Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt and Amend Certain Customer Protection and Financial Rules, 25631-25633 [2014-10171]
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Federal Register / Vol. 79, No. 86 / Monday, May 5, 2014 / Notices
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
added, deleted or postponed, please
contact the Office of the Secretary at
(202) 551–5400.
Dated: May 1, 2014.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–10362 Filed 5–1–14; 4:15 pm]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72042; File No. SR–CFE–
2014–001]
Self-Regulatory Organizations; CBOE
Futures Exchange, LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Adopt and
Amend Certain Customer Protection
and Financial Rules
April 29, 2014.
Pursuant to Section 19(b)(7) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 notice is hereby given that on
April 11, 2014, CBOE Futures Exchange,
LLC (‘‘CFE’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change described in
Items I, II, and III below, which Items
have been prepared by CFE. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons. CFE
also has filed this proposed rule change
with the Commodity Futures Trading
Commission (‘‘CFTC’’). CFE filed a
written certification with the CFTC
under Section 5c(c) of the Commodity
Exchange Act (‘‘CEA’’) 2 on April 11,
2014.
emcdonald on DSK67QTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Description of the Proposed Rule
Change
The Exchange proposes to adopt and
amend certain customer protection and
financial rules that are applicable to
security futures traded on CFE. The only
security futures currently traded on CFE
are traded under Chapter 16 of CFE’s
Rulebook which is applicable to
Individual Stock Based and ExchangeTraded Fund Based Volatility Index
security futures. The rule amendments
included as part of this rule change
relate generally to amending CFE Rules
to incorporate new and amended CFTC
1 15
27
U.S.C. 78s(b)(7).
U.S.C. 7a–2(c).
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17:56 May 02, 2014
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regulations concerning customer
protection and the financial surveillance
of futures commission merchants
(‘‘FCMs’’). The text of the proposed rule
change is attached as Exhibit 4.3
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, CFE
included statements concerning the
purpose of and basis for the proposed
rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. CFE has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed CFE rule
amendments included as part of this
rule change is to amend CFE rules (i) to
incorporate the final regulations
adopted by the CFTC under the caption
Enhancing Protections Afforded
Customers and Customer Funds Held by
Futures Commission Merchants and
Derivatives Clearing Organizations
(‘‘CFTC Rulemaking’’) 4 and (ii) to
enhance the financial surveillance of
FCMs that are Trading Privilege Holders
(‘‘TPHs’’). The rule amendments
included as part of this rule change are
to apply to all products traded on CFE,
including both non-security futures and
security futures. CFE is making these
rule amendments in conjunction with
other rule amendments being made by
CFE consistent with the CFTC
Rulemaking that are not required to be
submitted to the Commission pursuant
to Section 19(b)(7) of the Act 5 and thus
are not included as part of this rule
change.
CFE has incorporated into Appendix
to Chapter 5 of its Rulebook certain
CFTC regulations relating to customer
protection, recordkeeping, and reporting
and has provided that a violation of any
of those regulations shall be deemed a
violation of a specific CFE Rule. With
the exception of the amendments to CFE
Rule 503A, all other amendments to
CFE Rules contained in this filing are
proposed to change the CFE Rules in the
3 The Commission notes that the Exhibit 4 is
attached to the filing, but is not attached to the
publication of this notice.
4 78 FR 68506 (Nov. 14, 2013).
5 15 U.S.C. 78s(b)(7).
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25631
Appendix to Chapter 5 of the CFE
Rulebook to make their language
consistent with the language in the
CFTC regulations that was amended by
the CFTC Rulemaking.
CFE already requires that its FCMs
that are TPHs comply with all CFTC
regulations. For example, CFE Rule 604
prohibits TPHs and their Related Parties
from engaging in conduct in violation of
Applicable Law (which includes, among
other things, the CEA 6 and CFTC
regulations). CFE Rule 505 specifically
requires TPHs to comply with CFTC
regulations relating to the treatment of
customer funds and the maintenance of
related books and records. CFE Rule 518
specifically requires TPHs to comply
with CFTC regulations relating to
minimum financial requirements,
financial reporting requirements, and
protection of customer funds that are set
forth in the Appendix to Chapter 5 of
the CFE Rulebook. The purpose of these
proposed rule amendments is to make
the CFTC regulations that were added or
amended by the CFTC Rulemaking even
more explicit.
