Confidential Information and Commission Records and Information, 44939-44945 [E8-17529]

Agencies

• Commodity Futures Trading Commission

[Federal Register Volume 73, Number 149 (Friday, August 1, 2008)]
[Proposed Rules]
[Pages 44939-44945]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-17529]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 40, 41, and 145

RIN 3038-AC44


Confidential Information and Commission Records and Information

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking, reproposal.

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SUMMARY: On July 20, 2007, the Commission published in the Federal 
Register a notice of proposed rulemaking to amend the procedures under 
which designated contract markets (DCMs), derivatives clearing 
organizations (DCOs), and derivatives transaction execution facilities 
(DTEFs) (collectively, ``registered entities'') may request 
confidential treatment for products and rules submitted via 
certification procedures or for Commission review and approval under 
parts 40 and 41 of the Commission's regulations.\1\ Under the proposed 
amendments to Commission regulation 40.8, registered entities filing 
product and rule submissions would follow a procedure separate from the 
customary Freedom of Information Act (FOIA) confidential treatment 
procedures specified in Commission regulation 145.9, 17 CFR 145.9. As 
proposed to be amended, regulation 40.8(c) provided that: registered 
entities submitting material under parts 40 and 41 would be required to 
file a detailed written justification simultaneously with the request 
for confidential treatment; registered entities submitting material 
under parts 40 and 41 would be required to segregate material for which 
confidential treatment is requested in an appendix to the submission; 
and Commission staff may make an initial determination to grant or deny 
confidential treatment to such material before receiving a request 
under the FOIA. Regulation 40.8(c) is being reproposed to clarify that 
an initial determination by staff to deny confidential treatment may be 
appealed to the Commission's Office of General Counsel and that such an 
appeal will stay release of the material. The Commission believes these 
amendments, by creating a separate confidential treatment review 
process for filings under parts 40 and 41, will enhance the 
Commission's ability to provide the public with immediate access to 
non-confidential information.
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    \1\ 72 FR 39764 (July 20, 2007).
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    The Commission received comments from three registered entities in 
response to the proposed rulemaking.\2\ Two commenters expressed 
concerns with the amendments themselves and questioned the adequacy of 
the Commission's explanation for proposing the changes. In response to 
those comments, the Commission has determined to re-propose the 
amendments to regulation 40.8 to: clarify the procedure for seeking 
review of an adverse determination; amend appendix D to part 40 by 
adding to the submission cover sheet a box to be checked if 
confidential treatment is requested for any part of the underlying 
submission, in order to assist staff in efficiently and accurately 
posting publicly available information on the Commission's Web site; 
and amend Commission regulation 145.9(b) to clarify that its procedures 
for requesting confidential treatment do not apply to submissions filed 
under parts 40 and 41. The Commission further intends in this 
reproposal to more fully address its reasons for the proposed 
amendments and to explain the distinction between the proposed 
procedure and the procedures specified in regulation 145.9.
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    \2\ Letter dated August 20, 2007 from CME Group (CME); Letter 
dated August 20, 2007 from CBOE Futures Exchange (CFE); Letter dated 
August 23, 2007 from New York Mercantile Exchange, Inc. (NYMEX).

DATES: Submit comments on or before September 2, 2008. Comments 
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previously submitted need not be resubmitted.

ADDRESSES: You may submit comments by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov.
     Mail/Hand Deliver: David Stawick, Secretary of the 
Commission, Commodity Futures Trading Commission, Three Lafayette 
Centre, 1155 21st Street, NW., Washington, DC 20581.
     E-mail: secretary@cftc.gov.

FOR FURTHER INFORMATION CONTACT: Susan Nathan, Senior Special Counsel, 
(202) 418-5133, Division of Market Oversight, Commodity Futures Trading 
Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, 
DC 20581. Electronic mail: snathan@cftc.gov. This document is also 
available at https://www.regulations.gov.

SUPPLEMENTARY INFORMATION:

I. Background

A. Overview

    Part 40 of the Commission's regulations sets forth the standards 
and procedures to be followed by registered entities \3\ for listing 
products for trading by certification to the Commission; voluntary 
submission of new products for Commission review and approval; 
amendments to terms or conditions of enumerated agricultural contracts; 
voluntary submission of rules for Commission review and approval; and 
self-certification of rules by DCMs and DCOs. Part 41 of the 
regulations provides standards and procedures for filing required 
information with respect to security futures products. Although much of 
the information required by parts 40 and 41 is made public by statute, 
regulation or agency practice, the Commission has observed an increase 
over the past several years in the number of confidential treatment 
requests for filings submitted under these parts. Most, but not all of 
these requests for confidential treatment have been submitted to the 
Commission in connection with market maker and other incentive programs 
(collectively, incentive programs).\4\
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    \3\ A registered entity is defined in section 1a(29) of the 
Commodity Exchange Act (Act) as a DCM under section 5 of the Act 
(including section 5f), a DTEF registered under section 5a of the 
Act, and a DCO registered under section 5b of the Act. Section 5f of 
the Act, along with part 41 of the Commission's regulations, 
establishes requirements for national securities exchanges, national 
securities associations and alternative trading systems registered 
with the Securities and Exchange Commission to notice register with 
the Commission in order to list security futures products (i.e., 
futures on a single equity security and futures on narrow-based 
security indexes).
    \4\ Incentive programs typically are created by a registered 
entity to increase volume of trading and liquidity for new product 
launches or in markets that for other reasons have low trading 
volume. In general, registered entities have requested confidential 
treatment for the name of the market maker(s), the compensation 
arrangements provided by the registered entity, trade priorities 
(i.e., percentage of the order flow), and the bid/ask spread level.
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B. Freedom of Information Act

