Provisions Common to Registered Entities, 67282-67301 [2010-27533]

Agencies

• Commodity Futures Trading Commission

[Federal Register Volume 75, Number 211 (Tuesday, November 2, 2010)]
[Proposed Rules]
[Pages 67282-67301]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-27533]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 40

RIN 3038-AD07


Provisions Common to Registered Entities

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is proposing rules to implement new statutory provisions 
enacted under Title VII of the Dodd-Frank 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

[[Page 67283]]

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: https://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: https://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 
https://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 https://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.
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    \1\ 17 CFR 145.9.

FOR FURTHER INFORMATION CONTACT: Bella Rozenberg, Special Counsel, 
Division of Market Oversight (``DMO''), at 202-418-5119 or 
brozenberg@cftc.gov, Riva Spear Adriance, Associate Director for Market 
Review, DMO at 202-418-5494 or radriance@cftc.gov, in each case, also 
at the Commodity Futures Trading Commission, Three Lafayette Centre, 
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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 real-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.
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    \2\ 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 https://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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    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 Dodd-Frank 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 Dodd-Frank 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.
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    \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.
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    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.
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    \7\ Commission regulations referred to herein are found at 17 
CFR 1.

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[[Page 67284]]

    Although Section 745 of the Dodd-Frank 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

    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 Sec.  40.1. The 
Commission proposes to add definitions for ``dormant swap execution 
facilities'' and ``dormant swap data repositories'' to provide 
consistency with the extant Sec.  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 appropriate as Section 736 of the 
Dodd-Frank Act amends Section 8a(7) of the Act to permit the Commission 
to alter or supplement the rules of a registered 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.
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    \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 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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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 Sec.  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 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 Sec.  
40.2.
    The Commission proposes to amend Sec.  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 Sec.  
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\
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    \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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    Based on these experiences, the Commission proposes to amend Sec.  
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

[[Page 67285]]

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 Sec. Sec.  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 Sec.  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 Sec.  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 
Sec.  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 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 Sec.  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 
Sec.  40.2, described above, the Commission proposes to amend Sec.  
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 Sec.  40.2(a)(3)(vi), proposed 
Sec.  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 Sec. Sec.  40.2(a)(3)(vii) and 
40.6(a)(2), proposed Sec.  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 Dodd-Frank Act, proposed Sec.  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.

d. Section 40.4 Amendments to terms or conditions of enumerated 
agricultural products

    The Commission proposes a number of technical amendments to clarify 
existing regulatory obligations imposed on the DCMs that trade 
contracts based on an agricultural commodity listed in Section 1a(9) of 
the Act.
    Pursuant to Section 5c(c)(2)(B) of the Act, rules that materially 
change a term 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 Sec.  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 Sec.  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 Sec.  40.4(b) and the categories of 
rules enumerated in Sec.  40.6(d), the Commission proposes to amend 
Sec.  40.4(b) to refer to Sec.  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 Sec.  40.6 without prior approval or 
certification.
    In addition, the Commission proposes to clarify that changes in 
trading hours in Sec.  40.4(b)(3) and changes required to comply with 
an order of an adjudicative or regulatory body in Sec.  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 Sec.  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 Sec.  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 or the Commission's regulations promulgated 
thereunder. In determining whether a rule is inconsistent with the Act, 
the Commission may also consider, for example, whether the new rule or 
rule amendment potentially disrupts market integrity, or increases 
systemic risk.
    The Commission also proposes amendments to the information required 
to be submitted when requesting

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approval of amendments to the terms and conditions of a product under 
Sec.  40.5. Consistent with Sec.  40.2 and Sec.  40.3, the Commission 
proposes to amend Sec.  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 Sec. Sec.  40.2(a)(3)(vii), 40.3(a)(10) 
and 40.6 (a)(2), the Commission proposes in Sec.  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 Sec.  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 Sec. Sec.  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 Sec.  40.6, as follows.
    To implement the amended procedures for self-certification of rules 
described in Section 745 of the Dodd-Frank Act, the Commission proposes 
in Sec.  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 business days, 
that it is staying the certification pursuant to Sec.  40.6(c).
    Parallel to proposed Sec.  40.5(a), proposed Sec.  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 Sec.  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 Sec. Sec.  40.2, 40.3 and 40.5, proposed Sec.  
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 Sec. Sec.  40.2, 40.3 and 40.5 and discussed 
above, the Commission proposes to amend Sec.  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 Sec.  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.
    Proposed Sec.  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 90-
day 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 
Sec.  40.6(c)(1) is distinct from the stay provision presently in 
effect under current Sec.  40.6(b), which the Commission proposes to 
move to Sec.  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 Sec.  40.6(a). Conversely, the new stay provision in 
proposed Sec.  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 speculative 
position limit on a physical-delivery contract. The above mentioned

