Membership in a Registered Futures Association, 55022-55029 [2015-23046]
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Federal Register / Vol. 80, No. 177 / Monday, September 14, 2015 / Rules and Regulations
procurement. It also authorizes
contracting officers to restrict
competition or award sole source
contracts or orders to eligible WOSBs
for certain Federal contracts or orders in
industries in which SBA determines
that WOSBs are substantially
underrepresented in Federal
procurement and has waived the
economically disadvantaged
requirement.
3. Amend § 127.102 by revising the
definitions of the terms ‘‘EDWOSB
requirement’’, ‘‘Substantial
underrepresentation’’,
‘‘Underrepresentation’’, and ‘‘WOSB
requirement’’ to read as follows:
■
*
*
*
*
*
EDWOSB requirement means a
Federal requirement for services or
supplies for which a contracting officer
has restricted competition or awarded a
sole source contract or order to eligible
EDWOSBs, including Multiple Award
Contracts, partial set-asides, reserves,
sole source awards, and orders set aside
for EDWOSBs issued against a Multiple
Award Contract.
*
*
*
*
*
Substantial underrepresentation is
determined by a study using a reliable
and relevant methodology.
*
*
*
*
*
Underrepresentation is determined by
a study using a reliable and relevant
methodology.
*
*
*
*
*
WOSB requirement means a Federal
requirement for services or supplies for
which a contracting officer has
restricted competition or awarded a sole
source contract or order to eligible
WOSBs, including Multiple Award
Contracts, partial set-asides, reserves,
sole source awards, and orders set aside
for WOSBs issued against a Multiple
Award Contract.
■ 4. Revise § 127.500 to read as follows:
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§ 127.500 In what industries is a
contracting officer authorized to restrict
competition or make a sole source award
under this part?
A contracting officer may restrict
competition or make a sole source
award under this part only in those
industries in which SBA has
determined that WOSBs are
underrepresented or substantially
underrepresented in Federal
procurement, as specified in § 127.501.
[Amended]
5. Amend § 127.501 by removing the
word ‘‘disparity’’ in the two places
■
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6. Amend § 127.503 as follows:
a. Revise the section heading;
■ b. Revise paragraph (a) subject
heading and paragraph (b) subject
heading;
■ c. Redesignate paragraphs (c), (d), (e)
and (f) as paragraphs (e), (f), (g) and (h);
and
■ d. Add new paragraphs (c) and (d).
The revisions and additions read as
follows:
■
■
§ 127.503 When is a contracting officer
authorized to restrict competition or award
a sole source contract or order under this
part?
§ 127.102 What are the definitions of the
terms used in this part?
§ 127.501
where it appears in paragraph (b) and
adding the word ‘‘underrepresentation’’
in its place.
(a) Competition restricted to
EDWOSBs. * * *
(b) Competition restricted to WOSBs.
* * *
(c) Sole source awards to EDWOSBs.
For requirements in industries
designated by SBA as underrepresented
pursuant to § 127.501, a contracting
officer may issue a sole source award to
an EDWOSB when the contacting officer
determines that:
(1) The EDWOSB is a responsible
contractor with respect to performance
of the requirement and the contracting
officer does not have a reasonable
expectation that 2 or more EDWOSBs
will submit offers;
(2) The anticipated award price of the
contract (including options) will not
exceed $6,500,000 in the case of a
contract assigned a North American
Industry Classification System (NAICS)
code for manufacturing, or $4,000,000
in the case of any other contract
opportunity; and
(3) In the estimation of the contracting
officer, the award can be made at a fair
and reasonable price.
(d) Sole source awards to WOSBs. For
requirements in industries designated
by SBA as substantially
underrepresented pursuant to § 127.501,
a contracting officer may issue a sole
source award to a WOSB when the
contacting officer determines that:
(1) The WOSB is a responsible
contractor with respect to performance
of the requirement and the contracting
officer does not have a reasonable
expectation that 2 or more WOSBs will
submit offers;
(2) The anticipated award price of the
contract (including options) will not
exceed $6,500,000 in the case of a
contract assigned a NAICS code for
manufacturing, or $4,000,000 in the case
of any other contract opportunity; and
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(3) In the estimation of the contracting
officer, the award can be made at a fair
and reasonable price.
*
*
*
*
*
■ 7. Revise § 127.507 to read as follows:
§ 127.507 Are there EDWOSB and WOSB
contracting opportunities at or below the
simplified acquisition threshold?
If the requirement is valued at or
below the simplified acquisition
threshold, the contracting officer may
set aside the requirement or award the
requirement on a sole source basis as set
forth in § 127.503.
■ 8. Revise § 127.600 to read as follows:
§ 127.600 Who may protest the status of a
concern as an EDWOSB or WOSB?
(a) For sole source procurements. SBA
or the contracting officer may protest
the proposed awardee’s EDWOSB or
WOSB status.
(b) For all other EDWOSB or WOSB
requirements. An interested party may
protest the apparent successful offeror’s
EDWOSB or WOSB status.
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2015–22927 Filed 9–11–15; 8:45 am]
BILLING CODE 8025–01–P
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 170
RIN 3038–AE09
Membership in a Registered Futures
Association
Commodity Futures Trading
Commission.
ACTION: Final rule.
AGENCY:
The Commodity Futures
Trading Commission (‘‘Commission’’ or
‘‘CFTC’’) is adopting a new rule (‘‘Final
Rule’’) to require that all persons
registered with the Commission as
introducing brokers (‘‘IB’’), commodity
pool operators (‘‘CPO’’), or commodity
trading advisors (‘‘CTA’’), subject to an
exception for those persons who are
exempt from registration as a CTA
pursuant to a particular provision of the
Commission’s regulations, must, in each
case, become and remain a member of
at least one registered futures
association (‘‘RFA’’).
DATES: The Final Rule will become
effective November 13, 2015. All
persons subject to the Final Rule must
comply with the Final Rule by not later
than December 31, 2015.
FOR FURTHER INFORMATION CONTACT:
Katherine Driscoll, Associate Chief
SUMMARY:
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Counsel, 202–418–5544, kdriscoll@
cftc.gov; or Jacob Chachkin, Special
Counsel, 202–418–5496, jchachkin@
cftc.gov, Division of Swap Dealer and
Intermediary Oversight, Commodity
Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street NW.,
Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
Part 170 of the Commission’s
regulations relates to RFAs. An RFA is
an association of persons registered with
the Commission as such pursuant to
Section 17 of the Commodity Exchange
Act (‘‘CEA’’ or ‘‘Act’’).1 Subject to
Commission oversight, RFAs serve a
vital self-regulatory role by functioning
as frontline regulators of their members
(which members also remain subject to
Commission oversight).