Risk Management Program for FCMs
CFE is proposing to add to its Rules
new Rule 520 (and renumber all
subsequent Rules in the Chapter) to
require that FCMs comply with the risk
management requirements set forth in
CFTC Regulation 1.11: Risk
Management Program for futures
commission merchants.7 As a result of
the CFTC Rulemaking, CFTC Regulation
1.52(b)(2) requires that all selfregulatory organizations (‘‘SROs’’)
(defined as designated contract markets
and registered futures associations in
CFTC Regulation 1.52(a)(2)) adopt rules
prescribing risk management
requirements for FCM member
registrants that are at least as stringent
as the requirements contained in CFTC
Regulation 1.11.8 CFTC Regulation 1.11
imposes, among other things, both
recordkeeping and reporting
requirements on FCMs. Specifically,
FCMs must maintain their risk
management policies and procedures,
all written approvals, and all records
and reports required under the
Regulation.9 In addition, FCMs must
furnish a copy of their risk management
policies and procedures to the CFTC
and its designated SRO upon
application for registration and
thereafter upon request, as well as
furnish copies of Risk Exposure Reports
67
U.S.C. 1 et seq.
CFR 1.11.
8 17 CFR 1.52.
9 17 CFR 1.11(c)(2), (h).
7 17
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25632
Federal Register / Vol. 79, No. 86 / Monday, May 5, 2014 / Notices
to the CFTC.10 Although all FCMs that
are TPHs must already comply with all
CFTC Regulations, new CFE Rule 520 is
proposed specifically to follow the
CFTC Rulemaking’s directive with
respect to CFTC Regulation 1.11.
Recordkeeping
The recordkeeping amendments
proposed to be included in the
Appendix to Chapter 5 of the CFE
Rulebook would impose requirements
that generally already exist under CFE
Rules 505, 518, and 604, which, as
discussed, require adherence to CFTC
regulations. The amendments to certain
CFTC regulations by the CFTC
Rulemaking will now be specifically
incorporated into CFE’s rules. In
particular, CFE is proposing to amend
CFE Rule 521 which incorporates into
CFE’s Rulebook CFTC Regulation 1.18
(Minimum Financial Requirements for
Futures Commission Merchants and
Introducing Brokers),11 CFE Rule 523
which incorporates into CFE’s Rulebook
CFTC Regulation 1.20 (Futures
Customer Funds to be Segregated and
Separately Accounted for),12 CFE Rule
526 which incorporates into CFE’s
Rulebook CFTC Regulation 1.23
(Interest of Futures Commission
Merchants in Segregated Futures
Customer Funds; Additions and
Withdrawals),13 CFE Rule 528 which
incorporates into CFE’s Rulebook CFTC
Regulation 1.25 (Investment of
Customer Funds),14 CFE Rule 529
which incorporates into CFE’s Rulebook
CFTC Regulation 1.26 (Deposit of
Instruments Purchased with Futures
Customer Funds),15 and CFE Rule 535
which incorporates into CFE’s Rulebook
CFTC Regulation 1.32 (Reporting of
Segregated Account Computation and
Details Regarding the Holding of
Futures Customer Funds).16
Reporting
As CFE is proposing to do with
various recordkeeping requirements,
CFE is also proposing to specifically
incorporate into the Appendix to
Chapter 5 of its Rulebook the CFTC
Rulemaking’s amendments to CFTC
regulations relating to reporting. Like
with the foregoing amended
recordkeeping requirements, the
emcdonald on DSK67QTVN1PROD with NOTICES
10 17
CFR 1.11(c)(4), (e)(2)(ii).
CFR 1.18.