[[Page 67287]]

examples of submissions often raise a number of complex issues that may 
require an extended review period.
    Proposed Sec.  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 Sec.  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\
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    \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.
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    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.
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    \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 timely manner.
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    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 real-time 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 will 
notify the public and establish a timeline to implement new electronic 
filing procedures.
    The Commission proposes several amendments to Sec.  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 Sec. Sec.  40.4(b) and 40.6(d). The Commission in proposed 
Sec.  40.6(d)(2)(v), requires that fee changes associated with market 
making or other incentive programs be submitted for Commission review 
under Sec.  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 Sec.  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 Sec.  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 Sec.  
40.3(d) and Sec.  40.5(d) and the authority to stay the certification 
of new rules or rule amendments pursuant to Sec.  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 Sec.  40.3 (d) or Sec.  40.5(d) or Sec.  40.6(c), when the 
submission is incomplete or accompanied by an inadequate explanation.
    Finally, proposed Sec.  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 
Sec.  40.10 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 Sec.  
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\
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    \12\ See 75 FR 56513 (Sept. 16, 2010).
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    In addition, the Commission proposes to amend Sec.  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\
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    \13\ 17 CFR part 145.
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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 Sec.  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 Sec.  40.6(a)(1), as well as the Web site publication 
requirements under Sec.  40.6(a)(2). In addition to providing 
information required under Sec.  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

[[Page 67288]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  
40.6(c) (proposed to be redesignated as Sec.  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 
Sec.  40.6, the fact that the Dodd-Frank Act and Sec.  40.10 already 
establish a materiality threshold makes the existing list of non-
material changes less meaningful for purposes of Sec.  40.10. The 
Commission believes that any further refinement of what might be 
considered non-material for purposes of Sec.  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 Sec.  40.10.
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    \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 Sec.  
40.6(c)(2)(i).
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    Under proposed Sec.  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 Sec.  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 Sec.  40.10(e) would allow a SIDCO to implement a proposed 
rule change if the review period lapsed without Commission action.
    Proposed Sec.  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.
    Proposed Sec.  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 Sec.  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

[[Page 67289]]

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 Sec.  
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 Sec.  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 Sec.  
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 Sec.  
40.2 or Sec.  40.3, the Commission determines that such product may 
involve an activity that is enumerated in Sec.  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 Sec.  40.11(a). Upon completion 
of its review, the Commission will issue an order, as required by 
Section 745(b) of the Dodd-Frank Act, finding either that the product 
violates or does not violate the prohibitions in proposed Sec.  
40.11(a).

k. Section 40.12 Tolling of review period pending jurisdictional 
determination

    Under Section 718(a) of the Dodd-Frank 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 Dodd-Frank 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 and Exchange Commission seeks 
judicial review of a jurisdictional determination, proposed Sec.  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 
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 
self-certification that the rules comply with the Act and Commission 
regulations. The requirements for the self-certification 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.
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    \15\ 5 U.S.C. 601 et seq.
    \16\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    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\
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    \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.

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[[Page 67290]]

    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 self-regulatory 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.
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    \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.
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    Accordingly, the Chairman, on behalf of the Commission, hereby 
certifies pursuant to 5 U.S.C. Sec.  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.

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 Sec. Sec.  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 Sec. Sec.  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.
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    \20\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  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 Sec. Sec.  40.2(a)(3)(vii), 40.3(a)(10), 
40.5(a)(6), and 40.6(a)(2) 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 Sec.  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 Sec.  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

[[Page 67291]]

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 p