An RFA cannot enforce its rules over
Commission registrants who are not
members of the RFA.2 As such, the
Commission promulgated regulations
170.15 and 170.16 to require each
registered futures commission merchant
(‘‘FCM’’), and each registered swap
dealer (‘‘SD’’) and major swap
participant (‘‘MSP’’), respectively, to be
an RFA member, subject to an exception
for certain notice registered securities
brokers or dealers.3 Because the
National Futures Association (‘‘NFA’’)
was the only RFA under Section 17(a)
of the CEA 4 at the time § 170.15 and
§ 170.16, respectively, were
promulgated, these registered FCMs,
SDs, and MSPs were required to be NFA
members and, thus, were subject to
NFA’s rules. The Commission did not
promulgate regulations requiring other
Commission registrants, including IBs,5
17
U.S.C. 21.
Commission registrants that are not RFA
members are nevertheless subject to the rules and
regulations of the Commission. See 7 U.S.C. 21(e),
which specifies that any person registered under
the CEA, who is not an RFA member, ‘‘in addition
to the other requirements and obligations of [the
CEA] and the regulations thereunder shall be
subject to such other rules and regulations as the
Commission may find necessary to protect the
public interest and promote just and equitable
principles of trade.’’
3 17 CFR 170.15 and 170.16. See also Registration
of Swap Dealers and Major Swap Participants, 77
FR 2613 (Jan. 19, 2012).
4 7 U.S.C. 21(a). NFA remains the only RFA under
Section 17(a) of the CEA and is also a selfregulatory organization (‘‘SRO’’). Per Commission
regulation 1.3(ee), SROs are designated contract
markets, swap execution facilities, and registered
futures associations. 17 CFR 1.3(ee). Certain SROs
maintain and update, among other things, a
standardized audit program and coordinate audit
and financial statement surveillance activities over
certain types of firms that are members of more than
one SRO. See 17 CFR 1.52.
5 IB is defined, subject to certain exclusions and
additions, in CEA Section 1a(31) as any person
(except an individual who elects to be and is
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2 Those
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CPOs,6 and CTAs,7 to be members of an
registered as an associated person of a futures
commission merchant) (i) who (I) is engaged in
soliciting or in accepting orders for (aa) the
purchase or sale of any commodity for future
delivery, security futures product, or swap; (bb) any
agreement, contract, or transaction described in
Section 2(c)(2)(C)(i) or Section 2(c)(2)(D)(i); (cc) any
commodity option authorized under Section 4c; or
(dd) any leverage transaction authorized under
Section 19; and (II) does not accept any money,
securities, or property (or extend credit in lieu
thereof) to margin, guarantee, or secure any trades
or contracts that result or may result therefrom; or
(ii) who is registered with the Commission as an IB.
7 U.S.C. 1a(31).
IB is further defined, subject to certain exclusions
and additions, in Commission regulation 1.3(mm)
as (1) Any person who, for compensation or profit,
whether direct or indirect: (i) Is engaged in
soliciting or in accepting orders (other than in a
clerical capacity) for the purchase or sale of any
commodity for future delivery, security futures
product, or swap; any agreement, contract or
transaction described in Section 2(c)(2)(C)(i) or
Section 2(c)(2)(D)(i) of the Act; any commodity
option transaction authorized under Section 4c; or
any leverage transaction authorized under Section
19; or who is registered with the Commission as an
IB; and (ii) Does not accept any money, securities,
or property (or extend credit in lieu thereof) to
margin, guarantee, or secure any trades or contracts
that result or may result therefrom. 17 CFR
1.3(mm).
IBs are subject to registration with the
Commission under CEA Section 4d(g) and
Commission regulation 3.4(a). 7 U.S.C. 6d(g) and 17
CFR 3.4(a).
6 CPO is defined, subject to certain exclusions
and additions, in CEA Section 1a(11) as any person
(i) engaged in a business that is of the nature of a
commodity pool, investment trust, syndicate, or
similar form of enterprise, and who, in connection
therewith, solicits, accepts, or receives from others,
funds, securities, or property, either directly or
through capital contributions, the sale of stock or
other forms of securities, or otherwise, for the
purpose of trading in commodity interests,
including any (I) commodity for future delivery,
security futures product, or swap; (II) agreement,
contract, or transaction described in Section
2(c)(2)(C)(i) or Section 2(c)(2)(D)(i); (III) commodity
option authorized under Section 4c; or (IV) leverage
transaction authorized under Section 19; or (ii) who
is registered with the Commission as a CPO. 7
U.S.C. 1a(11).
CPO is further defined, subject to certain
exclusions and additions, in Commission regulation
1.3(cc) as any person engaged in a business which
is of the nature of a commodity pool, investment
trust, syndicate, or similar form of enterprise, and
who, in connection therewith, solicits, accepts, or
receives from others, funds, securities, or property,
either directly or through capital contributions, the
sale of stock or other forms of securities, or
otherwise, for the purpose of trading in commodity
interests, including any commodity for future
delivery, security futures product, or swap; any
agreement, contract or transaction described in
Section 2(c)(2)(C)(i) or Section 2(c)(2)(D)(i) of the
Act; any commodity option authorized under
Section 4c of the Act; any leverage transaction
authorized under Section 19 of the Act; or any
person who is registered with the Commission as
a CPO, but does not include such persons not
within the intent of the definition as the
Commission may specify by rule or regulation or by
order. 17 CFR 1.3(cc).
CPOs are subject to registration with the
Commission under CEA Section 4m and
Commission regulation 3.4(a). 7 U.S.C. 6m and 17
CFR 3.4(a).