12 17 CFR 1.20.
13 17 CFR 1.23.
14 17 CFR 1.25.
15 17 CFR 1.26.
16 17 CFR 1.32. CFE notes that certain of these
amendments relate to both recordkeeping and
reporting (discussed in the next section) but is only
including discussion of them in this section to
avoid duplicative mention.
11 17
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17:56 May 02, 2014
Jkt 232001
reporting amendments to this regulation
would impose requirements that
generally already exist under CFE Rules
505, 518, and 604, which, as discussed,
require adherence to CFTC regulations.
These amendments by the CFTC
Rulemaking will now be specifically
incorporated into CFE’s rules. In
particular, CFE is proposing to amend
CFE Rule 519 which incorporates into
CFE’s Rulebook CFTC Regulation 1.10
(Financial Reports of Futures
Commission Merchants and Introducing
Brokers) 17 and CFE Rule 520 which
incorporates into CFE’s Rulebook CFTC
Regulation 1.12 (Maintenance of
Minimum Financial Requirements by
Futures Commission Merchants and
Introducing Brokers).18
In addition to the foregoing
amendments that incorporate the CFTC
Rulemaking, CFE is proposing
amendments to CFE Rule 503A, which
relate to reporting obligations on FCMs
and are not related to the CFTC
Rulemaking. CFE Rule 503A, which
presently imposes reporting obligations
on FCMs that are TPHs, is proposed to
be amended to require these FCMs to
file financial documentation with CFE
in addition to the documentation the
Rule already requires. First, each TPH
that is an FCM would be required, in a
form and manner prescribed by the
Exchange, to concurrently file with the
Exchange all FOCUS Report Part III
submissions as well as any attachments
or related submissions to all Form 1–
FR–FCM, Form 1–FR–IB, or FOCUS
Report Part II, Part IIA or Part II CSE and
Part III submissions. Second, each TPH
that is an FCM would be required, in a
form and manner prescribed by the
Exchange, to concurrently file with the
Exchange a copy of any daily Statement
of Segregation Requirements and Funds
in Segregation for Customers Trading on
U.S. Commodity Exchanges filed with
the CFTC pursuant to CFTC Regulation
1.32. Third, each TPH that is an FCM
would be required, in a form and
manner prescribed by the Exchange, to
concurrently file with the Exchange a
copy of any daily net capital filings
submitted by the TPH to its Designated
Self-Regulatory Organization. Fourth,
each TPH that is an FCM would be
required, in a form and manner
prescribed by the Exchange, to
concurrently file with the Exchange a
copy of any notice that is filed with the
CFTC pursuant to CFTC Regulation
1.23. The receipt of this information
will enhance CFE’s financial
surveillance of FCMs.
17 17
18 17
PO 00000
CFR 1.10.
CFR 1.12.
Frm 00072
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,19 in general, and
furthers the objectives of Section
6(b)(5) 20 in particular in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
and to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and in general, to protect
investors and the public interest.
The addition of new CFE Rule 520,
which requires FCMs to establish risk
management programs that comply with
CFTC Regulation 1.11, will enhance
CFE’s ability to protect investors and the
public interest and to enforce CFE Rules
that prohibit fraudulent and
manipulative acts and conduct
inconsistent with just and equitable
principles of trade. By specifically
requiring that FCMs that are TPHs
establish risk management programs
that comply with CFTC Regulation 1.11,
CFE further protects FCM customers.