    Most requests for confidential treatment are made pursuant to the 
Freedom of Information Act, 5 U.S.C. 552 (FOIA), which provides 
generally that the public has a right of access to federal agency 
records except to the extent such records, or portions of them, are 
protected from disclosure by one or

[[Page 44940]]

more of nine exemptions.\5\ A registered entity requesting confidential 
treatment under the FOIA typically asserts that the information 
submitted to the Commission should be protected from disclosure 
pursuant to FOIA exemption (b)(4), 5 U.S.C. 552(b)(4), because its 
release will cause commercial or competitive harm to the submitter.\6\
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    \5\ 5 U.S.C. 552(b)(1)-(9).
    \6\ Exemption (b)(4) of the FOIA protects trade secrets and 
commercial or financial information obtained from a person that is 
privileged or confidential. See also Commission regulation 
145.9(d)(ii).
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C. The Commission's Implementing Regulations

    All agencies subject to the FOIA are required to establish rules, 
procedures and standards for implementing that statute.\7\ The 
Commission's FOIA rules are codified in part 145 of its regulations. 
Commission regulation 145.9 sets forth the procedures for requesting 
confidential treatment under the FOIA for information furnished to the 
Commission and for challenging adverse determinations of such requests. 
Under these provisions, a submitter must make, at the time of 
submission, a written request for confidential treatment which 
specifies the basis on which it believes confidential treatment is 
warranted. Unless and until a FOIA request is made for the material, 
however, no determination is made with respect to any request for 
confidential treatment.\8\ When a FOIA request is received, the 
submitter of the requested information is required to file a detailed 
written justification of the confidential treatment request.\9\ If 
staff initially determines that the request should be denied, 
regulation 145.9 permits the submitter to file an appeal of that 
initial decision with the Commission's Office of General Counsel. 
Likewise, if staff initially determines to grant the request for 
confidential treatment, a subsequent FOIA requester may appeal that 
decision to the Office of General Counsel.
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    \7\ The FOIA requires that each agency promulgate regulations 
governing, inter alia, the methods whereby the public may obtain 
information, make submissions or obtain decisions as well as other 
substantive and procedural FOIA regulations. 5 U.S.C. 552(a).
    \8\ See 17 CFR 145.9(d)(10).
    \9\ The guidelines and standards for preparing and filing a 
detailed written justification are found in Commission regulation 
145.9(e).
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    Commission regulation 145.9 also permits the Commission to specify 
``alternative procedures'' for ``a particular study, report, 
investigation, or other matter.''\10\ Consistent with that authority, 
the Commission is proposing to specify alternative procedures for 
processing requests for confidential treatment of filings submitted 
under parts 40 and 41 of the Commission's regulations.
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    \10\ Commission regulation 145.9(b).
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II. The Proposed Amendments