7 CTA is defined, subject to certain exclusions
and additions, in CEA Section 1(a)(12) as any
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55023
RFA. One of the NFA rules to which
NFA members are subject, however, is
NFA’s Bylaw 1101. NFA Bylaw 1101
requires that, generally, no NFA
member may ‘‘carry an account, accept
an order or handle a transaction in
commodity futures contracts’’ for, or on
behalf of, any non-member of NFA that
is required to be registered with the
Commission as, among other things, an
IB, CPO, or CTA.8 Accordingly, any IB,
CPO, or CTA required to be registered
with the Commission that desires to
conduct business with respect to
commodity futures contracts directly
with an FCM that is an NFA member
must also become an NFA member, and
derivatively, must ensure that it only
conducts such business with those IBs,
CPOs, or CTAs that also are NFA
members. Therefore, § 170.15, at the
time it was promulgated, operated in
conjunction with NFA Bylaw 1101 ‘‘to
assure essentially complete NFA
membership from the universe of
commodity professionals: [FCMs, CPOs,
CTAs, and IBs].’’ 9
Title VII of the Dodd-Frank Wall
Street Reform and Consumer Protection
Act (‘‘Dodd-Frank Act’’) amended the
person who (i) for compensation or profit, engages
in the business of advising others, either directly or
through publications, writings, or electronic media,
as to the value of or the advisability of trading in
(I) any contract of sale of a commodity for future
delivery, security futures product, or swap; (II) any
agreement, contract, or transaction described in
Section 2(c)(2)(C)(i) or Section 2(c)(2)(D)(i); (III) any
commodity option authorized under Section 4c; or
(IV) any leverage transaction authorized under
Section 19; (ii) for compensation or profit, and as
part of a regular business, issues or promulgates
analyses or reports concerning any of the activities
referred to in clause (i); (iii) is registered with the
Commission as a CTA; or (iv) the Commission, by
rule or regulation, may include if the Commission
determines that the rule or regulation will effectuate
the purposes of the Act. 7 U.S.C. 1a(12).
CTA is further defined, subject to certain
exclusions and additions, in Commission regulation
1.3(bb) as any person who, for compensation or
profit, engages in the business of advising others,
either directly or through publications, writings or
electronic media, as to the value of or the
advisability of trading in any contract of sale of a
commodity for future delivery, security futures
product, or swap; any agreement, contract or
transaction described in Section 2(c)(2)(C)(i) or
Section 2(c)(2)(D)(i) of the Act; any commodity
option authorized under Section 4c of the Act; any
leverage transaction authorized under Section 19 of
the Act; any person registered with the Commission
as a CTA; or any person, who, for compensation or
profit, and as part of a regular business, issues or
promulgates analyses or reports concerning any of
the foregoing. 17 CFR 1.3(bb).
CTAs are subject to registration with the
Commission under CEA Section 4m and
Commission regulation 3.4(a). 7 U.S.C. 6m and 17
CFR 3.4(a).
8 NFA Bylaw 1101 is available at: https://www.nfa.
futures.org/nfamanual/NFAManual.aspx?RuleID=
BYLAW%201101&Section=3.
9 Futures Associations: Futures Commission
Merchants: Mandatory Membership, 48 FR 26304,
26306 and n.22 (June 7, 1983).
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CEA to establish a comprehensive new
regulatory framework for swaps and
security-based swaps.10 The new
regulatory framework provides that,
among other things, persons that engage
in regulated activity with respect to
swaps will be required to register with
the Commission as IBs, CPOs, or CTAs,
as appropriate. Because of these
definitional amendments, the
intersection of § 170.15 and NFA Bylaw
1101 no longer assures NFA
membership for IBs, CPOs, or CTAs that
are required to register with the
Commission because, as noted above,
NFA Bylaw 1101 relates only to
commodity futures contracts.11
II. Proposed Rule
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On November 8, 2013, the
Commission proposed to amend part
170 by adding § 170.17, which would, if
adopted, have required each IB, CPO,
and CTA registered with the
Commission to become and remain a
member of at least one RFA
(‘‘Proposal’’).12
In the Proposal, the Commission
specifically solicited comments
regarding, among other things, the
impact of the Proposal on CTAs that are
registered with the Commission despite
being eligible to rely on the exemption
from registration set forth in
Commission regulation 4.14(a)(9)
(‘‘§ 4.14(a)(9) Exempted CTAs’’).13
Regulation 4.14(a)(9) provides that a
person is not required to register with
the Commission as a CTA if it does not:
(i) Direct any client accounts; or (ii)
provide commodity trading advice
based on, or tailored to, the commodity
interest or cash market positions or
other circumstances or characteristics of
particular clients.14 When the
Commission promulgated regulation
4.14(a)(9), it stated that ‘‘[a] CTA exempt
under rule 4.14(a)(9) that wishes to
apply for registration or retain its
10 Dodd-Frank Wall Street Reform and Consumer
Protection Act, Pub. L. 111–203, 124 Stat. 1376
(2010).
11 For example, as noted in the Proposal,
currently Commission-registered CTAs, CPOs, and
IBs engaging solely in swap-related activities are
not captured by the intersection of § 170.15 and
NFA Bylaw 1101 and, thus, are not required to be
NFA members. As such, these registrants, to the
extent that they have not voluntarily become NFA
members, are not being supervised in the same
manner as Commission registrants engaging in
similar activities relating to commodity futures
contracts, which registrants are effectively required
to be NFA members.
12 See Membership in a Registered Futures
Association, 78 FR 67078 (Nov. 8, 2013).
13 78 FR 67080 (Nov. 8, 2013).
14 17 CFR 4.14(a)(9). This exemption from CTA
registration generally pertains to persons only
providing advice to the general public, such as in
a newsletter, and not to specific clients.
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current registration may do so.’’ 15
Therefore, CTAs that may avail
themselves of the exemption from
registration in regulation 4.14(a)(9) may
be currently registered with the
Commission and may so register in the
future.
The comment period for the Proposal
ended on January 7, 2014.16 The
Commission received two substantive
comments in response to the Proposal 17
and, in consideration of those
comments, is adopting the Proposal
subject to certain changes, as noted
below.
III. Summary of Comments
In response to the Proposal, the
Commission received two substantive
comments, one from NFA and one from
James W. Lovely, Esq. (‘‘Lovely’’).18
Both comments related to the impact of
the Proposal on CTAs. No comments
were received in response to the CPO
and IB aspects of the Proposal.
A. NFA Comment
NFA supported the Proposal as an
appropriate and effective way to require
IBs, CPOs, and CTAs engaging in swaps
activities that otherwise are not
captured by the intersection of NFA
Bylaw 1101 or NFA Compliance Rule 2–
36 19 to become and remain NFA
members, and comply with the
applicable NFA requirements. However,
NFA recommended that the
Commission exclude § 4.14(a)(9)
Exempted CTAs from the Proposal. In
support of its position, NFA stated that
its existing rules focus primarily on an
intermediary’s conduct with respect to
clients and thus have little applicability
15 See Exemption from Registration as a
Commodity Trading Advisor, 65 FR 12938, 12941
(March 10, 2000).
16 The Proposal inaccurately stated the comment
period ended on January 17, 2014. To reflect the
accurate date, the Federal Register published a
correction that the comment period ended on
January 7, 2014. See 78 FR 67985 (Nov. 13, 2013).
Nonetheless, the Commission considered all
comments received by January 17, 2014.
17 See https://comments.cftc.gov/PublicComments/
CommentList.aspx?id=1424.
