Retail Foreign Exchange Transactions; Conforming Changes to Existing Regulations in Response to the Dodd-Frank Wall Street Reform and Consumer Protection Act, 56103-56107 [2011-23155]
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Federal Register / Vol. 76, No. 176 / Monday, September 12, 2011 / Rules and Regulations
d.1. Abrin;
d.2. Aflatoxins;
d.3. Botulinum toxins;
d.4. Cholera toxin;
d.5. Clostridium perfringens toxins;
d.6. Conotoxin;
d.7. Diacetoxyscirpenol toxin;
d.8. HT–2 toxin;
d.9. Microcystin (Cyanginosin);
d.10. Modeccin toxin;
d.11. Ricin;
d.12. Saxitoxin;
d.13. Shiga toxin;
d.14. Staphylococcus aureus toxins;
d.15. T–2 toxin;
d.16. Tetrodotoxin;
d.17. Verotoxin and other Shiga-like
ribosome inactivating proteins;
d.18. Viscum Album Lectin 1 (Viscumin);
or
d.19. Volkensin toxin.
e. ‘‘Fungi’’, as follows:
e.1. Coccidioides immitis; or
e.2. Coccidioides posadasii.
7. In Supplement No. 1 to Part 774
(the Commerce Control List), Category
1— Special Materials and Related
Equipment, Chemicals,
‘‘Microorganisms’’ and ‘‘Toxins,’’ ECCN
1C352 is amended by revising the
‘‘Related Controls’’ paragraph in the List
of Items Controlled section, to read as
follows:
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1C352 Animal pathogens, as follows (see
List of Items Controlled).
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■ 8. In Supplement No. 1 to Part 774
(the Commerce Control List), Category
1—Special Materials and Related
Equipment, Chemicals,
‘‘Microorganisms’’ and ‘‘Toxins,’’ ECCN
1C360 is amended by revising paragraph
(a) in the ‘‘Items’’ paragraph in the List
of Items Controlled to read as follows:
1C360 Select agents not controlled under
ECCN 1C351, 1C352, or 1C354.
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9. In Supplement No. 1 to Part 774
(the Commerce Control List), Category
1—Special Materials and Related
Equipment, Chemicals,
‘‘Microorganisms’’ and ‘‘Toxins,’’ ECCN
1C991 is amended by revising the
‘‘Items’’ paragraph in the List of Items
Controlled to read as follows:
■
1C991 Vaccines, immunotoxins, medical
products, diagnostic and food testing
kits, as follows (see List of Items
controlled).
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16:09 Sep 09, 2011
Retail Foreign Exchange Transactions;
Conforming Changes to Existing
Regulations in Response to the DoddFrank Wall Street Reform and
Consumer Protection Act
Commodity Futures Trading
Commission.
ACTION: Final rules; interpretation.
AGENCY:
The Commodity Futures
Trading Commission (Commission or
CFTC) is amending its regulations
governing off-exchange foreign currency
transactions with members of the retail
public (i.e., retail forex transactions).
These amendments (Amendments) are
necessary to incorporate into Part 5 of
the Commission’s regulations changes
made to the Commodity Exchange Act
(CEA) by the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(Dodd-Frank Act). The Commission is
also issuing certain related technical
interpretations of various provisions of
the CEA as amended by the Dodd-Frank
Act with respect to retail forex
transactions.
SUMMARY:
Effective September 12, 2011.
DATES:
FOR FURTHER INFORMATION CONTACT:
Dated: August 26, 2011.
Kevin J. Wolf,
Assistant Secretary for Export
Administration.
[FR Doc. 2011–22677 Filed 9–9–11; 8:45 am]
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17 CFR Part 5
Unit: * * *
Related Controls: * * *
Related Definitions: * * *
Items:
a. Vaccines against items controlled by
ECCN 1C351, 1C352, 1C353, 1C354, or
1C360;
b. Immunotoxins containing items
controlled by 1C351.d;
c. Medical products containing botulinum
toxins controlled by ECCN 1C351.d.3 or
conotoxins controlled by ECCN 1C351.d.6;
d. Medical products containing items
controlled by ECCN 1C351.d (except
botulinum toxins controlled by ECCN
1C351.d.3, conotoxins controlled by ECCN
1C351.d.6, and items controlled for CW
reasons under 1C351.d.11 or .d.12);
e. Diagnostic and food testing kits
containing items controlled by ECCN
1C351.d (except items controlled for CW
reasons under ECCN 1C351.d.11 or .d.12).
List of Items Controlled
Unit: * * *
Related Controls: * * *
Related Definitions: * * *
Items:
Note: * * *
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COMMODITY FUTURES TRADING
COMMISSION
List of Items Controlled
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List of Items Controlled
Unit: * * *
Related Controls: The Animal and Plant
Health Inspection Service (APHIS), U.S.
Department of Agriculture, and the Centers
for Disease Control and Prevention (CDC),
U.S. Department of Health and Human
Services, maintain controls on the
possession, use, and transfer within the
United States of certain items controlled by
this ECCN (for APHIS, see 7 CFR 331.3(b),
9 CFR 121.3(b), and 9 CFR 121.4(b); for
CDC, see 42 CFR 73.3(b) and 42 CFR
73.4(b)).
Related Definitions: * * *
Items:
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a. Human and zoonotic pathogens, as
follows:
a.1. Viruses, as follows:
a.1.a. Central European tick-borne
encephalitis viruses, as follows:
a.1.a.1. Absettarov;
a.1.a.2. Hanzalova;
a.1.a.3. Hypr;
a.1.a.4. Kumlinge;
a.1.b. Cercopithecine herpesvirus 1 (Herpes
B virus);
a.1.c. Flexal virus;
a.1.d. Reconstructed replication competent
forms of the 1918 pandemic influenza virus
containing any portion of the coding regions
of all eight gene segments;
a.2. [RESERVED];
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Christopher W. Cummings, Special
Counsel, Division of Clearing and
Intermediary Oversight, or Barbara S.
Gold, Associate Director, Division of
Clearing and Intermediary Oversight,
Commodity Futures Trading
Commission, 1155 21st Street, NW.,
Washington, DC 20581; telephone
number: (202) 418–5450; facsimile
number: (202) 418–5528; and electronic
mail: ccummings@cftc.gov or
bgold@cftc.gov, respectively.
SUPPLEMENTARY INFORMATION:
I. Background
On July 21, 2010, President Obama
signed the Dodd-Frank Act.1 Title VII of
the Dodd-Frank Act 2 amended the
CEA 3 to establish a comprehensive new
regulatory framework for swaps and
security-based swaps. The goal of this
legislation was to reduce risk, increase
transparency, and promote market
integrity within the financial system by,
1 See Dodd-Frank Wall Street Reform and
Consumer Protection Act, Pub. L. No. 111–203, 124
Stat. 1376 (2010). The text of the Dodd-Frank Act
may be accessed through the Commission’s Web
site at https://www.cftc.gov/.
2 Pursuant to Section 701 of the Dodd-Frank Act,
Title VII may be cited as the ‘‘Wall Street
Transparency and Accountability Act of 2010.’’
3 7 U.S.C. 1 et seq. (2006). The CEA also can be
accessed through the Commission’s Web site.
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among other things: (1) Providing for the
registration and comprehensive
regulation of swap dealers and major
swap participants; (2) imposing clearing
and trade execution requirements on
standardized derivative products; (3)
creating robust recordkeeping and realtime reporting regimes; and (4)
enhancing the Commission’s
rulemaking and enforcement authorities
with respect to, among others, all
registered entities and intermediaries
subject to the Commission’s oversight.