A. Procedures for Requesting Confidential Treatment Under Parts 40 and 
41

    The Commission is proposing to add paragraph (c) to Commission 
regulation 40.8 to establish the exclusive procedure to be followed by 
registered entities when requesting confidential treatment for 
information required to be filed under parts 40 and 41.\11\ The 
Commission is also proposing to add paragraph (d) to regulation 40.8 to 
make clear the circumstances under which requests for confidential 
treatment will not be considered. Under the new procedure, the request 
for confidential treatment and a detailed written justification must be 
filed simultaneously with the submission, in the form and manner 
prescribed by Commission regulation 145.9(e). Further, the material for 
which confidentiality is claimed must be separated from the remainder 
of the submission and filed as an appendix. Proposed regulation 40.8(c) 
would permit Commission staff immediately to make an initial 
determination to grant or deny confidential treatment rather than 
deferring consideration until a FOIA request is received for the 
information, and would allow the submitter to appeal an adverse 
decision to the Commission's Office of General Counsel in the manner 
prescribed by Commission regulation 145.9(g). Proposed regulation 
40.8(c) would not preclude reconsideration of a confidential treatment 
decision made under this regulation if a request for the material is 
subsequently made under the FOIA. In such circumstances, the process 
would be governed by the part 145 regulations.
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    \11\ The proposal also would add new regulations 40.2(a)(3)(iv), 
40.6(a)(3)(vi), 41.23(a)(7), and 41.24(a)(6), and amend regulations 
40.3(a)(7) and 40.5(a)(8) to direct the registered entity requesting 
confidential treatment for submissions made under part 40 or 41 to 
follow the new procedures specified in Commission regulation 
40.8(c).
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    The FOIA addresses tensions between the public's interest in access 
to certain information and the government's (or in some circumstances, 
the submitter's) interest in nondisclosure of sensitive information. 
Accordingly, that statute generally is triggered by a request for 
information from a member of the public, and the Commission's FOIA 
regulation provides that submitters of information who have properly 
requested confidential treatment need not file a detailed written 
justification supporting that request unless they receive notice from 
the Commission that it has received a FOIA request for that 
information.\12\ Those tensions are not present here. On the contrary, 
Congress included in the Act's core principles applicable to registered 
entities requirements that DCMs, DCOs and DTEFs make certain 
information available to the public,\13\ and the Commission 
demonstrated its commitment to transparency by adopting a regulation 
describing the types of information it considered publicly 
available.\14\ In the Commission's view, the FOIA does not protect 
public information, and the absence of a FOIA request should not be 
permitted to delay or hinder its release of such information to the 
public. Accordingly, under proposed regulation 40.8(c), Commission 
staff may immediately analyze the merits of a detailed written 
justification and balance the submitter's interest in confidentiality 
against the Commission's interest in fostering transparency. The 
Commission intends, and the re-proposed regulation clarifies, that the 
procedure described in proposed regulation 40.8(c)(1) would expedite 
the release of information to the public while continuing to afford a 
registered entity the opportunity to challenge the denial of a 
confidential treatment request. As re-proposed, regulation 40.8(c) 
makes plain that the registered entity may follow the procedures 
outlined in the Commission's general FOIA regulation to appeal a staff 
denial of confidential treatment to the Commission's Office of General 
Counsel.\15\ The re-proposed regulation further clarifies that a grant 
of any part of a request for confidential treatment may be reconsidered 
if a FOIA request for the same material subsequently is received by the 
Commission.
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    \12\ See Commission regulation 145.9(e)(1), 17 CFR 145.9(e)(1).
    \13\ See section 5(a)(7) (DCM Core Principle 7); section 
5b(2)(L) (DCO Core Principle L); and section 5a(d)(5) (DTEF Core 
Principle 5).
    \14\ See regulation 40.8(a).
    \15\ See regulation 145.9(g), 17 CFR 145.9(g).
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    When a registered entity requests confidential treatment for an 
entire submission filed under part 40 or 41, Commission staff 
frequently asks the entity to amend its original submission by 
segregating out the material for which it claims confidentiality so 
that remaining materials can be made public without delay.\16\ 
Registered entities

[[Page 44941]]

generally have been receptive to these informal staff requests. 
Proposed regulation 40.8(c)(2), which would require that material 
deemed confidential be segregated in an appendix to the submission, 
would codify this staff practice and enable the Commission to make 
plainly non-confidential material immediately available to the public 
while staff evaluates the registered entity's claims of confidentiality 
for the segregated material.
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    \16\ The Commission's policy is to provide public availability 
of submission information by posting submissions filed under parts 
40 and 41 on the Commission's Web site as efficiently and accurately 
as possible.
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B. Public Availability of Terms and Conditions of Products and 
Mechanisms for Executing Transactions on or Through the Facilities of 
the Contract Market