18 NFA Comment Letter and James Lovely, Esq.
Comment Letter.
19 Clause (d) of NFA Compliance Rule 2–36
applies to forex transactions and requires that no
NFA member carry a forex account for, accept a
forex order or account from, handle a forex
transaction for or on behalf of, receive
compensation (directly or indirectly) for forex
transactions from, or pay compensation (directly or
indirectly) for forex transactions to any nonmember of NFA, or suspended member, that is
required to be registered with the Commission as,
among other things, an FCM, IB, CPO, or CTA in
connection with its forex activities. NFA
Compliance Rule 2–36 is available at: https://
www.nfa.futures.org/nfamanual/
NFAManual.aspx?RuleID=RULE%202–
36&Section=4.
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to CTAs that do not direct client
accounts or otherwise exercise
discretion (i.e., § 4.14(a)(9) Exempted
CTAs).
B. Lovely Comment
Conversely, Lovely generally stated
that the Proposal ‘‘while wellintentioned, is ill-founded in many
respects’’ and argued that the costs
associated with further requiring
registered CTAs to become and remain
RFA members would be
disproportionate to any regulatory
benefit.
Lovely discussed those CTAs that
register with the Commission even
though they may not be required to so
register (e.g., because they may avail
themselves of a registration exception or
exclusion provided under Commission
regulation 4.14(a) or Sections 1a(12)(B)
or 4m(1) of the CEA, respectively).
According to Lovely, these CTAs
register for legal comfort in light of the
‘‘practical ambiguities around concepts
[related to CTA registration
requirements] such as ‘solely
incidental’, ‘principal business or
profession’, ‘holding out’ and ‘tailored
advice’’’ but do not have to become NFA
members, so long as such CTAs do not
manage or exercise discretion over
customer accounts or funds.20 He argues
that these CTAs’ voluntary registration
benefits the CFTC and that such persons
will likely deregister if the Commission
adopts the Proposal.21
Lovely further stated that the CFTC
‘‘significantly underestimates the cost of
NFA [membership]’’ for these CTAs
who are not currently required to
become NFA members. He noted that
most of such CTAs ‘‘have only
incidental involvement with commodity
interests’’ and, if required to become
NFA members, ‘‘would need to retain
external legal counsel or compliance
consultants to try to ascertain [which
NFA rules] apply to their activities and,
if so, how to comply with the same.’’
Notwithstanding that Lovely argues that
many NFA rules are not applicable to
such CTAs,22 he estimates that ‘‘external
20 Presumably Lovely means that such CTAs
would not be captured by the intersection of
§ 170.15 and NFA Bylaw 1101.
21 In this regard, Lovely also asserted that if the
Commission adopts the Proposal, the First
Amendment rights of these CTAs could be
jeopardized, and, in some cases, such CTAs may
drop their CFTC registration entirely ‘‘in reliance on
. . . [their] commercial free speech rights under the
U.S. Constitution.’’
22 Lovely provided a non-exhaustive list of what
he believes to be inapposite NFA member rules
including rules regarding: (1) Account opening, risk
disclosure and trading authority; (2) bunched orders
and order allocation; (3) suitability or churning
security futures products; (4) CTA program and
performance disclosure for managed accounts or
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legal and compliance assistance . . .
could easily cost [such a CTA]
$15,000.00 to $20,000.00 per year.’’
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IV. Final Rule
The Commission, in consideration of
the comments received by it on the
Proposal, is adopting the Proposal but
excluding § 4.14(a)(9) Exempted CTAs
from the Final Rule.23 The Final Rule
will help ensure the integrity of the
swaps and futures market and its
participants by subjecting all registered
IBs, CPOs, and CTAs, except for
§ 4.14(a)(9) Exempted CTAs, to NFA’s
developed set of rules and oversight
capabilities.24 As such, the Commission
believes that the markets are better
served, and the public better protected,
by having persons subject to the
requirements of the Final Rule become
RFA members.25
After considering the comments, the
Commission is persuaded by Lovely and
NFA that NFA’s rules have little
applicability to § 4.14(a)(9) Exempted
CTAs and, thus, there would be little
benefit from requiring § 4.14(a)(9)
Exempted CTAs to become and remain
RFA members.
The Commission, however, is not
persuaded that other registered CTAs,
regardless of whether such CTAs are
required to register with the
Commission, should be excluded from
the requirements of the Final Rule. Any
registered CTA that does not meet the
requirements of § 4.14(a)(9) would, by
definition, be engaged in either (i)
directing client accounts, or (ii)
providing commodity trading advice
based on, or tailored to, the commodity
interest or cash market positions or
pools; (5) solicitation and execution of customer
orders; (6) disaster recovery protocols (other than in
connection with CFTC mandated record retention);
(7) trading programs, performance and related
promotional materials; (8) anti-money laundering;
and (9) quarterly reporting of assets under
management, trading programs, performance,
carrying brokers and the like.
23 Notwithstanding this exclusion, if a person is
a § 4.14(a)(9) Exempted CTA and registered as an
IB or CPO, then such person shall still be subject
to the requirements of the Final Rule in its capacity
as a registered IB or CPO, as the case may be.
24 The Commission notes that, as a result of the
Final Rule, any person not required to register, and
not registered, with the CFTC would not
subsequently become subject to any NFA-imposed
requirement unless such person voluntarily elects
to become so registered. Any adverse financial,
commercial, or other impact, including the
potential chilling effect on free speech, which could
result from the Final Rule for such CTAs, could be
avoided simply by relying on the proper regulatory
exclusion or exemption without having to even
incur the cost of filing a notice with the CFTC or
NFA.
25 This is consistent with the Commission’s
rationale for § 170.15; that there should be
essentially complete NFA membership from the
universe of commodity professionals. See supra at
n.10.
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other circumstances or characteristics of
particular clients. As noted above, and
consistent with § 170.15, the
Commission believes that RFA
supervision of registered CTAs engaging
in these activities is beneficial to the
markets and the clients of such CTAs.