The recordkeeping amendments to
CFE Rules 521, 523, 526, 528, 529, and
535 and the reporting amendments to
CFE Rules 503A, 519, and 520 will also
enhance CFE’s ability to protect
investors and the public interest and to
enforce CFE Rules that prohibit
fraudulent and manipulative acts and
conduct inconsistent with just and
equitable principles of trade. These
recordkeeping requirements are
designed to ensure that TPHs maintain
records that enable CFE and/or other
regulators to investigate whether TPHs
are complying with applicable rules and
regulations by requiring the
maintenance of information that may be
reviewed to determine whether or not a
TPH is complying with applicable
regulatory requirements. Similarly,
these reporting requirements are
designed to enable CFE to receive and
request information that allows CFE to
monitor for compliance with rules and
regulations, to investigate for
noncompliance when appropriate, and
to conduct financial monitoring with
regard to TPHs that are FCMs.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CFE does not believe that the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
19 15
20 15
Fmt 4703
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E:\FR\FM\05MYN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
05MYN1
Federal Register / Vol. 79, No. 86 / Monday, May 5, 2014 / Notices
purposes of the Act, in that the rule
change makes enhancements to CFE’s
financial surveillance of FCMs and
requires TPHs to comply with the
amendments set forth in the CFTC
Rulemaking. The Exchange believes that
the proposed rule change is equitable
and not unfairly discriminatory because
all of the amended Rules would apply
equally to all TPHs that are subject to
the applicable requirements, and the
Amendment is expressly consistent
with the CFTC Rulemaking.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The proposed rule change will
become effective on April 28, 2014.
At any time within 60 days of the date
of effectiveness of the proposed rule
change, the Commission, after
consultation with the CFTC, may
summarily abrogate the proposed rule
change and require that the proposed
rule change be refiled in accordance
with the provisions of Section 19(b)(1)
of the Act.21
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
offices of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CFE–
2014–001, and should be submitted on
or before May 27, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–10171 Filed 5–2–14; 8:45 am]
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CFE–2014–001 on the subject line.
emcdonald on DSK67QTVN1PROD with NOTICES
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Amend Rule
Text Related to Acceptable Trade
Range in Chapter VI, Section 10 of the
BX Options Rules
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CFE–2014–001. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
April 29, 2014.
21 15
U.S.C. 78s(b)(1).
VerDate Mar<15>2010
17:56 May 02, 2014
Jkt 232001
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72041; File No. SR–BX–
2014–022]
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 23,
2014, NASDAQ OMX BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
22 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00073
Fmt 4703
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25633
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend rule
text related to Acceptable Trade Range
in Chapter VI, Section 10 of the BX
Options rules. The text of the proposed
rule change is available on the
Exchange’s Web site at https://
nasdaqomxbx.cchwallstreet.com/, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend rule text in Chapter
VI, Section 10 entitled ‘‘Book
Processing’’ to add additional rule text
regarding Acceptable Trade Range. The
Acceptable Trade Range is a mechanism
to prevent the system 3 from
experiencing dramatic price swings by
creating a level of protection that
prevents the market from moving
beyond set thresholds. The thresholds
consist of a Reference Price plus (minus)
set dollar amounts based on the nature
of the option and the premium of the
option.
Currently, the rule provides that the
System will calculate an Acceptable
Trade Range to limit the range of prices
at which an order will be allowed to
execute. The Acceptable Trade Range is
calculated by taking the reference price,
plus or minus a value to be determined
by the Exchange, (i.e., the reference
price—(x) for sell orders and the
3 The term ‘‘System’’ means the automated system
for order execution and trade reporting owned and
operated by BX. See BX Rules at Chapter VI,
Section 1(a).
E:\FR\FM\05MYN1.SGM
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Agencies
[Federal Register Volume 79, Number 86 (Monday, May 5, 2014)]
[Notices]
[Pages 25631-25633]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10171]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72042; File No. SR-CFE-2014-001]
Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Adopt and Amend Certain Customer Protection and Financial Rules
April 29, 2014.
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934
(``Act''),\1\ notice is hereby given that on April 11, 2014, CBOE
Futures Exchange, LLC (``CFE'' or ``Exchange'') filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') the
proposed rule change described in Items I, II, and III below, which
Items have been prepared by CFE. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons. CFE also has filed this proposed rule change with the
Commodity Futures Trading Commission (``CFTC''). CFE filed a written
certification with the CFTC under Section 5c(c) of the Commodity
Exchange Act (``CEA'') \2\ on April 11, 2014.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(7).