    As noted, substantial portions of the material filed pursuant to 
parts 40 and 41 are required by statute to be made publicly available 
by registered entities. Section 5(d)(7) of the Act--DCM Core Principle 
7--requires that the terms and conditions of contracts and the 
mechanisms for executing transactions on or through a DCM be made 
available by the DCM to market authorities, market participants, and 
the public.\17\ Similarly, DTEF Core Principle 5 requires that boards 
of trade publicly disclose specified information, and Core Principle L 
requires that DCOs make available to market participants information 
concerning the rules and operating systems of clearing and settlement 
systems. In 2004, the Commission added paragraph (a) to regulation 40.8 
to specify the portions of DTEF, DCO and DCM applications which are 
publicly available.\18\
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    \17\ Mechanisms for executing transactions generally include 
such information as trading algorithms, market maker programs and 
information from an exchange's rulebook that pertain to or impact 
trading.
    \18\ Publicly available portions include: Transmittal letter, 
proposed rules, the applicant's regulatory compliance chart, 
documents establishing the applicant's legal status, and documents 
setting forth the applicant's governance structure. The Commission 
noted that regulation 40.8(a) is not intended to limit the 
information that may be released, but to specify the portions of an 
application that are automatically public and therefore would not be 
granted confidential treatment under any circumstances. 69 FR 67503 
(Nov. 18, 2004).
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    Furthermore, regulations 40.3(a)(7) and 40.5(a)(8) specify that a 
product's terms and conditions are publicly available at the time of 
their submission. Product terms and conditions made publicly available 
at the time of submission enable the Commission to obtain the views of 
market participants and others to ascertain whether the proposed 
product would be readily susceptible to manipulation or would otherwise 
violate the Act. To this end, Commission staff routinely conduct trade 
interviews when reviewing novel instruments to ascertain the relative 
susceptibility of a product to manipulation. To be meaningful, these 
interviews require the release of the proposed instrument's terms and 
conditions.\19\
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    \19\ In cases of new products for which Commission approval has 
been requested, the Commission generally intends to continue its 
long-standing practice of requesting public comment on the terms and 
conditions by publication of notices in the Federal Register. Where 
notice in the Federal Register is impracticable or otherwise 
unnecessary, notice of a submission for voluntary approval and of 
the public availability of the proposed product's terms and 
conditions will be through the Commission's internet Web site 
(https://www.cftc.gov). The terms and conditions of products eligible 
for trading by self-certification will be available from the 
Commission at the time that the exchange legally could commence 
trading: The beginning of the business day following certification 
to the Commission.
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    The Commission wishes to ensure that registered entities are fully 
aware that staff will summarily deny requests for confidential 
treatment of information that is publicly-available pursuant to statute 
or regulation. Accordingly, the Commission proposes also to amend part 
40 by adding new paragraph (d) to regulation 40.8 to provide that staff 
will not consider requests for confidential treatment of information 
that is subject to section 5(d)(7) or regulations 40.3(a)(7) and 
40.5(a)(8).

C. Comments Received

    In response to its original proposal, the Commission received 
comment letters from CME Group, CBOE Futures Exchange (CFE), and the 
New York Mercantile Exchange (NYMEX). These comments raised several 
related concerns.
1. Market Maker Programs and Mechanisms for Executing Transactions
    CFE generally supported proposed regulation 40.8(c) but urged that 
it be further amended to specify that the terms and conditions of 
market maker programs and other compensation and incentive plans will 
be denied confidential treatment because they are rules as defined in 
Commission regulation 40.1. The CME, on the other hand, asserted that 
DCMs have a legitimate commercial and competitive interest in 
maintaining the confidentiality of specific information about the 
contractual obligations of, and incentives offered to, their market 
makers.
    Market maker and incentive programs are considered ``rules'' under 
Commission regulations and are presumptively public. Accordingly, it is 
agency practice to post compensation and incentive information promptly 
on the Commission's Web site. The Commission believes that market 
participants should have the opportunity to evaluate the compensation 
structures of incentive programs since these arrangements may affect 
the quality of price quotations provided by market makers as well as 
liquidity in the market. Because material of this kind routinely is 
made public, disclosure will not create a competitive disadvantage for 
any exchange.\20\ Incentive programs may, however, include information 
for which confidential treatment is appropriate. Commission staff has, 
for example, withheld information relating to participant names, bid-
ask spreads and minimum size requirements of bid/ask spreads because 
access to this information could give an unfair advantage to potential 
counterparties of market makers as well as providing other markets with 
a competitive edge when setting up their own market maker programs and 
negotiating agreements with potential market makers. In these 
circumstances, the Commission believes that while incentive programs 
may presumptively be public, those programs may from time to time 
include commercially valuable information which may be entitled to 
protection. Accordingly, summary denial of confidential treatment to 
all information in incentive programs would be inappropriate.
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    \20\ As CFE observed, the Commission's Office of General Counsel 
so reasoned in rejecting an exchange's claim that its market maker 
information was proprietary and protected under FOIA exemption 
(b)(4), which protects under certain circumstances commercial or 
financial information where its release could cause competitive harm 
to the submitter. Letter dated October 27, 2005 from Office of 
General Counsel regarding Freedom of Information Act Nos. 05-0138 
and 05-0139.
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    NYMEX made a similar argument in connection with the Commission's 
determination not to process confidential treatment requests covering, 
inter alia, the mechanisms for executing transactions on or through the 
facilities of the contract market. NYMEX claims that a trading tool 
could potentially qualify as proprietary intellectual property for 
which a registered entity may seek protection under patent or trademark 
laws. The Commission notes that mechanisms for executing transactions 
on or through the facilities of a contract market are required by 
statute to be made publicly available.\21\ The Commission also 
recognizes the importance to a registered entity of protecting what it 
believes to be commercially sensitive