In addition, the Commission believes
that Lovely’s cost estimates are very
high for retaining advisors in relation to
NFA’s rules. Assuming a CTA was to
contact an attorney familiar with
Commission regulations and NFA rules
applicable to CTAs, the Commission
believes that determining which NFA
rules are applicable to such a CTA
would be a routine task that would not
take a substantial amount of time.26
Furthermore, with respect to those
CTAs that opt into CFTC registration to
avoid making determinations as to their
activities in relation to their eligibility
for the exceptions or exclusions from
the CTA registration requirements noted
in Lovely’s comments, such persons
should review available guidance from
the Commission and consult with their
advisors and Commission staff, as
necessary, to determine if registration is
required.27
In support of the Final Rule, Section
4p of the CEA authorizes the
Commission to ‘‘specify by rules and
regulations appropriate standards with
respect to training, experience, and such
other qualifications as the Commission
finds necessary or desirable to insure
the fitness of persons required to be
registered with the Commission.’’ 28
The Final Rule also provides a means
for assuring that the purpose of Section
17(m) of the CEA,29 allowing for
26 As noted above, Lovely himself refers to many
of these rules as ‘‘inapposite.’’ Such a description
belies Lovely’s argument that any substantial legal
review would be required to determine whether
NFA rules would apply to one of the CTAs about
which Lovely comments.
Moreover, the Commission believes the costs of
compliance review in subsequent years would be
significantly less than the initial review costs,
because it is likely that only the changes to NFA
rules that took place during the prior year would
need to be considered.
27 The Commission notes that it is not of the view
that making such a definitive determination is
impossible or exceedingly difficult, as Lovely’s
comment suggests. However, the Commission does
recognize that, once this determination has been
made, and depending on the determination, a
Commission registrant may need time to review and
possibly reorganize its business in order to ensure
its compliance with NFA’s rules or undertake the
deregistration process, as the case may be.
Therefore, the Commission is providing the
extended compliance period described in the DATES
section above.
28 7 U.S.C. 6p. Also, Section 8a(5) of the CEA
authorizes the Commission ‘‘to make and
promulgate such rules and regulations as, in the
judgment of the Commission, are reasonably
necessary to effectuate any of the provisions or to
accomplish any of the purposes’’ of the CEA.
29 7 U.S.C. 21(m).
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55025
compulsory RFA membership, is
achieved.30 The Commission believes
that the Final Rule is reasonably
necessary and desirable to effectuate
comprehensive and effective market
oversight by NFA in its capacity as an
SRO. As the only RFA, NFA serves as
the frontline regulator of its members,
subject to Commission oversight.
Without such mandatory membership in
NFA or another RFA, effective
implementation of the programs
required by Section 17 of the CEA and
NFA’s self-regulatory programs could be
impeded.31
In summary, by mandating RFA
membership by each registered IB, CPO,
and CTA, except § 4.14(a)(9) Exempted
CTAs, the Final Rule enables the
Commission to further ensure the
fitness, and provide for direct NFA
oversight, of these Commission
registrants.
V. Administrative Compliance
A. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(‘‘PRA’’) 32 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. An
agency may not conduct or sponsor, and
a registered entity is not required to
respond to, a collection of information
unless it displays a currently valid
control number by the Office of
Management and Budget (‘‘OMB’’).
In connection with the Proposal, the
Commission anticipated that, if
adopted, the Final Rule would simply
require an amendment to the number of
respondents included in OMB
Collection 3038–0023.33 The basis for
this preliminary finding was that, at the
time of the Proposal, NFA had indicated
that certain CPOs, CTAs, and IBs were
registered with the Commission, but not
NFA members. Therefore, because
registration and membership require the
filing of Form 7–R, the Commission
initially believed these respondents’
paperwork burden would have been
affected by the Proposal.
As discussed above, the Final Rule
does not require IBs, CPOs, or CTAs to
30 See Futures Associations: Futures Commission
Merchants: Mandatory Membership, 48 FR 26304
(June 7, 1983).
31 The Commission notes that in addition to the
authority discussed herein, as noted previously,
CPOs and CTAs are subject to registration with the
Commission under Section 4m of the CEA, and IBs
are subject to such registration under Section 4d(g)
of the CEA. 7 U.S.C. 6m and 6d(g).
32 44 U.S.C. 3501 et seq.
33 See OMB Control No. 3038–0023, https://
www.reginfo.gov/public/do/
PRAOMBHistory?ombControlNumber=3038-0023.
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register with the Commission. Rather,
the Final Rule only requires that certain
of such persons that register with the
Commission become and remain an
NFA member. To indicate NFA
membership an applicant needs to
‘‘check a box’’ on Form 7–R.34 Current
OMB Collection 3038–0023 captures the
burdens associated with the registration
process for these persons, including the
filing of and updating of Form 7–R for
registration purposes. Therefore, to
comply with the Final Rule, such
registrants that are not NFA members,
would be required to ‘‘check-the-box’’
on Form 7–R indicating their status as
an NFA member.
Accordingly, because the burden
associated with updating Form 7–R is
currently captured in OMB Collection
3038–0023, and those persons who are
directly impacted by the Final Rule are
either currently registered with the
Commission (i.e., have already filed a
Form 7–R) or will be required to file a
Form 7–R in connection with their
registration with the Commission, no
adjustment is necessary to take into
account the number of Commission
registrants who will have to become
NFA members as a result of the Final
Rule. Further, the Commission believes
the additional burden of ‘‘checking the
box’’ on Form 7–R to be nonsubstantive. Therefore, upon further
review and for the reasons stated above,
the Final Rule does not require
amending existing OMB Collection
3038–0023.35
B. Regulatory Flexibility Act
The Regulatory Flexibility Act 36
requires federal agencies, in
promulgating regulations, to consider
the impact of those regulations on small
entities. In the Proposal, the
Commission certified that the Proposal
would not have a significant economic
impact on a substantial number of small
entities.
1. CPOs
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The Commission has previously
determined that CPOs are not small
entities for purposes of the Regulatory
34 The Commission has designated NFA to
receive Form 7–R submissions on its behalf. The
Commission notes that application for NFA
membership is incorporated in Form 7–R.
35 The Commission further believes that many
Commission registrants’ recordkeeping obligations
associated with preparing for an NFA audit are
already covered by other OMB control numbers. For
example, §§ 4.23 and 4.33 of the Commission’s
regulations are recordkeeping requirements
associated with registered CPOs and CTAs,
respectively, which are covered by OMB control
number 3038–0005.
36 5 U.S.C. 601 et seq.
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Flexibility Act.37 Accordingly, the
Chairman, on behalf of the Commission,
hereby certifies pursuant to 5 U.S.C.
605(b) that the Final Rule will not have
a significant economic impact on a
substantial number of small entities
with respect to CPOs.
small entities. The Commission also
stated its preliminary belief that NFA
membership would impose few
additional compliance costs on affected
entities, because these entities are
already subject to the majority of
regulations that NFA enforces, whether
or not they are NFA members. The
Commission specifically requested
comment on any additional compliance
costs beyond those an entity would face
as a result of it being registered with the
Commission.