To accomplish its goal, the DoddFrank Act, among other things,
amended the existing definitions in, and
added new definitions to, CEA Section
1a, which has resulted in a
reorganization and renumbering of the
definitions in Section 1a.4 The DoddFrank Act also deleted two classes of
persons and added a new class of
person permitted to serve, or to offer to
serve, as a counterparty to a retail forex
transaction under CEA Section
2(c)(2)(B) (‘‘permitted counterparty’’),
which similarly has resulted in a
reorganization and redesignation of the
CEA provisions identifying these
permitted counterparties.5
As is explained below, the foregoing
changes to the CEA necessitate
corresponding amendments to Part 5 of
the Commission’s regulations,6 which
concerns retail forex transactions. In
this regard, the Commission notes that
it is also proposing other rulemakings in
response to the Dodd-Frank Act that
could affect the Part 5 regulations.7 The
Commission intends to resolve any
discrepancies that may arise between
any of these other rulemakings and the
Amendments in the course of finalizing
its rulemakings under the Dodd-Frank
Act.
II. The Amendments
A. Amendments Resulting Solely From
a Renumbering of a CEA Definition
Several definitions in Regulation 5.1
employ the phrase ‘‘eligible contract
participant as that term is defined in
[CEA] Section 1a(12).’’ Specifically, this
phrase is found in the following
definitions in Regulation 5.1:
‘‘commodity pool operator’’ (paragraph
4 See
Dodd-Frank Act Section 721(a).
Dodd-Frank Act Section 742(c)(1).
6 The Commission’s regulations are found at 17
CFR Ch. I (2011) and can be accessed through the
Commission’s Web site, https://www.cftc.gov.
7 See, e.g., Adaptation of Regulations to
Incorporate Swaps, 76 FR 33066 (Jun. 7, 2011)
(‘‘June 7 Proposal’’), whereby in response to the
deletion of the term ‘‘derivatives transaction
execution facility’’ from the CEA by the Dodd-Frank
Act, the Commission has proposed to delete
reference to the term ‘‘derivatives transaction
execution facility’’ from Regulation 5.1(m), which
defines the term ‘‘retail forex transaction.’’
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(d)(1) of the regulation); ‘‘commodity
trading advisor’’ (paragraph (e)(1) of the
regulation); ‘‘introducing broker’’
(paragraph (f)(1) of the regulation);
‘‘retail forex account’’ (paragraph (i) of
the regulation); and ‘‘retail forex
account agreement’’ (paragraph (j) of the
regulation). However, as a result of the
Dodd-Frank Act, the term ‘‘eligible
contract participant’’ is now defined in
CEA Section 1a(18). By the
Amendments, the Commission is
amending Regulations 5.1(d)(1), (e)(1),
(f)(1), (i) and (j) to reflect this numbering
change, such that each of the definitions
contained in these regulations refers to
CEA Section 1a(18).8
Regulations 5.10, which concerns risk
assessment recordkeeping applicable to
retail forex transactions, and 5.11,
which concerns risk assessment
reporting applicable to retail forex
transactions, provide at paragraphs
(c)(2) and (d)(2), respectively, that ‘‘the
term ‘Foreign Futures Authority’ shall
have the meaning set forth in [CEA]
section 1a(10).’’ As a result of the DoddFrank Act, this term is now defined in
CEA Section 1a(26). The Amendments
similarly change Regulations 5.10(c)(2)
and 5.11(d)(2) to reflect this numbering
change, such that the definition of
‘‘Foreign Futures Authority’’ refers to
CEA Section 1a(26).
Regulation 5.18 establishes trading
and operational standards for persons
offering to serve as a retail forex
counterparty. Specifically, paragraph
(a)(1)(ii) refers to such persons as a
‘‘[f]utures commission merchant as
defined in [CEA] Section 1a(20).’’
Pursuant to the Dodd-Frank Act, the
term ‘‘futures commission merchant’’
(FCM) is now defined in CEA Section
1a(28). Accordingly, the Amendments
likewise revise Regulation 5.18(a)(1)(ii)
so that the FCM reference therein is to
CEA Section 1a(28).
B. Amendments Resulting From the
Change in Permitted Counterparties
Regulation 5.1(h) defines the term
‘‘retail foreign exchange dealer’’ (RFED)
to mean ‘‘any person that is, or that
offers to be, the counterparty to a retail
forex transaction, except for a person
described in sub-paragraph (aa), (bb),
(cc)(AA), (dd), (ee) or (ff) of [CEA]
section 2(c)(2)(B)(i)(II).’’ 9 The DoddFrank Act: (1) Removed from this list of
permitted counterparties the persons
8 For the same reason, by the June 7 Proposal, the
Commission proposed to amend the definition of
the term ‘‘retail forex customer’’ in paragraph (k) of
Regulation 5.1, such that the definition similarly
would refer to Section 1a(18).
9 CEA Section 2(c)(2)(B) generally provides the
Commission with authority over retail forex
transactions.
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previously found in items (dd) and (ff),
which respectively refered to certain
insurance companies (including a
regulated subsidiary or affiliate) and
investment bank holding companies; (2)
redesignated item (ee) as item (dd); and
(3) redesignated item (gg) as item (ff).10
In light of these changes, the
Amendments delete from Regulation
5.1(h)(1) the references therein to items
(ee) and (ff) of CEA Section
2(c)(2)(B)(i)(II). For similar reasons, the
Amendments change the references in
Regulations 5.10(a)(1), 5.11(a)(1) and
5.11(a)(2) to the authority pursuant to
which a person is registered with the
Commission as an RFED from CEA
Section 2(c)(2)(B)(i)(II)(gg) to CEA
Section 2(c)(2)(B)(i)(II)(ff).
C. Amendments Related to the FCM
Definition
For the effective regulation of retail
forex transactions, the CEA and Part 5
distinguish between an FCM that is
‘‘primarily or substantially’’ engaged in
soliciting and accepting orders for
exchange-traded futures contracts and
accepting customer funds or property to
margin or secure such contracts, who is
permitted under CEA Section
2(c)(2)(B)(i)(II)(cc) to engage in retail
forex transactions based on its
registration as an FCM, and a person
that is registered as an FCM but is not
‘‘primarily or substantially’’ engaged in
those activities, who must register as an
RFED in order to engage in retail forex
transactions. Regulation 5.1(g) currently
provides that the term ‘‘[p]rimarily or
substantially means, when used to
describe the extent of a futures
commission merchant’s engagement in
the activities described in section
1a(20)’’ of the CEA, that the FCM’s gross
revenues meet certain thresholds, or
that the FCM is a clearing member of a
derivatives clearing organization.11 The
Commission explained this distinction,
which originated in the CFTC
Reauthorization Act of 2008 (CRA),12 as
being ‘‘for use in determining whether
a registered FCM is primarily or
substantially engaged in FCM activities,
such that it need not register as an RFED
in order to conduct customer
business.’’ 13
Thus, the Commission defined the
term ‘‘primarily or substantially’’ in
10 As a result of these changes, then, the
identification of the permitted counterparties in
CEA Section 2(c)(2)(B)(i)(II) runs from (aa) through
(dd), skips (ee), and ends at (ff). See Part III of this
Federal Register release, infra.
11 See CEA Section 5b and Part 39 of the
Commission’s regulations.
12 See Title XIII of the Food, Conservation and
Energy Act of 2008, Public Law 110–246, 122 Stat.
1651, 2189–2204 (2008).
13 75 FR 3282, 3288 (Jan. 20, 2010).
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Regulation 5.1(g), and drafted the
requirement to register as an RFED if a
registered FCM was not engaged
primarily or substantially in FCM
activities, with reference to the activities
described in the then-existing FCM
definition and by means of a simple
reference to ‘‘the activities described in
Section 1a(20)’’ of the CEA. However, in
addition to renumbering the FCM
definition in the CEA from Section
1a(20) to Section 1a(28), the Dodd-Frank
Act amended the FCM definition itself
to include certain activities involving
swaps and retail forex transactions
among the activities that bring a person
within the FCM definition, and it added
to the FCM definition any person that is
registered with the Commission as an
FCM.14 In order to maintain the
distinction between FCM and RFED
established by the CRA, the
Amendments amend Regulations 5.1(g)
and 5.3(a)(4)(i) such that each of these
rules refers solely to those provisions of
the CEA’s FCM definition that were in
effect at the time of adoption of the
CRA—i.e., the activities that, pursuant
to the Dodd-Frank Act, are now set forth
in CEA Sections 1a(28)(A)(i)(I)(aa)(AA)
(‘‘the purchase or sale of a commodity
for future delivery’’) and 1a(28)(A)(i)(II)
(‘‘in or in connection with the activities
described in [item aa of subclause (I)],
accepts any money, securities, or
property (or extends credit in lieu
thereof) to margin, guarantee, or secure
any trades or contracts that result or
may result therefrom’’).