[[Page 44942]]

information, and invites public comment with respect to specific types 
of trading tools that should be given consideration under a request for 
confidential treatment.
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    \21\ See Section 7(d)(8) of the CEA, 7 U.S.C. 7(d)(8) (DCM Core 
Principle 8).
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2. Limited Applicability of Proposed Regulation to Registered Entities
    In its comment letter, NYMEX questioned why the proposed regulation 
singles out registered exchanges and clearing organizations for the new 
requirements, while other submitters of information would continue to 
follow the FOIA procedures in regulation 145.9 when requesting 
confidential treatment of submissions to the Commission. On the 
contrary, the proposed rule does not target a specific group of 
submitters but rather is directed toward specific categories of 
submissions--those filed pursuant to parts 40 and 41--for which 
confidential treatment is frequently claimed despite requirements in 
the Commodity Exchange Act and Commission regulations that those 
submissions be made available to the public. The harm to be remedied is 
the frequently unwarranted delay in making public information filed 
pursuant to these regulations. When registered entities have occasion 
to submit other types of information to the Commission, they would 
continue to follow the procedures provided in Commission regulation 
145.9 for requesting confidential treatment under the FOIA of those 
submissions.
3. Relationship of the Proposed Procedures to the FOIA Process
    Other concerns raised by the commenters may spring from a 
misunderstanding of the relationship between the proposed regulation 
and the FOIA. NYMEX, for example, appears to believe that all 
confidentiality issues arise in the context of the FOIA and must be 
made ``ripe'' by a FOIA request.\22\ On the contrary, confidentiality 
issues frequently arise outside the scope of the FOIA and are resolved 
without reference to that statute.\23\ As noted above, the Commission's 
responsibility to provide transparency with respect to certain 
information exists separately from its duty to implement the FOIA. The 
latter obligation is addressed by the Commission's part 145 
regulations, which deal with disclosure issues in the context of public 
requests for information under the FOIA and are not necessarily 
relevant or useful outside that context. In contrast, while registered 
entities' interest in having their part 40 and 41 submissions protected 
from disclosure may implicate the FOIA, it is separately in tension 
with their statutory responsibility to make certain information 
publicly available and with the Commission's commitment to providing 
transparency where appropriate. It is this tension, not the filing of a 
FOIA request, that signifies ``ripeness.'' As discussed above, the 
Commission's obligations are in some instances statutory. In other 
circumstances, the Commission has concluded as a matter of policy that 
public access information about products and trading mechanisms 
generally outweighs the asserted right of a registered entity to keep 
its information confidential. Without the measures provided by the 
proposed rulemaking, the Commission's ability fully to consider the 
impact of a rule on the public would continue to be dependent on the 
filing of a FOIA request to trigger the resolution of confidentiality 
and disclosure issues.
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    \22\ The CME similarly cites a perceived burden on Commission 
staff, which may be ``inundated'' with detailed written 
justifications for every confidential treatment request where no 
FOIA request is pending.
    \23\ The Commission notes that the SEC specifies one procedure 
for requesting confidential treatment under the FOIA (17 CFR 200.83) 
and a separate procedure where the FOIA is not implicated. (17 CFR 
240.24b-2) The latter applies to such filings as registration 
statements, reports, applications, statements or other documents 
filed pursuant to the Securities Exchange Act of 1934. Like the rule 
proposed by the Commission, the SEC regulation requires that a 
written justification be submitted simultaneously with the filing. 
An initial decision to grant or disallow a request for nondisclosure 
of information is not triggered by a FOIA request, and a submitter 
objecting to an initial decision to deny confidential treatment may 
petition the SEC for review of that decision.
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    CME's observation that such a request ``is likely never to be 
received'' \24\ highlights the necessity for the proposed regulation. 
The Commission frequently has been hobbled in its efforts to make 
information public by confidential treatment requests which, while 
perhaps not calculated to do so, can create a lengthy delay in the 
disclosure of information the Commission believes should be publicly 
available. The amendments we have proposed will permit the Commission 
to quickly resolve confidentiality issues in connection with material 
submitted pursuant to parts 40 and 41.
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    \24\ Letter dated August 20, 2007 from CME Group, at 2 and 3.
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    In that regard, the CME questioned the fairness of the proposed 
regulation, asserting that it would prejudice FOIA requesters who would 
not have an opportunity to respond to an appeal under the procedures 
specified in the proposal. Similarly, the exchange expressed concern 
that because the Commission may reconsider a grant of confidential 
treatment if a FOIA request is subsequently made for the material, the 
registered entity would be required to submit a ``new updated detailed 
written justification based on possible changed circumstances at the 
time of the appeal.'' \25\
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    \25\ Id. at 3.
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    The Commission believes these concerns are unwarranted. If an 
appeal were filed by a registered entity under the procedures specified 
in proposed regulation 40.8(c), no FOIA requester's rights would be 
compromised, because the appeal would be based on staff's initial 
determination to disclose the subject information prior to the filing 
of a FOIA request. Should a FOIA requester subsequently seek 
information given confidential treatment under regulation 40.8(c), the 
process would be governed by FOIA regulation 145.9, and both the FOIA 
requester and the submitter would have the appeal rights provided by 
regulation 145.9. In these circumstances, the Commission believes that 
fairness requires that the registered entity be given an opportunity to 
update its detailed written justification based on ``possible changed 
circumstances at the time of the appeal'' and to respond to specific 
arguments raised by the requester. An updated detailed written 
justification is not required, however, and the registered entity may 
opt instead to rely on its original justification. In such cases, the 
Commission's decision would consider the registered entity's detailed 
written justification submitted under regulation 40.8(c) and the FOIA 
requester's response to it, if any. Because the comments reflect some 
confusion in this regard, the Commission proposes to further amend 
proposed regulation 40.8(c) to clarify that appeal rights and 
subsequent FOIA requests in which confidential treatment is an issue 
will continue to be governed by regulation 145.9.
    Finally, the Commission is not persuaded by CME's argument that the 
proposed regulation would impose numerous costs on the Commission, 
registered entities and FOIA requesters. All of the purported costs and 
burdens cited by the exchange appear to be premised on its 
misunderstanding that issues of disclosure exist only in the context of 
the FOIA and that their resolution prior to receipt of a FOIA request 
would be premature as well as duplicative. As discussed above, it is 
the Commission's view that its ability to make information publicly 
available cannot depend upon circumstances outside its control--such as 
receipt of a FOIA request. Further, the registered