\2\ 7 U.S.C. 7a-2(c).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Description of the Proposed Rule
Change
The Exchange proposes to adopt and amend certain customer
protection and financial rules that are applicable to security futures
traded on CFE. The only security futures currently traded on CFE are
traded under Chapter 16 of CFE's Rulebook which is applicable to
Individual Stock Based and Exchange-Traded Fund Based Volatility Index
security futures. The rule amendments included as part of this rule
change relate generally to amending CFE Rules to incorporate new and
amended CFTC regulations concerning customer protection and the
financial surveillance of futures commission merchants (``FCMs''). The
text of the proposed rule change is attached as Exhibit 4.\3\
---------------------------------------------------------------------------
\3\ The Commission notes that the Exhibit 4 is attached to the
filing, but is not attached to the publication of this notice.
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, CFE included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. CFE has prepared summaries, set forth in Sections A, B,
and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed CFE rule amendments included as part of
this rule change is to amend CFE rules (i) to incorporate the final
regulations adopted by the CFTC under the caption Enhancing Protections
Afforded Customers and Customer Funds Held by Futures Commission
Merchants and Derivatives Clearing Organizations (``CFTC Rulemaking'')
\4\ and (ii) to enhance the financial surveillance of FCMs that are
Trading Privilege Holders (``TPHs''). The rule amendments included as
part of this rule change are to apply to all products traded on CFE,
including both non-security futures and security futures. CFE is making
these rule amendments in conjunction with other rule amendments being
made by CFE consistent with the CFTC Rulemaking that are not required
to be submitted to the Commission pursuant to Section 19(b)(7) of the
Act \5\ and thus are not included as part of this rule change.
---------------------------------------------------------------------------
\4\ 78 FR 68506 (Nov. 14, 2013).
\5\ 15 U.S.C. 78s(b)(7).
---------------------------------------------------------------------------
CFE has incorporated into Appendix to Chapter 5 of its Rulebook
certain CFTC regulations relating to customer protection,
recordkeeping, and reporting and has provided that a violation of any
of those regulations shall be deemed a violation of a specific CFE
Rule. With the exception of the amendments to CFE Rule 503A, all other
amendments to CFE Rules contained in this filing are proposed to change
the CFE Rules in the Appendix to Chapter 5 of the CFE Rulebook to make
their language consistent with the language in the CFTC regulations
that was amended by the CFTC Rulemaking.
CFE already requires that its FCMs that are TPHs comply with all
CFTC regulations. For example, CFE Rule 604 prohibits TPHs and their
Related Parties from engaging in conduct in violation of Applicable Law
(which includes, among other things, the CEA \6\ and CFTC regulations).
CFE Rule 505 specifically requires TPHs to comply with CFTC regulations
relating to the treatment of customer funds and the maintenance of
related books and records. CFE Rule 518 specifically requires TPHs to
comply with CFTC regulations relating to minimum financial
requirements, financial reporting requirements, and protection of
customer funds that are set forth in the Appendix to Chapter 5 of the
CFE Rulebook. The purpose of these proposed rule amendments is to make
the CFTC regulations that were added or amended by the CFTC Rulemaking
even more explicit.
---------------------------------------------------------------------------
\6\ 7 U.S.C. 1 et seq.
---------------------------------------------------------------------------
Risk Management Program for FCMs
CFE is proposing to add to its Rules new Rule 520 (and renumber all
subsequent Rules in the Chapter) to require that FCMs comply with the
risk management requirements set forth in CFTC Regulation 1.11: Risk
Management Program for futures commission merchants.\7\ As a result of
the CFTC Rulemaking, CFTC Regulation 1.52(b)(2) requires that all self-
regulatory organizations (``SROs'') (defined as designated contract
markets and registered futures associations in CFTC Regulation
1.52(a)(2)) adopt rules prescribing risk management requirements for
FCM member registrants that are at least as stringent as the
requirements contained in CFTC Regulation 1.11.\8\ CFTC Regulation 1.11
imposes, among other things, both recordkeeping and reporting
requirements on FCMs. Specifically, FCMs must maintain their risk
management policies and procedures, all written approvals, and all
records and reports required under the Regulation.\9\ In addition, FCMs
must furnish a copy of their risk management policies and procedures to
the CFTC and its designated SRO upon application for registration and
thereafter upon request, as well as furnish copies of Risk Exposure
Reports
[[Page 25632]]
to the CFTC.\10\ Although all FCMs that are TPHs must already comply
with all CFTC Regulations, new CFE Rule 520 is proposed specifically to
follow the CFTC Rulemaking's directive with respect to CFTC Regulation
1.11.