III. Interpretation of Dodd-Frank Act
Amendments to CEA Sections 2(c)(2)(B)
and 2(c)(2)(C)
As is noted above, the Dodd-Frank
Act revised the list of permitted
counterparties in CEA Section
2(c)(2)(B)(i)(II) from items (aa) through
(gg), to items (aa) through (dd) and (ff)
(without an item (ee)). It did so in order
both to delete insurance companies and
investment bank holding companies
from the list of permitted counterparties
in CEA Section 2(c)(2)(B)(i)(II) and to redesignate the items corresponding to the
remaining permitted counterparties.15
However, in amending CEA Sections
2(c)(2)(B) and 2(c)(2)(C),16 the DoddFrank Act did not adjust certain internal
references in these sections to reflect
these changes to the list of permitted
counterparties.
Thus, for example, at numerous
places CEA Section 2(c)(2)(B) continues
14 See
Dodd-Frank Act Section 721(a)(13).
Dodd-Frank Act Sections 741(b) and 742(c).
16 CEA Section 2(c)(2)(C) generally provides the
Commission with authority over certain
transactions that are not within the scope of CEA
Section 2(c)(2)(B).
15 See
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to refers to item (gg), although item (gg)
has been redesignated as item (ff).17
Similarly, in various other provisions of
CEA Sections 2(c)(2)(B) and 2(c)(2)(C)
the permitted counterparties other than
FCMs and RFEDs are listed as either
‘‘item (aa), (bb), (dd), (ee) or (ff)’’ of CEA
Section 2(c)(2)(B)(i)(II) or ‘‘item (aa)
through (ff)’’ of CEA Section
2(c)(2)(B)(i)(II).18 These references now
inadvertently include RFEDs, because
RFEDs are now listed in item (ff).
Finally, these same references
inadvertently no longer include a
financial holding company, because
while the Dodd-Frank Act redesignated
this permitted counterparty as item (dd),
it nonetheless called for ‘‘striking ‘(dd)’
each place it appears’’ in CEA Sections
2(c)(2)(B) and 2(c)(2)(C).19
To avoid any impediment to a full
implementation of its regulatory
program for retail forex transactions that
any of the foregoing provisions might
present, by this Federal Register release
the Commission is issuing the following
interpretations of the Dodd-Frank Act.
First, to clarify that CEA Section
2(c)(2)(B)(i)(II) includes a financial
holding company as a permitted
counterparty to retail forex transactions,
the Commission interprets the
directions in Dodd-Frank Act Sections
741(b)(8) and (b)(9) to strike item ‘‘(dd)’’
each place it appears as a direction to
strike item ‘‘(ee)’’ instead.20 This
interpretation is necessary and
appropriate because pursuant to the
Dodd-Frank Act item (dd) includes a
financial holding company as a
permitted counterparty to retail forex
transactions and item (ee) no longer
exists in CEA Section 2(c)(2)(B)(i)(II).
Second, to clarify that an RFED is a
permitted counterparty, the Commission
17 This occurs once each in CEA Sections
2(c)(2)(B)(iii), 2(c)(2)(B)(iv)(I) and 2(c)(2)(B)(iv)(III),
and twice in CEA Section 2(c)(2)(B)(v).
18 Reference to ‘‘item (aa), (bb), (dd), (ee) or (ff)’’
of CEA Section 2(c)(2)(B)(i)(II) occurs in Sections
2(c)(2)(B)(iv)(I)(aa), 2(c)(2)(B)(iv)(I)(bb),
2(c)(2)(B)(iv)(I)(cc), 2(c)(2)(B)(iv)(II)(aa),
2(c)(2)(C)(i)(I)(aa), 2(c)(2)(C)(ii)(II)(aa),
2(c)(2)(C)(iii)(I)(aa), 2(c)(2)(C)(iii)(I)(bb) and
2(c)(2)(C)(iii)(II)(aa). The reference to ‘‘item (aa)
through (ff)’’ occurs in CEA Section
2(c)(2)(B)(iv)(IV)(aa).
19 Absent the interpretation being provided
herein, the instruction in Dodd-Frank Act Sections
741(b)(8)(A) and 741(b)(9)(A) for ‘‘striking ‘(dd)’
each place it appears’’ in CEA Sections 2(c)(2)(B)
and 2(c)(2)(C) not only would remove the (dd) item
heading from Section 2(c)(2)(B)(i)(II)(dd) (which
identifies a financial holding company as a
permitted counterparty for retail forex transactions),
but it would also affect all of the cross-references
to ‘‘item (aa), (bb), (dd), (ee) or (ff),’’ identified
previously.
20 Thus, CEA Section 2(c)(2)(B)(i)(II)(dd) retains
its designation, and each reference to ‘‘item (aa),
(bb), (dd), (ee) or (ff)’’ identified previously
continues to include a reference to ‘‘a financial
holding company.’’
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interprets each reference in CEA
Sections 2(c)(2)(B) and 2(c)(2)(C) to
‘‘item (gg) ’’ as a reference to ‘‘item (ff).’’
This interpretation similarly is
necessary and appropriate because
pursuant to the Dodd-Frank Act item (ff)
includes an RFED as a permitted
counterparty and item (gg) no longer
exists in CEA Section 2(c)(2)(B)(i)(II).
IV. Related Matters
A. Administrative Procedure Act
The Administrative Procedure Act
(APA) generally requires an agency to
publish notice of a proposed rulemaking
in the Federal Register.21 This
requirement does not apply, however, if
the agency ‘‘for good cause finds * * *
that notice and public procedure are
impracticable, unnecessary, or contrary
to the public interest.’’ 22 In addition,
the APA generally requires that an
agency publish an adopted rule in the
Federal Register 30 days before it
becomes effective, with certain
exceptions, including if an agency finds
good cause.23 The Commission finds
that notice and solicitation of comment
before the effective date of the changes
being made herein are unnecessary,
inasmuch as the rule changes are
entirely non-substantive technical
adjustments, and the interpretation
would do no more than clarify certain
technical drafting anomalies to express
what is clearly the intent of the DoddFrank Act.24 Accordingly, pursuant to
section 553(b) of the APA, the
Commission finds that there is good
cause not to follow notice and comment
procedures for this rulemaking. For the
same reason, the Commission finds,
pursuant to section 553(b) of the APA,
that the Amendments may be made
effective immediately upon publication
in the Federal Register.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act
(RFA) 25 requires that agencies, in
proposing rules, consider the impact of
those rules on small businesses.26 The
21 See 5 U.S.C. 553(b). This requirement does not
apply to interpretative rules or general statements
of policy.
22 Id.
23 See 5 U.S.C. 553(d).
24 This finding also satisfies the requirements of
the Congressional Review Act, specifically 5 U.S.C.
808(2), allowing the Proposal to become effective,
notwithstanding the requirement of 5 U.S.C. 801 (if
a Federal agency finds that notice and public
comment are ‘‘impracticable, unnecessary or
contrary to the public interest,’’ a rule ‘‘shall take
effect at such time as the Federal agency
promulgating the rule determines’’).
25 5 U.S.C. 601 et seq. (2006).
26 By its terms, the RFA does not apply to
‘‘individuals.’’ See 48 FR 14933, n. 115 (Apr. 6,
1983).