2. IBs and CTAs
The Commission has previously
determined to evaluate within the
context of a particular rule proposal
whether all or some IBs or CTAs should
be considered to be small entities and,
if so, to analyze the economic impact on
them of any such rule.38
Since there may be some small
entities that are IBs or CTAs and would
be required to become NFA members,
the Commission has considered whether
this rulemaking would have a
significant economic impact on these
entities.
The Final Rule requires all IBs and
CTAs, except § 4.14(a)(9) Exempt CTAs,
who register with the Commission to
become RFA members. This would
require such IBs and CTAs to pay
membership dues, ‘‘check a box’’ on
Form 7–R, and ensure that they are
prepared for an NFA audit.39 As noted
in the Proposal, the Commission is of
the view that any costs associated with
preparing for an audit by the NFA
should not be substantially different
from, or significantly exceed, the costs
associated with preparing for an audit
by the Commission, which every
registered person would already be
responsible to do.40 Moreover, because
the Final Rule only pertains to
Commission Registrants, any audit
related costs incident to NFA
membership would be negligible, and
should not have a significant economic
impact on IBs or CTAs that may be
In response to the Proposal, a
comment from Lovely stated that most
CTAs that opt into CFTC registration
and do not manage or exercise
discretion over customer accounts or
funds are ‘‘small or one-person
operations or may have only incidental
involvement with commodity interests.’’
Further, Lovely asserts that, although
many of NFA’s rules are not relevant to
such CTAs, the Commission understates
the cost of required NFA membership,
including that the costs to these CTAs
of reviewing and complying with such
rules would be approximately $15,000
to $20,000 annually.
As discussed above, the Commission
believes that Lovely’s compliance cost
estimates are very high. Rather, the
Commission believes that the costs
faced by a CTA would, at most, be
approximately $2,950 in the first year
and $1,476 in subsequent years.41 The
Commission does not believe that these
amounts plus the $750 membership
dues required of all NFA members that
are CTAs, results in an unreasonable
burden on any CTAs (including those
that may be small entities under the
Regulatory Flexibility Act).42 Further, as
37 Policy Statement and Establishment of
Definitions of ‘‘Small Entities’’ for Purposes of the
Regulatory Flexibility Act, 47 FR 18618, 18619
(Apr. 30, 1982).
38 See, with respect to CTAs, 47 FR at 18620 (Apr.
30, 1982); and see, with respect to IBs, Introducing
Brokers and Associated Persons of Introducing
Brokers, Commodity Trading Advisors and
Commodity Pool Operators; Registration and Other
Regulatory Requirements, 48 FR 35276 (Aug. 3,
1983).
39 See 78 FR 67083 (Nov. 8, 2013). As stated in
the booklet titled ‘‘NFA Regulatory Requirements:
For FCMs, IBs, CPOs, and CTAs,’’ NFA audits have
two major objectives: (1) To determine whether the
firm is maintaining records in accordance with NFA
rules and applicable CFTC regulations; and (2) to
ensure that the firm is being operated in a
professional manner and that customers are
protected against unscrupulous activities and
fraudulent or high-pressure sales practices.
40 As noted above, the Commission believes that
many of the recordkeeping obligations associated
with preparing for an NFA audit are already
required for Commission registrants. Moreover,
given the average periodicity for NFA audits, the
magnitude of annual audit-related costs is limited.
41 This estimate is based on the following labor
estimates for this determination: for the first year,
6 hours of an attorney; in subsequent years, 3 hours
of an attorney, in each case at approximately
$492.21/hour. The estimate of the hourly cost is
from the Securities Industry and Financial Markets
Association’s Report on Management and
Professional Earnings in the Securities Industry—
2013, modified by CFTC staff to account for an
1800-hour work-year and multiplied by 5.35 to
account for firm size, employee benefits, and
overhead. The Commission believes that the use of
this multiplier is appropriate here because the
Commission is assuming that persons retain outside
advisors to assist in complying with NFA rules. The
Commission rounds to two significant digits.
42 Assuming that IBs would face similar
compliance costs as CTAs, the Commission does
not believe that these costs result in an
unreasonable burden on any IBs (including those
that may be small entities under the Regulatory
Flexibility Act). Further, as of June 30, 2015, all
registered IBs that are not members of NFA are
pending withdrawal of their Commission
registration. Accordingly, the Commission believes
that no currently registered IBs will be impacted by
this rule.
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a. Comments on Costs to CTAs
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discussed above, § 4.14(a)(9) Exempted
CTAs (i.e., those CTAs that neither
manage nor exercise discretion over
customer accounts or funds and that do
provide clients advice described in
§ 4.14(a)(9)(ii)) will not be required to
become or remain RFA members
pursuant to the Final Rule and, thus,
will not face any compliance costs from
the Final Rule.
b. Commission Determination
Accordingly, for the reasons stated
above, the Commission believes that the
Final Rule will not have a significant
economic impact on a substantial
number of small entities. Therefore, the
Chairman, on behalf of the Commission,
hereby certifies, pursuant to 5 U.S.C.
605(b), that the Final Rule being
published today by this Federal
Register release will not have a
significant economic impact on a
substantial number of small entities.
C. Considerations of Costs and Benefits
Section 15(a) of the CEA requires the
Commission to consider the costs and
benefits of its actions before
promulgating a regulation under the
CEA or issuing an order. Section 15(a)
further specifies that the costs and
benefits shall be evaluated in light of the
following 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 considers the costs and
benefits resulting from its discretionary
determinations with respect to the
section 15(a) factors.
1. Background
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As discussed above, the Dodd-Frank
Act amended the CEA to establish a
comprehensive new regulatory
framework for swaps markets and, in
doing so, required IBs, CPOs, and CTAs
acting in relation to swaps to register
with the Commission. These newly
registered persons, however, are not
currently required to become NFA
members because, as discussed above,
The Commission also notes that, pursuant to
Section 17(d) of the Act, each CTA or IB that is
registered with the Commission, but not an RFA
member is required to ‘‘. . . pay to the Commission
such reasonable fees and charges [established by the
Commission] as may be necessary to defray the
costs of additional regulatory duties required to be
performed by the Commission because such person
is not a member of an [RFA].’’ 7 U.S.C. 21(d). The
Commission has not yet established any such fees
or charges, but noted in the release for § 170.15 that
these charges are likely to be greater than the costs
attendant to RFA membership. See 48 FR at 26311.
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Jkt 235001
they are not captured by the intersection
of § 170.15 and NFA Bylaw 1101.