---------------------------------------------------------------------------
\7\ 17 CFR 1.11.
\8\ 17 CFR 1.52.
\9\ 17 CFR 1.11(c)(2), (h).
\10\ 17 CFR 1.11(c)(4), (e)(2)(ii).
---------------------------------------------------------------------------
Recordkeeping
The recordkeeping amendments proposed to be included in the
Appendix to Chapter 5 of the CFE Rulebook would impose requirements
that generally already exist under CFE Rules 505, 518, and 604, which,
as discussed, require adherence to CFTC regulations. The amendments to
certain CFTC regulations by the CFTC Rulemaking will now be
specifically incorporated into CFE's rules. In particular, CFE is
proposing to amend CFE Rule 521 which incorporates into CFE's Rulebook
CFTC Regulation 1.18 (Minimum Financial Requirements for Futures
Commission Merchants and Introducing Brokers),\11\ CFE Rule 523 which
incorporates into CFE's Rulebook CFTC Regulation 1.20 (Futures Customer
Funds to be Segregated and Separately Accounted for),\12\ CFE Rule 526
which incorporates into CFE's Rulebook CFTC Regulation 1.23 (Interest
of Futures Commission Merchants in Segregated Futures Customer Funds;
Additions and Withdrawals),\13\ CFE Rule 528 which incorporates into
CFE's Rulebook CFTC Regulation 1.25 (Investment of Customer Funds),\14\
CFE Rule 529 which incorporates into CFE's Rulebook CFTC Regulation
1.26 (Deposit of Instruments Purchased with Futures Customer
Funds),\15\ and CFE Rule 535 which incorporates into CFE's Rulebook
CFTC Regulation 1.32 (Reporting of Segregated Account Computation and
Details Regarding the Holding of Futures Customer Funds).\16\
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\11\ 17 CFR 1.18.
\12\ 17 CFR 1.20.
\13\ 17 CFR 1.23.
\14\ 17 CFR 1.25.
\15\ 17 CFR 1.26.
\16\ 17 CFR 1.32. CFE notes that certain of these amendments
relate to both recordkeeping and reporting (discussed in the next
section) but is only including discussion of them in this section to
avoid duplicative mention.
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Reporting
As CFE is proposing to do with various recordkeeping requirements,
CFE is also proposing to specifically incorporate into the Appendix to
Chapter 5 of its Rulebook the CFTC Rulemaking's amendments to CFTC
regulations relating to reporting. Like with the foregoing amended
recordkeeping requirements, the reporting amendments to this regulation
would impose requirements that generally already exist under CFE Rules
505, 518, and 604, which, as discussed, require adherence to CFTC
regulations. These amendments by the CFTC Rulemaking will now be
specifically incorporated into CFE's rules. In particular, CFE is
proposing to amend CFE Rule 519 which incorporates into CFE's Rulebook
CFTC Regulation 1.10 (Financial Reports of Futures Commission Merchants
and Introducing Brokers) \17\ and CFE Rule 520 which incorporates into
CFE's Rulebook CFTC Regulation 1.12 (Maintenance of Minimum Financial
Requirements by Futures Commission Merchants and Introducing
Brokers).\18\
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\17\ 17 CFR 1.10.
\18\ 17 CFR 1.12.