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Commission previously has established
certain definitions of ‘‘small entities’’ to
be used by the Commission in
evaluating the impact of its rules on
such entities in accordance with the
RFA.27 The Commission previously has
determined that FCMs and RFEDs
should not be considered small entities
for purposes of the RFA.28 With respect
to commodity pool operators (CPOs),
the Commission previously has
determined that a CPO is a small entity
for the purpose of the RFA if it meets
the criteria for an exemption from
registration under Regulation
4.13(a)(2).29 Thus, because the
Amendments apply to registered CPOs,
the RFA is not applicable to them. As
for introducing brokers (IBs) and
commodity trading advisors (CTAs), the
Commission previously has stated that
it would evaluate within the context of
a particular rule proposal whether all or
some affected IBs and CTAs would be
considered to be small entities and, if
so, the economic impact on them of the
particular rule.30 In this regard, the
Commission notes that the Amendments
apply to registered IBs and registered
CTAs, and do not change their existing
obligations or burdens. Moreover, as is
explained below, the Amendments will
not have a significant economic impact
on any person who would be affected
thereby, because they will not impose
any additional operational requirements
or otherwise direct or confine the
activities of affected persons.
Accordingly, the Chairman hereby
certifies pursuant to 5 U.S.C. 605(b) that
the Amendments will not have a
significant economic impact on a
substantial number of small entities.
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C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA) 31 imposes certain requirements
on Federal agencies (including the
Commission) in connection with their
conducting or sponsoring any collection
of information as defined by the PRA.
The Commission believes that the
Amendments will not impose new
recordkeeping or information collection
requirements that require approval by
the Office of Management and Budget
under 44 U.S.C. 3501, et seq.
Accordingly, the PRA does not apply to
this rulemaking.
27 See
47 FR 18618 (Apr. 30, 1982).
47 FR 18618, 18619 (Apr. 30, 1982) (FCMs)
and 75 FR 55410, 55416 (Sep. 10, 2010) (RFEDs).
29 See 47 FR at 18619–20.
30 See 48 FR 35248, 35276 (Aug. 3, 1993) (IBs)
and 47 FR at 18619, 18620 (CTAs).
31 44 U.S.C. 3501 et seq.
28 See
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16:09 Sep 09, 2011
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D. Cost-Benefit Considerations
List of Subjects in 17 CFR Part 5
Section 15(a) of the CEA 32 requires
the Commission to consider the costs
and benefits of its actions before issuing
a rulemaking under the CEA. By its
terms, Section 15(a) does not require the
Commission to quantify the costs and
benefits of a rule or to determine
whether the benefits of the rulemaking
outweigh its costs; rather, it simply
requires that the Commission
‘‘consider’’ the costs and benefits of its
actions. Section 15(a) further specifies
that the costs and benefits shall be
evaluated in light of five broad areas of
market and public concern: (1)
Protection of market participants and
the public; (2) efficiency,
competitiveness and financial integrity
of futures markets; (3) price discovery;
(4) sound risk management practices;
and (5) other public interest
considerations. The Commission may 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
rule is necessary or appropriate to
protect the public interest or to
effectuate any of the provisions or
accomplish any of the purposes of the
CEA.
Summary of Amendments. As is
explained above, the Amendments to
Part 5 ensure that the Commission’s
regulations governing retail forex
transactions reflect changes made to the
CEA by the Dodd-Frank Act by, e.g.,
aligning references in Part 5 to
definitional and other provisions in the
CEA with the appropriate provisions in
the CEA as amended by the Dodd-Frank
Act.
Costs. With respect to costs, the
Commission has determined that the
costs of the Amendments will not be
significant. This is because the
Amendments will simply amend the
current Part 5 text to take into account
the numerical and designation changes
made to the CEA as a result of the DoddFrank Act. No changes are being made
to the existing regulatory framework.
Thus there will be little (if any) costs to
persons who will be affected by the
Amendments.
Benefits. With respect to benefits, the
Commission has determined that the
benefits of the Amendments will be
significant. This is because they will
maintain the customer protections
currently provided under Part 5 by
ensuring that the provisions of Part 5
accurately reflect the text of the CEA as
amended by the Dodd-Frank Act.
Bulk transfers, Commodity pool
operators, Commodity trading advisors,
Consumer protection, Customer’s
money, securities and property,
Definitions, Foreign exchange,
Minimum financial and reporting
requirements, Prohibited transactions in
retail foreign exchange, Recordkeeping
requirements, Retail foreign exchange
dealers, Risk assessment, Special calls,
Trading practices.
For the reasons presented above, the
Commission hereby amends Chapter I of
Title 17 of the Code of Federal
Regulations as follows:
32 7
PO 00000
U.S.C. 19(a).
Frm 00016
Fmt 4700
Sfmt 4700
PART 5—OFF-EXCHANGE FOREIGN
CURRENCY TRANSACTIONS
1. The authority citation for part 5 is
revised to read as follows:
■
Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6c, 6d,
6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 6o, 8, 9, 9a, 12,
12a, 13b, 13c, 16a, 18, 19, 21, and 23, as
amended by Title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection Act,
Pub. L. No. 111–203, 124 Stat. 1376 (Jul. 21,
2010).
§ 5.1
[Amended]
2. Section 5.1 is amended by:
a. Removing from paragraphs (d)(1)(i),
(e)(1), (f)(1), (i) and (j) the words
‘‘section 1a(12) of the Act’’ and adding
in their place the words ‘‘section 1a(18)
of the Act’’;
■ b. Removing from paragraph (g)
introductory text the words ‘‘section
1a(20) of the Act’’ and adding in their
place the words ‘‘section
1a(28)(A)(i)(I)(aa)(AA) of the Act and
section 1a(28)(A)(i)(II) of the Act insofar
as that section references the activities
described in section
1a(28)(A)(i)(I)(aa)(AA)’’; and
■ c. Removing from paragraph (h)(1) the
words ‘‘sub-paragraph (aa), (bb),
(cc)(AA), (dd), (ee) or (ff)’’ and adding
in their place the words ‘‘item (aa), (bb),
(cc)(AA) or (dd)’’.
■
■
§ 5.3
[Amended]
3. Section 5.3 is amended by
removing from paragraph (a)(4)(i)(A) the
words ‘‘section 1a(20) of the Act’’ and
adding in their place the words ‘‘section
1a(28)(A)(i)(I)(aa)(AA) of the Act and
section 1a(28)(A)(i)(II) of the Act insofar
as that section references the activities
described in section
1a(28)(A)(i)(I)(aa)(AA)’’.
■
§ 5.10
[Amended]
4. Section 5.10 is amended by:
a. Removing from paragraph (a)(1)
introductory text the words ‘‘section
2(c)(2)(B)(i)(II)(gg) of the Act’’ and
■
■
E:\FR\FM\12SER1.SGM
12SER1
Federal Register / Vol. 76, No. 176 / Monday, September 12, 2011 / Rules and Regulations
adding in their place the words ‘‘section
2(c)(2)(B)(i)(II)(ff) of the Act’’; and
■ b. Removing from paragraph (c)(2) the
words ‘‘section 1a(10) of the Act’’ and
adding in their place the words ‘‘section
1a(26) of the Act’’.
§ 5.11
[Amended]
5. Section 5.11 is amended by:
a. Removing from paragraph (a)(1)
introductory text the words ‘‘Section
2(c)(2)(B)(i)(II)(gg) of the Act’’ and
adding in their place the words ‘‘section
2(c)(2)(B)(i)(II)(ff) of the Act’’; and
■ b. Removing from paragraph (a)(2)
introductory text the words ‘‘section
2(c)(2)(B)(i)(II)(gg) of the Act’’ and
adding in their place the words ‘‘section
2(c)(2)(B)(i)(II)(ff) of the Act’’; and
■ c. Removing from paragraph (d)(2) the
words ‘‘section 1a(10) of the Act’’ and
adding in their place the words ‘‘section
1a(26) of the Act’’.
