through the registered entity any of
the following:
(1) An agreement, contract,
transaction, or swap based on 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

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Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules

(2) An agreement, contract,
transaction, or swap based on 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
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) no 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.

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§ 40.12 Tolling of review period pending
jurisdictional determination.

(a) Notice of novel derivative
products. (1) A registered entity
certifying, submitting for approval, or
otherwise filing a proposal to list, trade,
or clear an agreement, contract,
transaction, or swap having elements of
both a security and a derivative,
including a contract for the sale of a
commodity for future delivery, 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

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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 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 or the approval review
period for the submitted agreement,
contract, transaction, or swap 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 submission review period will
resume 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.

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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, NW., 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 to the Secretary of the
Commodity Futures Trading Commission, at
[email protected] in a format specified by
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
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
1 Even though ECM–SPDC was eliminated by the
Dodd-Frank Act, the Commission proposes to retain
references to this entity in the cover sheet since
ECM may be allowed to operate until July 20, 2012,
pursuant to grandfather relief issued by the
Commission. See 75 FR 56513 (Sept. 16, 2010).

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Federal Register / Vol. 75, No. 211 / Tuesday, November 2, 2010 / Proposed Rules
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 October 26,
2010, by the Commission.
David A. Stawick,
Secretary of the Commission.
Note: The following attachment will not
appear in the Code of Federal Regulations.
Statement of Chairman Gary Gensler
Provisions Common to Registered Entities
October 26, 2010
I support the proposal to publish for
comment the proposed rule on the
Commission’s process for certification and
approval of rules and new products for
designated contract markets (DCMs),
derivatives clearing organizations (DCOs),
swap execution facilities (SEFs) and swap
data repositories (SDRs). The Dodd-Frank Act
establishes enhanced procedures for
Commission review and certification of new
rules, rule amendments and products.
Today’s rule gives important procedural
guidance to registered entities on how to
comply with Congress’s mandate for the
Commission’s review of new rules and
products.
[FR Doc. 2010–27533 Filed 11–1–10; 8:45 am]
BILLING CODE 6351–01–P

COMMODITY FUTURES TRADING
COMMISSION
17 CFR Chapter I

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RIN Number 3038–AD26

Antidisruptive Practices Authority
Contained in the Dodd-Frank Wall
Street Reform and Consumer
Protection Act
Commodity Futures Trading
Commission.
ACTION: Advance notice of proposed
rulemaking; request for comments.
AGENCY:

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The Dodd-Frank Wall Street
Reform and Consumer Protection Act
(the ‘‘Dodd-Frank Act’’) amends section
4c(a) of the Commodity Exchange Act
(‘‘CEA’’) in section 747 to expressly
prohibit certain trading practices
deemed disruptive of fair and equitable
trading. The Commodity Futures
Trading Commission (‘‘Commission’’) is
issuing this advance notice of proposed
rulemaking and request for public
comment to assist the Commission in
promulgating such rules and regulations
to meet the requirements of section 747.
DATES: Comments must be in writing
and received by January 3, 2011.
ADDRESSES: You may submit comments,
identified by RIN number AD26, by any
of the following methods:
• Agency Web site, via its Comments
Online process: Comments may be
submitted to: http://comments.cftc.gov.
Follow the instructions for submitting
comments on the Web site.
• Mail: David A. Stawick, Secretary of
the Commission, Commodity Futures
Trading Commission, Three Lafayette
Centre, 1155 21st Street, NW.,
Washington, DC 20581.
• Hand Delivery/Courier: Same as
mail above.
• Federal eRulemaking Portal: http://
www.regulations.gov. Follow the
instructions for submitting comments.
All comments must be submitted in
English, or if not, accompanied by an
English translation. Comments will be
posted as received to http://
www.cftc.gov. You should submit only
information that you wish to make
available publicly. If you wish the
Commission to consider information
that is exempt from disclosure under the
Freedom of Information Act, a petition
for confidential treatment of the exempt
information may be submitted according
to the established procedures in CFTC
Regulation 145.9.1
The Commission reserves the right,
but shall have no obligation, to review,
pre-screen, filter, redact, refuse or
remove any or all of your submission
from http://www.cftc.gov that it may
deem to be inappropriate for
publication, such as obscene language.
All submissions that have been redacted
or removed that contain comments on
the merits of the rulemaking will be
retained in the public comment file and
will be considered as required under the
Administrative Procedure Act and other
applicable laws, and may be accessible
under the Freedom of Information Act.
FOR FURTHER INFORMATION CONTACT:
Robert Pease, Counsel to the Director of
Enforcement, 202–418–5863,
SUMMARY:

1 17

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67301

[email protected], or Mark D. Higgins,
Counsel to the Director of Enforcement,
202–418–5864, [email protected],
Division of Enforcement, Commodity
Futures Trading Commission, Three
Lafayette Centre, 1151 21st Street, NW.,
Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
On July 21, 2010, President Obama
signed the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(‘‘Dodd-Frank Act’’).2 Title VII of the
Dodd-Frank Act 3 amended the
Commodity Exchange Act (‘‘CEA’’) 4 to
establish a comprehensive new
regulatory framework for swaps and
security-based swaps. The legislation
was enacted to reduce risk, increase
transparency, and promote market
integrity within the financial system by,
among other things: (1) Providing for the
registration and comprehensive
regulation of swap dealers and major
swap participants; (2) imposing clearing
and trade execution requirements on
standardized derivative products; (3)
creating robust recordkeeping and realtime reporting regimes; and (4)
enhancing the Commission’s
rulemaking and enforcement authorities
with respect to, among others, all
registered entities and intermediaries
subject to the Commission’s oversight.
Section 747 of the Dodd-Frank Act
amends section 4c(a) of the CEA to add
a new section entitled ‘‘Disruptive
Practices.’’
II. Solicitation for Comments About
Disruptive Practices Pursuant to DoddFrank Act Section 747
In section 747 of the Dodd-Frank Act,
Congress amended the CEA to expressly
prohibit certain trading practices that it
determined were disruptive of fair and
equitable trading. Dodd-Frank section
747 amends section 4c(a) of the CEA to
make it unlawful for any person to
engage in any trading, practice, or
conduct on or subject to the rules of a
registered entity that—
(A) violates bids or offers;
(B) demonstrates intentional or
reckless disregard for the orderly
execution of transactions during the
closing period; or
(C) is, is of the character of, or is
commonly known to the trade as,
2 See Dodd-Frank Wall Street Reform and
Consumer Protection Act, Public Law No. 111–203,
124 Stat. 1376 (2010). The text of the Dodd-Frank
Act may be accessed at http://www.cftc.gov./
LawRegulation/OTCDERIVATIVES/index.htm.
3 Pursuant to Section 701 of the Dodd-Frank Act,
Title VII may be cited as the ‘‘Wall Street
Transparency and Accountability Act of 2010.’’
4 7 U.S.C. 1 et seq. (2006).

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