NFA cannot enforce its rules over
Commission registrants who do not
become NFA members, including IBs,
CPOs, and CTAs active solely in relation
to swap transactions, which are not
currently required to become NFA
members. Thus, the Final Rule requires
registered IBs, CPOs, and CTAs, except
§ 4.14(a)(9) Exempted CTAs, to become
NFA members similarly to how § 170.15
presently requires FCMs to become NFA
members and how § 170.16 requires the
same of SDs and MSPs. In conjunction
with §§ 170.15 and 170.16, the
Commission is intending to create an
oversight regime that ensures more
consistent treatment of its registered
intermediaries. The Commission
believes that the Final Rule is
reasonably necessary to ensure the
fitness and comprehensive regulation
and appropriate oversight of such
persons.
In assessing the costs and benefits of
the Final Rule, the Commission employs
a status quo baseline. The Commission
analyzes the cost and benefit to those
registered persons that, but for the Final
Rule, would not have to become RFA
members. As of June 30, 2015, the
following numbers of Commission
registered IBs, CPOs, and CTAs
(registered in the below categories) were
not NFA members (‘‘Non-member
Registrants’’): 43
Registration category
Non-member
registrants
IB only ...................................
CPO only ..............................
CTA only ...............................
IB & CPO ..............................
IB & CTA ..............................
CTA & CPO ..........................
FCM & CPO .........................
21
61
573
1
2
41
1
Total ...............................
700
Of these Non-member Registrants,
however, approximately 138 are
pending withdrawal of their
Commission registration. The
Commission is assuming that these Nonmember Registrants will withdraw their
registration and, thus, will not be
impacted by the Final Rule. In addition,
only approximately one percent of the
Non-member Registrants registered
solely as CTAs reported to the
Commission in the most recent
reporting cycle that they had directed
43 See NFA’s daily directory of CFTC Registrants
and Members available at: https://
www.nfa.futures.org/NFA-registration/NFAdirectories.HTML.
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55027
client accounts.44 As such, the
Commission believes that many of the
Non-member Registrants registered
solely as CTAs will be § 4.14(a)(9)
Exempted CTAs and, thus, will not be
required to comply with the Final
Rule.45 Accordingly, the Commission
estimates that 296 46 persons registered
with the CFTC as a CPO, CTA, or IB will
be required to become and remain NFA
members as a result of the Final Rule.47
Because at this time the Commission
cannot reasonably estimate the number
of Non-member Registrants that may
deregister with the Commission as a
result of the Final Rule, the Commission
is assuming that no Non-member
Registrants will deregister as a result of
the Final Rule. The Commission
believes that this will lead to an
overstatement of the compliance costs
relating to the Final Rule.
2. Costs
a. Costs to IBs, CPOs, and CTAs
As discussed above, the process for a
Non-member Registrant to become an
NFA member amounts to checking a box
on the CFTC registration form and
updating some contact information.
Thus, the Commission believes the cost
of filing for membership to be nonsubstantive.48
Affected persons are also subject to
certain membership fees. NFA imposes
initial membership dues and annual
membership dues for IBs, CPOs, and
CTAs. Currently, such initial
membership dues are $750 for the first
year, and the annual dues to maintain
membership are $750 per year
44 The Commission is assuming that all Nonmember Registrants registered solely as CTAs have
reported to the Commission the amount of assets
they have directed, if any.
45 For purposes of its analysis, the Commission is
assuming that approximately half of the 573 Nonmember Registrants registered solely as CTAs (286
Non-member Registrants) will be § 4.14(a)(9)
Exempted CTAs and will not be required to comply
with the Final Rule, and 20 of these 286 Nonmember Registrants will be pending withdrawal of
their Commission registration.
46 To arrive at the estimate, the 700 figure was
reduced by the sum of (i) 138 (the Non-member
Registrants whose withdrawal from Commission
registration is pending) and (ii) 266 (the Nonmember Registrants that the Commission assumes
will be § 4.14(a)(9) Exempted CTAs net of those
pending withdrawal, as described above).
47 For purposes of assessing the costs of this rule,
the Commission is assuming that no Non-member
Registrant is, absent the Final Rule, required to be
an NFA member.
48 See Form 7–R, https://www.nfa.futures.org/
NFA-registration/templates-and-forms/form7r.HTML. Applications forms for NFA membership
and Associate membership are incorporated in
Forms 7–R and 8–R. See NFA Membership and
Dues, https://www.nfa.futures.org/NFA-registration/
NFA-membership-and-dues.HTML.
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thereafter.49 Thus, the 296 affected Nonmember Registrants, in the aggregate,
will incur an initial and ongoing annual
registration/membership cost of
approximately $222,000.50
The Commission agrees with Lovely
that the Final Rule will also impose
certain compliance costs on affected
Non-member Registrants. However, as
noted above, the Commission believes
that, given the existing requirements
imposed on such registrants, the
compliance costs of becoming an NFA
member and complying with NFA’s
rules (including preparing for an audit
by NFA) will be partially offset by the
costs already incurred by these
registrants (i.e., the costs associated
with complying with Commission
regulations and preparing for
examinations by the Commission). In
that regard, as discussed above, the
Commission disagrees with Lovely’s
cost estimates and estimates that an
affected registrant may, at most, face
additional compliance costs of
approximately $2,950 initially and
$1,476 in subsequent years, equating to
an industry total of $873,200 in the first
year and $436,896 in subsequent
years,51 plus the indirect costs of the
periodic audits. The Commission cannot
reasonably provide an exact estimate of
these costs due to the idiosyncratic
nature of the indirect costs incurred.52
become IBs, CPOs, and CTAs because of
the added burden of being an RFA
member. The Commission is unable to
estimate accurately how many IBs,
CPOs, and CTAs will deregister with the
Commission or elect not to so register in
the future, or how many persons will
choose to not become such an
intermediary, in each case, as a result of
the Final Rule. Further, the Commission
believes that if a market participant has
chosen not to register with the
Commission, the costs incurred by that
participant for not registering would be
less than the costs that would have been
incurred to register. Otherwise, the
market participant would likely have
chosen to register instead. However, the
Commission cannot make a more
accurate determination of costs beyond
this overestimate without knowing more
specifics about a particular market
participant.
tkelley on DSK3SPTVN1PROD with RULES
b. Other Market Costs
In addition to the direct costs to
Commission Registrants, the
Commission considered other costs to
the markets of the Final Rule. In
particular, the Commission considered
the impact the Final Rule will have on
IBs, CPOs, and CTAs (i) election to not
register with the Commission and (ii)
optional deregistration, in each case,
where such persons are not required to
be registered with the Commission.