■
■
§ 5.18
[Amended]
6. Section 5.18 is amended by
removing from paragraph (a)(1)(ii) the
words ‘‘section 1a(20) of the Act’’ and
adding in their place the words ‘‘section
1a(28) of the Act’’.
■
Issued in Washington, DC, on September 2,
2011, by the Commission.
Sauntia S. Warfield,
Assistant Secretary of the Commission.
[FR Doc. 2011–23155 Filed 9–9–11; 8:45 am]
BILLING CODE P
SOCIAL SECURITY ADMINISTRATION
20 CFR Parts 404 and 416
[Docket No. SSA–2011–0015]
RIN 0960–AH31
Requiring Use of Electronic Services
by Certain Claimant Representatives
Social Security Administration.
Final rules.
AGENCY:
ACTION:
We are revising our rules to
require that claimant representatives use
our electronic services as they become
available on matters for which the
representatives request direct fee
payment. In the future, we will publish
a notice in the Federal Register when
we require representatives who request
direct fee payment on a matter to use
our available electronic services. We are
also adding the requirement to use our
available electronic services on matters
for which the representative requests
direct fee payment as an affirmative
duty in our representative conduct
rules. These revisions reflect the
increased use of technology in
representatives’ business practices. We
emcdonald on DSK5VPTVN1PROD with RULES
SUMMARY:
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16:09 Sep 09, 2011
Jkt 223001
expect that the use of electronic services
will improve our efficiency by allowing
us to manage our workloads more
effectively. These rules do not require
claimants to use our available electronic
services directly; they only require their
representatives to use the services on
matters for which the representatives
request direct fee payment.
DATES: These final rules are effective on
October 12, 2011.
FOR FURTHER INFORMATION CONTACT:
Joann S. Anderson, Office of Income
Security Programs, Social Security
Administration, 6401 Security
Boulevard, Baltimore, MD 21235–6401,
(410) 965–6716. For information on
eligibility or filing for benefits, call our
national toll-free number, 1–800–772–
1213 or TTY 1–800–325–0778, or visit
our Internet site, Social Security Online,
at https://www.socialsecurity.gov.
SUPPLEMENTARY INFORMATION:
Background
We may issue rules and regulations to
administer the Social Security Act (Act).
42 U.S.C. 405(a), 902(a)(5), 810(a), and
1383(d)(1).
On September 8, 2008, we published
a notice of proposed rulemaking
(NPRM) in the Federal Register entitled
Revisions to Rules on Representation of
Parties, and we gave the public 60 days
to comment. 73 FR 51963.
In the NPRM, we proposed to add an
affirmative duty that would have
required professional representatives to
conduct business with us electronically
at the times and in the manner that we
prescribe. We proposed to define a
professional representative as ‘‘any
attorney, any individual other than an
attorney, or any entity that holds itself
out to the public as providing
representational services * * * before
us, regardless of whether the
representative charges or collects a fee
for providing the representational
services.’’ Proposed sections 404.1703
and 416.1503. We received several
comments that opposed our broad
definition of professional representative
and our proposal that all professional
representatives must conduct business
with us electronically at the times and
in the manner we prescribe.
After careful consideration of these
comments, we decided to require some,
and encourage all, representatives to use
our electronic services as much as
possible.
Therefore, we are adding sections
404.1713 and 416.1513 and revising
sections 404.1740(b)(4) and
416.1540(b)(4) to require that
representatives conduct business with
us electronically at the times and in the
PO 00000
Frm 00017
Fmt 4700
Sfmt 4700
56107
manner we prescribe on matters for
which they request direct fee payment.
This means that a representative will be
required to use our available electronic
services in conducting business with us
on any matter for which he or she has
or will request direct fee payment.
We continue to consider the rest of
the regulatory changes we proposed in
the NPRM, and we may publish
additional final rules to address them.
Requiring Use of Our Electronic
Services
We employ comprehensive usability
testing, which includes inviting
members of the public to test our
electronic services and provide
feedback, to ensure that our electronic
services work well before we make them
publicly available. Even after we make
electronic services publicly available,
we use customer satisfaction surveys
and request user feedback to improve
them. In accordance with our usual
practice, we intend to employ usability
testing and solicit user feedback for any
electronic services we may require
representatives to use under these final
rules. Once we determine that we
should make a particular electronic
service publicly available because it
works well, we will publish a notice in
the Federal Register. The notice will
contain the new requirement(s) and a
list of all established electronic service
requirements.
If we discover that a representative
who has an affirmative duty to use the
available electronic services is not
complying with our rules, we may
investigate to determine if the
representative is purposefully violating
this duty or attempting to circumvent
our rules. We will use our existing rules
in sections 20 CFR 404.1740–404.1799
and 416.1540–416.1599 to address
potential violations.
We will not penalize the claimant if
the representative disregards his or her
affirmative duty to use our electronic
services. We will not reject or delay a
claimant’s request or process it
differently if a representative fails to
comply with this rule, but we may
decide to pursue sanctions against the
representative in appropriate cases.
We also proposed to add sections
404.1713 and 416.1513, in addition to
the affirmative duty in proposed
sections 404.1740 and 416.1540. We are
adopting, with minor changes, only the
provisions of sections 404.1713(a) and
416.1513(a) that we proposed, and we
are adopting, with minor changes, our
proposed affirmative duty in final
sections 404.1740 and 416.1540. We are
also making other conforming changes.
E:\FR\FM\12SER1.SGM
12SER1
]]>Agencies
[Federal Register Volume 76, Number 176 (Monday, September 12, 2011)]
[Rules and Regulations]
[Pages 56103-56107]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-23155]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 5
Retail Foreign Exchange Transactions; Conforming Changes to
Existing Regulations in Response to the Dodd-Frank Wall Street Reform
and Consumer Protection Act
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rules; interpretation.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)
is amending its regulations governing off-exchange foreign currency
transactions with members of the retail public (i.e., retail forex
transactions). These amendments (Amendments) are necessary to
incorporate into Part 5 of the Commission's regulations changes made to
the Commodity Exchange Act (CEA) by the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank Act). The Commission is also
issuing certain related technical interpretations of various provisions
of the CEA as amended by the Dodd-Frank Act with respect to retail
forex transactions.
DATES: Effective September 12, 2011.
FOR FURTHER INFORMATION CONTACT: Christopher W. Cummings, Special
Counsel, Division of Clearing and Intermediary Oversight, or Barbara S.
Gold, Associate Director, Division of Clearing and Intermediary
Oversight, Commodity Futures Trading Commission, 1155 21st Street, NW.,
Washington, DC 20581; telephone number: (202) 418-5450; facsimile
number: (202) 418-5528; and electronic mail: ccummings@cftc.gov or
bgold@cftc.gov, respectively.
SUPPLEMENTARY INFORMATION:
I. Background
On July 21, 2010, President Obama signed the Dodd-Frank Act.\1\
Title VII of the Dodd-Frank Act \2\ amended the CEA \3\ to establish a
comprehensive new regulatory framework for swaps and security-based
swaps. The goal of this legislation was to reduce risk, increase
transparency, and promote market integrity within the financial system
by,
[[Page 56104]]
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.
---------------------------------------------------------------------------
\1\ See Dodd-Frank Wall Street Reform and Consumer Protection
Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010). The text of the
Dodd-Frank Act may be accessed through the Commission's Web site at
https://www.cftc.gov/.
\2\ Pursuant to Section 701 of the Dodd-Frank Act, Title VII may
be cited as the ``Wall Street Transparency and Accountability Act of
2010.''
\3\ 7 U.S.C. 1 et seq. (2006). The CEA also can be accessed
through the Commission's Web site.