[[Page 44943]]

entity may choose not to assume the burden and cost, if any, of 
updating its original detailed written justification in the event a 
subsequent FOIA request is received. The Commission nonetheless 
believes that fundamental fairness dictates that the registered entity 
be given the opportunity to do so. Finally, the exchange has not 
explained its claim that the proposed procedures would disadvantage 
FOIA requesters, either financially or otherwise.

D. Proposed Amendment to Appendix D--Submission Cover Sheet and 
Instructions

    In 2004, the Commission amended the part 40 and 41 regulations to 
specify the portions of DTEF, DCO and DCM applications that are 
publicly available. At that time, the Commission also added Appendix D 
to the part 40 regulations prescribing a Submission Cover Sheet to 
accompany all self-certified rules, self-certified products, rules 
submitted for Commission approval, notifications of rule amendments, 
and non-material agricultural rule changes.\26\ To this end, Appendix D 
included a copy of the Submission Cover Sheet along with step-by-step 
instructions for completing and returning the form to the Commission. 
The cover sheet assists Commission staff in preparing and maintaining 
the accuracy of the submissions being published on the Commission's Web 
site. In order to alert staff that a submission contains material that 
should not be published, the Commission proposes to amend the 
Submission Cover Sheet to include a prominently placed box to be 
checked when confidential treatment is being requested for any part of 
a submission filed pursuant to part 40 or 41. The Commission also 
proposes to amend Appendix D to part 40 to add an instruction to ensure 
that registered entities are fully aware that checking the 
``confidential treatment requested'' box on the Submission Cover Sheet 
in no way obviates the submitter's responsibility to comply with the 
confidential treatment requirements established in proposed regulation 
40.8(c) and will not substitute either for notice or for full 
compliance with those requirements.
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    \26\ 69 FR 67503 (Nov. 18, 2004).
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E. Freedom of Information Act Amendments

    Commission regulation 145.9(b) defines the scope of the 
Commission's confidential treatment regulations: Its provisions apply 
only where the Commission has not specified that an alternative 
procedure be utilized in connection with a particular study, report, 
investigation, or other matter. The Commission proposes to amend 
regulation 145.9(b) to reference the alternative procedure provided in 
regulation 40.8(c) for submissions filed under parts 40 and 41.

III. Cost-Benefit Analysis

    Section 15(a) of the Act, as amended by section 119 of the CFMA, 
requires the Commission to consider the costs and benefits of its 
action before issuing a new regulation under the Act. By its terms, 
section 15(a) as amended does not require the Commission to quantify 
the costs and benefits of a new regulation or to determine whether the 
benefits of a regulation outweigh its costs. Rather, section 15(a) 
simply requires the Commission to ``consider the costs and benefits'' 
of its action.
    Section 15(a) of the Act further specifies that costs and benefits 
shall be evaluated in light of five broad areas of market and public 
concern: Protection of market participants and the public; efficiency, 
competitiveness, and financial integrity of futures markets; price 
discovery; sound risk management practices; and other public interest 
considerations. Accordingly, the Commission could, in its discretion, 
give greater weight to any one of the five enumerated areas and could, 
in its discretion, determine that, notwithstanding its costs, a 
particular regulation was necessary or appropriate to protect the 
public interest or to effectuate any of the provisions or to accomplish 
any of the purposes of the Act.
    The Commission is considering the costs and benefits of these 
proposed regulations in light of the specified provisions of section 
15(a) of the Act:
    1. Protection of market participants and the public. The proposed 
amendments should have no effect on the Commission's ability to protect 
market participants and the public.
    2. Efficiency and competition. The proposed amendments are expected 
to benefit efficiency by making the non-confidential information from 
registered entity submissions available to the public in a more timely 
manner. The Commission anticipates that the costs of compliance with 
the confidential treatment procedures will be minimal. The proposed 
amendments should have no effect, from the standpoint of imposing costs 
or creating benefits, on competition in the futures and options 
markets.
    3. Financial integrity of futures markets and price discovery. The 
amendments should have no effect, from the standpoint of imposing costs 
or creating benefits, on the financial integrity or price discovery 
function of the futures and options markets.
    4. Sound risk management practices. The amendments being proposed 
herein should have no effect on the risk management practices of the 
futures and options industry.
    5. Other public considerations. No additional public considerations 
could be determined.
    After considering these factors, the Commission has determined to 
propose the rules and rule amendments set forth below. The Commission 
invites public comment on its application of the cost-benefit 
provision. Commenters also are invited to submit with their comment 
letters any data that they may have quantifying the costs and benefits 
of the proposal.