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In addition to the foregoing amendments that incorporate the CFTC
Rulemaking, CFE is proposing amendments to CFE Rule 503A, which relate
to reporting obligations on FCMs and are not related to the CFTC
Rulemaking. CFE Rule 503A, which presently imposes reporting
obligations on FCMs that are TPHs, is proposed to be amended to require
these FCMs to file financial documentation with CFE in addition to the
documentation the Rule already requires. First, each TPH that is an FCM
would be required, in a form and manner prescribed by the Exchange, to
concurrently file with the Exchange all FOCUS Report Part III
submissions as well as any attachments or related submissions to all
Form 1-FR-FCM, Form 1-FR-IB, or FOCUS Report Part II, Part IIA or Part
II CSE and Part III submissions. Second, each TPH that is an FCM would
be required, in a form and manner prescribed by the Exchange, to
concurrently file with the Exchange a copy of any daily Statement of
Segregation Requirements and Funds in Segregation for Customers Trading
on U.S. Commodity Exchanges filed with the CFTC pursuant to CFTC
Regulation 1.32. Third, each TPH that is an FCM would be required, in a
form and manner prescribed by the Exchange, to concurrently file with
the Exchange a copy of any daily net capital filings submitted by the
TPH to its Designated Self-Regulatory Organization. Fourth, each TPH
that is an FCM would be required, in a form and manner prescribed by
the Exchange, to concurrently file with the Exchange a copy of any
notice that is filed with the CFTC pursuant to CFTC Regulation 1.23.
The receipt of this information will enhance CFE's financial
surveillance of FCMs.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\19\ in general, and furthers the
objectives of Section 6(b)(5) \20\ in particular in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and in general, to
protect investors and the public interest.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
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The addition of new CFE Rule 520, which requires FCMs to establish
risk management programs that comply with CFTC Regulation 1.11, will
enhance CFE's ability to protect investors and the public interest and
to enforce CFE Rules that prohibit fraudulent and manipulative acts and
conduct inconsistent with just and equitable principles of trade. By
specifically requiring that FCMs that are TPHs establish risk
management programs that comply with CFTC Regulation 1.11, CFE further
protects FCM customers.
The recordkeeping amendments to CFE Rules 521, 523, 526, 528, 529,
and 535 and the reporting amendments to CFE Rules 503A, 519, and 520
will also enhance CFE's ability to protect investors and the public
interest and to enforce CFE Rules that prohibit fraudulent and
manipulative acts and conduct inconsistent with just and equitable
principles of trade. These recordkeeping requirements are designed to
ensure that TPHs maintain records that enable CFE and/or other
regulators to investigate whether TPHs are complying with applicable
rules and regulations by requiring the maintenance of information that
may be reviewed to determine whether or not a TPH is complying with
applicable regulatory requirements. Similarly, these reporting
requirements are designed to enable CFE to receive and request
information that allows CFE to monitor for compliance with rules and
regulations, to investigate for noncompliance when appropriate, and to
conduct financial monitoring with regard to TPHs that are FCMs.
B. Self-Regulatory Organization's Statement on Burden on Competition
CFE does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the
[[Page 25633]]
purposes of the Act, in that the rule change makes enhancements to
CFE's financial surveillance of FCMs and requires TPHs to comply with
the amendments set forth in the CFTC Rulemaking. The Exchange believes
that the proposed rule change is equitable and not unfairly
discriminatory because all of the amended Rules would apply equally to
all TPHs that are subject to the applicable requirements, and the
Amendment is expressly consistent with the CFTC Rulemaking.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change will become effective on April 28, 2014.
At any time within 60 days of the date of effectiveness of the
proposed rule change, the Commission, after consultation with the CFTC,
may summarily abrogate the proposed rule change and require that the
proposed rule change be refiled in accordance with the provisions of
Section 19(b)(1) of the Act.\21\
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\21\ 15 U.S.C. 78s(b)(1).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CFE-2014-001 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CFE-2014-001. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal offices of the Exchange.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-CFE-2014-001,
and should be submitted on or before May 27, 2014.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10171 Filed 5-2-14; 8:45 am]
BILLING CODE 8011-01-P