---------------------------------------------------------------------------
To accomplish its goal, the Dodd-Frank Act, among other things,
amended the existing definitions in, and added new definitions to, CEA
Section 1a, which has resulted in a reorganization and renumbering of
the definitions in Section 1a.\4\ The Dodd-Frank Act also deleted two
classes of persons and added a new class of person permitted to serve,
or to offer to serve, as a counterparty to a retail forex transaction
under CEA Section 2(c)(2)(B) (``permitted counterparty''), which
similarly has resulted in a reorganization and redesignation of the CEA
provisions identifying these permitted counterparties.\5\
---------------------------------------------------------------------------
\4\ See Dodd-Frank Act Section 721(a).
\5\ See Dodd-Frank Act Section 742(c)(1).
---------------------------------------------------------------------------
As is explained below, the foregoing changes to the CEA necessitate
corresponding amendments to Part 5 of the Commission's regulations,\6\
which concerns retail forex transactions. In this regard, the
Commission notes that it is also proposing other rulemakings in
response to the Dodd-Frank Act that could affect the Part 5
regulations.\7\ The Commission intends to resolve any discrepancies
that may arise between any of these other rulemakings and the
Amendments in the course of finalizing its rulemakings under the Dodd-
Frank Act.
---------------------------------------------------------------------------
\6\ The Commission's regulations are found at 17 CFR Ch. I
(2011) and can be accessed through the Commission's Web site, https://www.cftc.gov.
\7\ See, e.g., Adaptation of Regulations to Incorporate Swaps,
76 FR 33066 (Jun. 7, 2011) (``June 7 Proposal''), whereby in
response to the deletion of the term ``derivatives transaction
execution facility'' from the CEA by the Dodd-Frank Act, the
Commission has proposed to delete reference to the term
``derivatives transaction execution facility'' from Regulation
5.1(m), which defines the term ``retail forex transaction.''
---------------------------------------------------------------------------
II. The Amendments
A. Amendments Resulting Solely From a Renumbering of a CEA Definition
Several definitions in Regulation 5.1 employ the phrase ``eligible
contract participant as that term is defined in [CEA] Section 1a(12).''
Specifically, this phrase is found in the following definitions in
Regulation 5.1: ``commodity pool operator'' (paragraph (d)(1) of the
regulation); ``commodity trading advisor'' (paragraph (e)(1) of the
regulation); ``introducing broker'' (paragraph (f)(1) of the
regulation); ``retail forex account'' (paragraph (i) of the
regulation); and ``retail forex account agreement'' (paragraph (j) of
the regulation). However, as a result of the Dodd-Frank Act, the term
``eligible contract participant'' is now defined in CEA Section 1a(18).
By the Amendments, the Commission is amending Regulations 5.1(d)(1),
(e)(1), (f)(1), (i) and (j) to reflect this numbering change, such that
each of the definitions contained in these regulations refers to CEA
Section 1a(18).\8\
---------------------------------------------------------------------------
\8\ For the same reason, by the June 7 Proposal, the Commission
proposed to amend the definition of the term ``retail forex
customer'' in paragraph (k) of Regulation 5.1, such that the
definition similarly would refer to Section 1a(18).
---------------------------------------------------------------------------
Regulations 5.10, which concerns risk assessment recordkeeping
applicable to retail forex transactions, and 5.11, which concerns risk
assessment reporting applicable to retail forex transactions, provide
at paragraphs (c)(2) and (d)(2), respectively, that ``the term `Foreign
Futures Authority' shall have the meaning set forth in [CEA] section
1a(10).'' As a result of the Dodd-Frank Act, this term is now defined
in CEA Section 1a(26). The Amendments similarly change Regulations
5.10(c)(2) and 5.11(d)(2) to reflect this numbering change, such that
the definition of ``Foreign Futures Authority'' refers to CEA Section
1a(26).
Regulation 5.18 establishes trading and operational standards for
persons offering to serve as a retail forex counterparty. Specifically,
paragraph (a)(1)(ii) refers to such persons as a ``[f]utures commission
merchant as defined in [CEA] Section 1a(20).'' Pursuant to the Dodd-
Frank Act, the term ``futures commission merchant'' (FCM) is now
defined in CEA Section 1a(28). Accordingly, the Amendments likewise
revise Regulation 5.18(a)(1)(ii) so that the FCM reference therein is
to CEA Section 1a(28).
B. Amendments Resulting From the Change in Permitted Counterparties
Regulation 5.1(h) defines the term ``retail foreign exchange
dealer'' (RFED) to mean ``any person that is, or that offers to be, the
counterparty to a retail forex transaction, except for a person
described in sub-paragraph (aa), (bb), (cc)(AA), (dd), (ee) or (ff) of
[CEA] section 2(c)(2)(B)(i)(II).'' \9\ The Dodd-Frank Act: (1) Removed
from this list of permitted counterparties the persons previously found
in items (dd) and (ff), which respectively refered to certain insurance
companies (including a regulated subsidiary or affiliate) and
investment bank holding companies; (2) redesignated item (ee) as item
(dd); and (3) redesignated item (gg) as item (ff).\10\ In light of
these changes, the Amendments delete from Regulation 5.1(h)(1) the
references therein to items (ee) and (ff) of CEA Section
2(c)(2)(B)(i)(II). For similar reasons, the Amendments change the
references in Regulations 5.10(a)(1), 5.11(a)(1) and 5.11(a)(2) to the
authority pursuant to which a person is registered with the Commission
as an RFED from CEA Section 2(c)(2)(B)(i)(II)(gg) to CEA Section
2(c)(2)(B)(i)(II)(ff).
---------------------------------------------------------------------------
\9\ CEA Section 2(c)(2)(B) generally provides the Commission
with authority over retail forex transactions.
\10\ As a result of these changes, then, the identification of
the permitted counterparties in CEA Section 2(c)(2)(B)(i)(II) runs
from (aa) through (dd), skips (ee), and ends at (ff). See Part III
of this Federal Register release, infra.
---------------------------------------------------------------------------
C. Amendments Related to the FCM Definition
For the effective regulation of retail forex transactions, the CEA
and Part 5 distinguish between an FCM that is ``primarily or
substantially'' engaged in soliciting and accepting orders for
exchange-traded futures contracts and accepting customer funds or
property to margin or secure such contracts, who is permitted under CEA
Section 2(c)(2)(B)(i)(II)(cc) to engage in retail forex transactions
based on its registration as an FCM, and a person that is registered as
an FCM but is not ``primarily or substantially'' engaged in those
activities, who must register as an RFED in order to engage in retail
forex transactions. Regulation 5.1(g) currently provides that the term
``[p]rimarily or substantially means, when used to describe the extent
of a futures commission merchant's engagement in the activities
described in section 1a(20)'' of the CEA, that the FCM's gross revenues
meet certain thresholds, or that the FCM is a clearing member of a
derivatives clearing organization.\11\ The Commission explained this
distinction, which originated in the CFTC Reauthorization Act of 2008
(CRA),\12\ as being ``for use in determining whether a registered FCM
is primarily or substantially engaged in FCM activities, such that it
need not register as an RFED in order to conduct customer business.''
\13\
---------------------------------------------------------------------------
\11\ See CEA Section 5b and Part 39 of the Commission's
regulations.
\12\ See Title XIII of the Food, Conservation and Energy Act of
2008, Public Law 110-246, 122 Stat. 1651, 2189-2204 (2008).
\13\ 75 FR 3282, 3288 (Jan. 20, 2010).
---------------------------------------------------------------------------
Thus, the Commission defined the term ``primarily or
substantially'' in
[[Page 56105]]
Regulation 5.1(g), and drafted the requirement to register as an RFED
if a registered FCM was not engaged primarily or substantially in FCM
activities, with reference to the activities described in the then-
existing FCM definition and by means of a simple reference to ``the
activities described in Section 1a(20)'' of the CEA. However, in
addition to renumbering the FCM definition in the CEA from Section
1a(20) to Section 1a(28), the Dodd-Frank Act amended the FCM definition
itself to include certain activities involving swaps and retail forex
transactions among the activities that bring a person within the FCM
definition, and it added to the FCM definition any person that is
registered with the Commission as an FCM.\14\ In order to maintain the
distinction between FCM and RFED established by the CRA, the Amendments
amend Regulations 5.1(g) and 5.3(a)(4)(i) such that each of these rules
refers solely to those provisions of the CEA's FCM definition that were
in effect at the time of adoption of the CRA--i.e., the activities
that, pursuant to the Dodd-Frank Act, are now set forth in CEA Sections
1a(28)(A)(i)(I)(aa)(AA) (``the purchase or sale of a commodity for
future delivery'') and 1a(28)(A)(i)(II) (``in or in connection with the
activities described in [item aa of subclause (I)], accepts any money,
securities, or property (or extends credit in lieu thereof) to margin,
guarantee, or secure any trades or contracts that result or may result
therefrom'').