IV. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq. (2000), 
requires federal agencies, in proposing regulations, to consider the 
impact of those regulations on small entities. The regulations proposed 
herein would affect derivatives transaction execution facilities, 
designated contract markets, and derivatives clearing organizations. 
The Commission previously has determined that the foregoing entities 
are not small entities for purposes of the RFA.\27\ Accordingly, the 
Acting Chairman, on behalf of the Commission, hereby certifies pursuant 
to 5 U.S.C. 605(b) that the proposed regulations will not have a 
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \27\ 47 FR 18618, 18619 (April 30, 1982), discussing contract 
markets; 66 FR 42256, 42268 (August 10, 2001), discussing exempt 
boards of trade, exempt commercial markets and derivatives 
transaction execution facilities; 66 FR 45605, 45609 (August 29, 
2001), discussing derivatives clearing organizations.
---------------------------------------------------------------------------

B. Paperwork Reduction Act of 1995

    This proposed rulemaking contains information collection 
requirements. As required by the Paperwork Reduction Act (PRA) of 1995, 
44 U.S.C. 3504(h), the Commission has submitted a copy of this section 
to the Office of Management and Budget (OMB) for its review.
    Collection of Information: Rules Relating to part 40, Provisions 
Common to DCMs, DTEFs and DCOs, OMB Control Number 3038-0022.
    The expected effect of the proposed amended regulations will be to 
increase the burden previously approved by OMB for this collection of 
information by 16 hours as it will result in the filing

[[Page 44944]]

of approximately five additional pages when a registered entity files a 
detailed written justification and confidential appendix under 
Commission Regulations 40.2, 40.4, 40.5, and 40.6.
    The estimated burden was calculated as follows:
    Estimated number of respondents: 12.
    Annual responses by each respondent: .30.
    Total annual responses: 4.
    Estimated average hours per response: 4.
    Annual reporting burden: 16.
    Collection of Information: Rules Relating to part 41, Security 
Futures Products, OMB Control Number 3038-0059.
    The expected effect of the proposed amended regulations will be to 
increase the burden previously approved by OMB for this collection of 
information by 3.6 hours as it will result in the filing of 
approximately five additional pages when a registered entity files a 
detailed written justification and confidential appendix under 
Commission regulations 41.23 and 41.24.
    Estimated number of respondents: 3.
    Annual responses by each respondent: .30.
    Total annual responses: .90.
    Estimated average hours per response: 4.
    Annual reporting burden: 3.6.
    Organizations and individuals desiring to submit comments on the 
information collection requirements should direct them to the Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
Room 10202, New Executive Office Building, 725 17th Street, NW., 
Washington, DC 20503; Attention: Desk Officer for the Commodity Futures 
Trading Commission.
    In Compliance with the PRA, the Commission, through these proposed 
regulations, solicits comments to: (1) Evaluate whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information will 
have a practical use; (2) evaluate the accuracy of the Commission's 
estimate of the burden of the proposed collection of information, 
including the validity of the methodology and assumptions used; (3) 
enhance the quality, usefulness, and clarity of the information to be 
collected; and (4) minimize the burden of collecting information on 
those who are to respond, including through the use of appropriate 
automated electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission responses.
    OMB is required to make a decision concerning the collection of 
information contained in these proposed regulations between 30 and 60 
days after publication of this document in the Federal Register. This 
does not affect the deadline for the public to comment to the 
Commission on the proposed regulations. Copies of the information 
collection submission to OMB are available from the CFTC Clearance 
Officer, 1155 21st Street, NW., Washington, DC 20581, (202) 418-5160.

List of Subjects

17 CFR Part 40

    Commodity futures, Contract markets, Designation application, 
Reporting and recordkeeping requirements.

17 CFR Part 41

    Security Futures.

17 CFR Part 145

    Commission records and information.