---------------------------------------------------------------------------
\14\ See Dodd-Frank Act Section 721(a)(13).
---------------------------------------------------------------------------
III. Interpretation of Dodd-Frank Act Amendments to CEA Sections
2(c)(2)(B) and 2(c)(2)(C)
As is noted above, the Dodd-Frank Act revised the list of permitted
counterparties in CEA Section 2(c)(2)(B)(i)(II) from items (aa) through
(gg), to items (aa) through (dd) and (ff) (without an item (ee)). It
did so in order both to delete insurance companies and investment bank
holding companies from the list of permitted counterparties in CEA
Section 2(c)(2)(B)(i)(II) and to re-designate the items corresponding
to the remaining permitted counterparties.\15\ However, in amending CEA
Sections 2(c)(2)(B) and 2(c)(2)(C),\16\ the Dodd-Frank Act did not
adjust certain internal references in these sections to reflect these
changes to the list of permitted counterparties.
---------------------------------------------------------------------------
\15\ See Dodd-Frank Act Sections 741(b) and 742(c).
\16\ CEA Section 2(c)(2)(C) generally provides the Commission
with authority over certain transactions that are not within the
scope of CEA Section 2(c)(2)(B).
---------------------------------------------------------------------------
Thus, for example, at numerous places CEA Section 2(c)(2)(B)
continues to refers to item (gg), although item (gg) has been
redesignated as item (ff).\17\ Similarly, in various other provisions
of CEA Sections 2(c)(2)(B) and 2(c)(2)(C) the permitted counterparties
other than FCMs and RFEDs are listed as either ``item (aa), (bb), (dd),
(ee) or (ff)'' of CEA Section 2(c)(2)(B)(i)(II) or ``item (aa) through
(ff)'' of CEA Section 2(c)(2)(B)(i)(II).\18\ These references now
inadvertently include RFEDs, because RFEDs are now listed in item (ff).
Finally, these same references inadvertently no longer include a
financial holding company, because while the Dodd-Frank Act
redesignated this permitted counterparty as item (dd), it nonetheless
called for ``striking `(dd)' each place it appears'' in CEA Sections
2(c)(2)(B) and 2(c)(2)(C).\19\
---------------------------------------------------------------------------
\17\ This occurs once each in CEA Sections 2(c)(2)(B)(iii),
2(c)(2)(B)(iv)(I) and 2(c)(2)(B)(iv)(III), and twice in CEA Section
2(c)(2)(B)(v).
\18\ Reference to ``item (aa), (bb), (dd), (ee) or (ff)'' of CEA
Section 2(c)(2)(B)(i)(II) occurs in Sections 2(c)(2)(B)(iv)(I)(aa),
2(c)(2)(B)(iv)(I)(bb), 2(c)(2)(B)(iv)(I)(cc),
2(c)(2)(B)(iv)(II)(aa), 2(c)(2)(C)(i)(I)(aa),
2(c)(2)(C)(ii)(II)(aa), 2(c)(2)(C)(iii)(I)(aa),
2(c)(2)(C)(iii)(I)(bb) and 2(c)(2)(C)(iii)(II)(aa). The reference to
``item (aa) through (ff)'' occurs in CEA Section
2(c)(2)(B)(iv)(IV)(aa).
\19\ Absent the interpretation being provided herein, the
instruction in Dodd-Frank Act Sections 741(b)(8)(A) and 741(b)(9)(A)
for ``striking `(dd)' each place it appears'' in CEA Sections
2(c)(2)(B) and 2(c)(2)(C) not only would remove the (dd) item
heading from Section 2(c)(2)(B)(i)(II)(dd) (which identifies a
financial holding company as a permitted counterparty for retail
forex transactions), but it would also affect all of the cross-
references to ``item (aa), (bb), (dd), (ee) or (ff),'' identified
previously.
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To avoid any impediment to a full implementation of its regulatory
program for retail forex transactions that any of the foregoing
provisions might present, by this Federal Register release the
Commission is issuing the following interpretations of the Dodd-Frank
Act. First, to clarify that CEA Section 2(c)(2)(B)(i)(II) includes a
financial holding company as a permitted counterparty to retail forex
transactions, the Commission interprets the directions in Dodd-Frank
Act Sections 741(b)(8) and (b)(9) to strike item ``(dd)'' each place it
appears as a direction to strike item ``(ee)'' instead.\20\ This
interpretation is necessary and appropriate because pursuant to the
Dodd-Frank Act item (dd) includes a financial holding company as a
permitted counterparty to retail forex transactions and item (ee) no
longer exists in CEA Section 2(c)(2)(B)(i)(II). Second, to clarify that
an RFED is a permitted counterparty, the Commission interprets each
reference in CEA Sections 2(c)(2)(B) and 2(c)(2)(C) to ``item (gg) ''
as a reference to ``item (ff).'' This interpretation similarly is
necessary and appropriate because pursuant to the Dodd-Frank Act item
(ff) includes an RFED as a permitted counterparty and item (gg) no
longer exists in CEA Section 2(c)(2)(B)(i)(II).
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\20\ Thus, CEA Section 2(c)(2)(B)(i)(II)(dd) retains its
designation, and each reference to ``item (aa), (bb), (dd), (ee) or
(ff)'' identified previously continues to include a reference to ``a
financial holding company.''
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IV. Related Matters
A. Administrative Procedure Act
The Administrative Procedure Act (APA) generally requires an agency
to publish notice of a proposed rulemaking in the Federal Register.\21\
This requirement does not apply, however, if the agency ``for good
cause finds * * * that notice and public procedure are impracticable,
unnecessary, or contrary to the public interest.'' \22\ In addition,
the APA generally requires that an agency publish an adopted rule in
the Federal Register 30 days before it becomes effective, with certain
exceptions, including if an agency finds good cause.\23\ The Commission
finds that notice and solicitation of comment before the effective date
of the changes being made herein are unnecessary, inasmuch as the rule
changes are entirely non-substantive technical adjustments, and the
interpretation would do no more than clarify certain technical drafting
anomalies to express what is clearly the intent of the Dodd-Frank
Act.\24\ Accordingly, pursuant to section 553(b) of the APA, the
Commission finds that there is good cause not to follow notice and
comment procedures for this rulemaking. For the same reason, the
Commission finds, pursuant to section 553(b) of the APA, that the
Amendments may be made effective immediately upon publication in the
Federal Register.
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\21\ See 5 U.S.C. 553(b). This requirement does not apply to
interpretative rules or general statements of policy.
\22\ Id.
\23\ See 5 U.S.C. 553(d).
\24\ This finding also satisfies the requirements of the
Congressional Review Act, specifically 5 U.S.C. 808(2), allowing the
Proposal to become effective, notwithstanding the requirement of 5
U.S.C. 801 (if a Federal agency finds that notice and public comment
are ``impracticable, unnecessary or contrary to the public
interest,'' a rule ``shall take effect at such time as the Federal
agency promulgating the rule determines'').