    For the reasons stated in the preamble, the Commission proposes to 
amend 17 CFR parts 40, 41, and 145 as follows:

PART 40--PROVISIONS COMMON TO CONTRACT MARKETS, DERIVATIVES 
TRANSACTION EXECUTION FACILITIES AND DERIVATIVES CLEARING 
ORGANIZATIONS

    1. The authority citation for part 40 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 5, 6, 6c, 7, 7a, 8 and 12a, as 
amended by appendix E of Pub. L. 106-554, 114 Stat. 2763A-365.

    2. Section 40.2 is amended by adding paragraph (a)(3)(v) to read as 
follows:


Sec.  40.2  Listing Products for trading by certification.

    (a) * * *
    (3) * * *
    (v) A request for confidential treatment as permitted under the 
procedures of Sec.  40.8.
* * * * *
    3. Section 40.3 is amended by revising paragraph (a)(7) to read as 
follows:


Sec.  40.3  Voluntary submission of new products for Commission review 
and approval.

    (a) * * *
    (7) Include a request for confidential treatment as permitted under 
the procedures of Sec.  40.8.
* * * * *
    4. Section 40.5 is amended by revising paragraph (a)(8) to read as 
follows:


Sec.  40.5  Voluntary submission of rules for Commission review and 
approval.

    (a) * * *
    (8) Include a request for confidential treatment as permitted under 
the procedures of Sec.  40.8.
* * * * *
    5. Section 40.6 is amended by adding new paragraph (a)(3)(vi) to 
read as follows:


Sec.  40.6  Self-certification of rules by designated contract markets 
and registered derivatives clearing organizations.

    (a) * * *
    (3) * * *
    (vi) A request for confidential treatment as permitted under the 
procedures of Sec.  40.8.
* * * * *
    6. Section 40.8 is amended by adding new paragraphs (c) and (d) to 
read as follows:


Sec.  40.8  Availability of public information.

* * * * *
    (c) A registered entity's filing of new products under the self-
certification procedures, new products for Commission review and 
approval, new rules and rule amendments for Commission review and 
approval, and new rules and rule amendments submitted under the self-
certification procedures will be treated as public information unless 
covered by a request for confidential treatment. If a registered entity 
files a request for confidential treatment, the following procedures 
will 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 Sec.  145.9(e) 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, redacted;
    (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) 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 Sec.  
145.9(g) of this chapter.
    (6) 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.

[[Page 44945]]

    (d) Commission staff will not consider requests for confidential 
treatment of information that is required to be made public under 
Section 5(d)(7) of the Act or Commission Regulations 40.3(a)(7) or 
40.5(a)(8).
    6. Appendix D is amended by adding a new sentence to the end of 
section 8, ``Other requirements,'' to read as follows:

Appendix D to Part 40--Submission Cover Sheet and Instructions

* * * * *
    (8) Other requirements--* * * 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 
Rule 40.8(c) and, where appropriate, Rule 145.9, and will not 
substitute for notice or full compliance with such requirements.
* * * * *

PART 41--SECURITY FUTURES PRODUCTS

    7. The authority citation for part 41 continues to read as follows:

    Authority: Sections 206, 251 and 252, Pub. L. 106-554, 114 Stat. 
2763, 7 U.S.C. 1a, 2, 6f, 6j, 7a-2, 12a; 15 U.S.C. 78g(c)(2).

    8. Section 41.23 is amended by adding new paragraph (a)(7) to read 
as follows:


Sec.  41.23  Listing of security futures products for trading.

    (a) * * *
    (7) Includes a request for confidential treatment as permitted 
under the procedures of Sec.  40.8.
* * * * *
    9. Section 41.24 is amended by adding new paragraph (a)(6) to read 
as follows:


Sec.  41.24  Rule amendments to security futures products.

    (a) * * *
    (6) Includes a request for confidential treatment as permitted 
under the procedures of Sec.  40.8.
* * * * *

PART 145--COMMISSION RECORDS AND INFORMATION

    10. The authority for part 145 continues to read as follows:

    Authority: Pub. L. 99-570, 100 Stat. 3207; Pub. L. 89-554, 80 
Stat. 383; Pub. L. 90-23, 81 Stat. 54; Pub. L. 98-502, 88 Stat. 
1561-1564 (5 U.S.C. 552); Sec. 101(a), Pub. L. 93-463, 88 Stat. 1389 
(5 U.S.C. 4a(j)); unless otherwise noted.

    11. Section 145.9 is amended by revising paragraph (b) to read as 
follows:


Sec.  145.9  Petition for confidential treatment of information 
submitted to the Commission.

* * * * *
    (b) Scope. The provisions of this section shall apply only where 
the Commission has not specified that an alternative procedure be 
utilized in connection with a particular study, report, investigation, 
or other matter. See Sec.  40.8 for procedures to be utilized in 
connection with filing information required to be filed pursuant to 17 
CFR parts 40 and 41.
* * * * *

    Issued in Washington, DC on July 23, 2008, by the Commission.
David Stawick,
Secretary of the Commission.
[FR Doc. E8-17529 Filed 7-31-08; 8:45 am]
BILLING CODE 6351-01-P