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B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \25\ requires that agencies,
in proposing rules, consider the impact of those rules on small
businesses.\26\ The
[[Page 56106]]
Commission previously has established certain definitions of ``small
entities'' to be used by the Commission in evaluating the impact of its
rules on such entities in accordance with the RFA.\27\ The Commission
previously has determined that FCMs and RFEDs should not be considered
small entities for purposes of the RFA.\28\ With respect to commodity
pool operators (CPOs), the Commission previously has determined that a
CPO is a small entity for the purpose of the RFA if it meets the
criteria for an exemption from registration under Regulation
4.13(a)(2).\29\ Thus, because the Amendments apply to registered CPOs,
the RFA is not applicable to them. As for introducing brokers (IBs) and
commodity trading advisors (CTAs), the Commission previously has stated
that it would evaluate within the context of a particular rule proposal
whether all or some affected IBs and CTAs would be considered to be
small entities and, if so, the economic impact on them of the
particular rule.\30\ In this regard, the Commission notes that the
Amendments apply to registered IBs and registered CTAs, and do not
change their existing obligations or burdens. Moreover, as is explained
below, the Amendments will not have a significant economic impact on
any person who would be affected thereby, because they will not impose
any additional operational requirements or otherwise direct or confine
the activities of affected persons. Accordingly, the Chairman hereby
certifies pursuant to 5 U.S.C. 605(b) that the Amendments will not have
a significant economic impact on a substantial number of small
entities.
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\25\ 5 U.S.C. 601 et seq. (2006).
\26\ By its terms, the RFA does not apply to ``individuals.''
See 48 FR 14933, n. 115 (Apr. 6, 1983).
\27\ See 47 FR 18618 (Apr. 30, 1982).
\28\ See 47 FR 18618, 18619 (Apr. 30, 1982) (FCMs) and 75 FR
55410, 55416 (Sep. 10, 2010) (RFEDs).
\29\ See 47 FR at 18619-20.
\30\ See 48 FR 35248, 35276 (Aug. 3, 1993) (IBs) and 47 FR at
18619, 18620 (CTAs).
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C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) \31\ imposes certain
requirements on Federal agencies (including the Commission) in
connection with their conducting or sponsoring any collection of
information as defined by the PRA. The Commission believes that the
Amendments will not impose new recordkeeping or information collection
requirements that require approval by the Office of Management and
Budget under 44 U.S.C. 3501, et seq. Accordingly, the PRA does not
apply to this rulemaking.
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\31\ 44 U.S.C. 3501 et seq.
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D. Cost-Benefit Considerations
Section 15(a) of the CEA \32\ requires the Commission to consider
the costs and benefits of its actions before issuing a rulemaking under
the CEA. By its terms, Section 15(a) does not require the Commission to
quantify the costs and benefits of a rule or to determine whether the
benefits of the rulemaking outweigh its costs; rather, it simply
requires that the Commission ``consider'' the costs and benefits of its
actions. Section 15(a) further specifies that the costs and benefits
shall be evaluated in light of five broad areas of market and public
concern: (1) Protection of market participants and the public; (2)
efficiency, competitiveness and financial integrity of futures markets;
(3) price discovery; (4) sound risk management practices; and (5) other
public interest considerations. The Commission may 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 rule is necessary or appropriate to protect the public
interest or to effectuate any of the provisions or accomplish any of
the purposes of the CEA.
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\32\ 7 U.S.C. 19(a).
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Summary of Amendments. As is explained above, the Amendments to
Part 5 ensure that the Commission's regulations governing retail forex
transactions reflect changes made to the CEA by the Dodd-Frank Act by,
e.g., aligning references in Part 5 to definitional and other
provisions in the CEA with the appropriate provisions in the CEA as
amended by the Dodd-Frank Act.
Costs. With respect to costs, the Commission has determined that
the costs of the Amendments will not be significant. This is because
the Amendments will simply amend the current Part 5 text to take into
account the numerical and designation changes made to the CEA as a
result of the Dodd-Frank Act. No changes are being made to the existing
regulatory framework. Thus there will be little (if any) costs to
persons who will be affected by the Amendments.
Benefits. With respect to benefits, the Commission has determined
that the benefits of the Amendments will be significant. This is
because they will maintain the customer protections currently provided
under Part 5 by ensuring that the provisions of Part 5 accurately
reflect the text of the CEA as amended by the Dodd-Frank Act.
List of Subjects in 17 CFR Part 5
Bulk transfers, Commodity pool operators, Commodity trading
advisors, Consumer protection, Customer's money, securities and
property, Definitions, Foreign exchange, Minimum financial and
reporting requirements, Prohibited transactions in retail foreign
exchange, Recordkeeping requirements, Retail foreign exchange dealers,
Risk assessment, Special calls, Trading practices.
For the reasons presented above, the Commission hereby amends
Chapter I of Title 17 of the Code of Federal Regulations as follows:
PART 5--OFF-EXCHANGE FOREIGN CURRENCY TRANSACTIONS
0
1. The authority citation for part 5 is revised to read as follows:
Authority: 7 U.S.C. 1a, 2, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g, 6h,
6i, 6k, 6m, 6n, 6o, 8, 9, 9a, 12, 12a, 13b, 13c, 16a, 18, 19, 21,
and 23, as amended by Title VII of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376
(Jul. 21, 2010).
Sec. 5.1 [Amended]
0
2. Section 5.1 is amended by:
0
a. Removing from paragraphs (d)(1)(i), (e)(1), (f)(1), (i) and (j) the
words ``section 1a(12) of the Act'' and adding in their place the words
``section 1a(18) of the Act'';
0
b. Removing from paragraph (g) introductory text the words ``section
1a(20) of the Act'' and adding in their place the words ``section
1a(28)(A)(i)(I)(aa)(AA) of the Act and section 1a(28)(A)(i)(II) of the
Act insofar as that section references the activities described in
section 1a(28)(A)(i)(I)(aa)(AA)''; and
0
c. Removing from paragraph (h)(1) the words ``sub-paragraph (aa), (bb),
(cc)(AA), (dd), (ee) or (ff)'' and adding in their place the words
``item (aa), (bb), (cc)(AA) or (dd)''.
Sec. 5.3 [Amended]
0
3. Section 5.3 is amended by removing from paragraph (a)(4)(i)(A) the
words ``section 1a(20) of the Act'' and adding in their place the words
``section 1a(28)(A)(i)(I)(aa)(AA) of the Act and section
1a(28)(A)(i)(II) of the Act insofar as that section references the
activities described in section 1a(28)(A)(i)(I)(aa)(AA)''.
Sec. 5.10 [Amended]
0
4. Section 5.10 is amended by:
0
a. Removing from paragraph (a)(1) introductory text the words ``section
2(c)(2)(B)(i)(II)(gg) of the Act'' and
[[Page 56107]]
adding in their place the words ``section 2(c)(2)(B)(i)(II)(ff) of the
Act''; and
0
b. Removing from paragraph (c)(2) the words ``section 1a(10) of the
Act'' and adding in their place the words ``section 1a(26) of the
Act''.
Sec. 5.11 [Amended]
0
5. Section 5.11 is amended by:
0
a. Removing from paragraph (a)(1) introductory text the words ``Section
2(c)(2)(B)(i)(II)(gg) of the Act'' and adding in their place the words
``section 2(c)(2)(B)(i)(II)(ff) of the Act''; and
0
b. Removing from paragraph (a)(2) introductory text the words ``section
2(c)(2)(B)(i)(II)(gg) of the Act'' and adding in their place the words
``section 2(c)(2)(B)(i)(II)(ff) of the Act''; and
0
c. Removing from paragraph (d)(2) the words ``section 1a(10) of the
Act'' and adding in their place the words ``section 1a(26) of the
Act''.
Sec. 5.18 [Amended]
0
6. Section 5.18 is amended by removing from paragraph (a)(1)(ii) the
words ``section 1a(20) of the Act'' and adding in their place the words
``section 1a(28) of the Act''.
Issued in Washington, DC, on September 2, 2011, by the
Commission.
Sauntia S. Warfield,
Assistant Secretary of the Commission.
[FR Doc. 2011-23155 Filed 9-9-11; 8:45 am]
BILLING CODE P