Further, the Commission considered
that the requirements of the Final Rule
may cause fewer persons to elect to
c. Consideration of the Proposal as an
Alternative to the Final Rule
The Commission believes the costs in
a. and b. above, respectively, are
reduced from those that would have
resulted had the Proposal been adopted
without modification (the Proposal
would have required each registered IB,
CPO, and CTA, without exception, to
become and remain a member of an
RFA), because the Commission has
excepted § 4.14(a)(9) Exempted CTAs
from the requirements of the Final Rule.
This exclusion limits the Commission’s
ability to oversee these persons through
delegation to an RFA; however, the
Commission has determined that this
reduction in the Commission’s oversight
abilities is reasonable in light of the
burden that the Proposal would
otherwise impose on § 4.14(a)(9)
Exempted CTAs and the markets. The
Commission further notes that, as
discussed above, § 4.14(a)(9) Exempted
CTAs that are not RFA members are still
subject to the Commission’s rules and
regulations.
49 See NFA Membership and Dues, https://
www.nfa.futures.org/NFA-registration/NFAmembership-and-dues.HTML.
50 To arrive at the monetary estimate, the 296
figure was multiplied by the $750.00 per-person
annual membership dues.
51 To arrive at the monetary estimate, the 296
figure was multiplied by the estimated per-person
compliance costs.
52 The Commission also considered that, in
addition to the Non-member Registrants discussed
above, the Final Rule will cause future persons
registering with the Commission as IBs, CPOs, and
CTAs because of their activities in relation to swaps
to incur additional costs similar to those described
above. The Commission expects that many persons
will apply for registration under the Commission’s
swaps market regime in such capacities, but the
Commission is not able to accurately estimate the
exact number of new Commission registrants that
will do so and, thus, be affected by the Final Rule.
3. Benefits
The Final Rule enables the
Commission to (i) carry out its
obligations pursuant to Section 17 of the
CEA to delegate certain oversight
responsibility for intermediaries,
including IBs, CPOs, and CTAs, to an
RFA, and (ii) ensure the fitness of its
registrants as described under Section
4p of the CEA. The Commission
believes that by requiring RFA
membership, the Final Rule results in a
more efficient deployment of agency
resources which would otherwise have
to be used to oversee these registrants
who would, without the Final Rule, not
be overseen by an RFA. Further, the
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Commission believes that the Final Rule
enables NFA to apply its experience as
a SRO to oversee and ensure the fitness
of all registered IBs, CPOs, and CTAs,
except § 4.14(a)(9) Exempt CTAs. The
markets and the public will benefit from
NFA’s developed set of rules and
oversight capabilities to ensure the
integrity of the swaps market and its
participants.
4. Section 15(a) Factors
The Commission requested comment
on all aspects of the Section 15(a)
factors. Except as discussed above, the
Commission did not receive any
comments relating to costs and benefits
of the Final Rule.
Section 15(a) of the CEA requires the
Commission to consider the effects of its
actions in light of the following five
factors:
a. Protection of Market Participants and
the Public
The Final Rule will protect the public
by ensuring that registered IBs, CPOs,
and CTAs, except § 4.14(a)(9) Exempt
CTAs, are subject to the same level of
comprehensive NFA oversight.
b. Efficiency, Competitiveness, and
Financial Integrity of Markets
The Final Rule ensures that all
registered IBs, CPOs, and CTAs, except
§ 4.14(a)(9) Exempt CTAs, are subject to
a similar level of oversight and
regulatory responsibility. In so doing,
the Commission believes the integrity of
markets is enhanced. Furthermore, the
Commission also believes that the Final
Rule will promote public confidence in
the integrity of derivatives markets by
ensuring consistent and adequate
regulation and oversight of registered
IBs, CPOs, and CTAs, except § 4.14(a)(9)
Exempt CTAs.
c. Price Discovery
The Commission has not identified an
impact on price discovery as a result of
the Final Rule.
d. Sound Risk Management
The Commission has not identified an
impact on the risk management
decisions of market participants as a
result of the Final Rule.
e. Other Public Interest Considerations
The Commission has not identified an
impact on other public interest
considerations as a result of the Final
Rule.
List of Subjects in 17 CFR Part 170
Authority delegations (Government
agencies), Commodity futures,
Membership in a Registered Futures
E:\FR\FM\14SER1.SGM
14SER1
Federal Register / Vol. 80, No. 177 / Monday, September 14, 2015 / Rules and Regulations
Association, Reporting and
recordkeeping requirements.
DEPARTMENT OF LABOR
For the reasons stated in the
preamble, the Commodity Futures
Trading Commission amends 17 CFR
part 170 as set forth below:
29 CFR Part 552
Wage and Hour Division
RIN 1235–AA05
Application of the Fair Labor
Standards Act to Domestic Service;
Announcement of 30-Day Period of
Non-Enforcement
PART 170—REGISTERED FUTURES
ASSOCIATIONS
1. The authority citation for part 170
is revised to read as follows:
■
Wage and Hour Division,
Department of Labor.
ACTION: Policy statement.
AGENCY:
Authority: 7 U.S.C. 6d, 6m, 6p, 6s, 12a,
and 21.
■
§ 170.17 Introducing brokers, commodity
pool operators, and commodity trading
advisors.
Each person registered as an
introducing broker, commodity pool
operator, or commodity trading advisor
must become and remain a member of
at least one futures association that is
registered under Section 17 of the Act
and that provides for the membership
therein of introducing brokers,
commodity pool operators, or
commodity trading advisors, as the case
may be, unless no such futures
association is so registered; provided,
however that a person registered as a
commodity trading advisor shall not be
required to become or remain a member
of such a futures association, solely in
respect of its registration as a
commodity trading advisor, if such
person is eligible for the exemption
from registration as such pursuant to
§ 4.14(a)(9) of this chapter.
Issued in Washington, DC, on September 9,
2015, by the Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
Note: The following appendix will not
appear in the Code of Federal Regulations.
Appendix to Membership in a
Registered Futures Association—
Commission Voting Summary
On this matter, Chairman Massad and
Commissioners Bowen and Giancarlo voted
in the affirmative. No Commissioner voted in
the negative.
[FR Doc. 2015–23046 Filed 9–11–15; 8:45 am]
tkelley on DSK3SPTVN1PROD with RULES
BILLING CODE 6351–01–P
The Department of Labor’s
(Department) Final Rule amending
regulations regarding domestic service
employment, which extends Fair Labor
Standards Act (FLSA) protections to
most home care workers, had an
effective date of January 1, 2015. The
Department has not begun enforcement
of the Final Rule both because of its
previously announced time-limited nonenforcement policy and because it is a
party to a federal lawsuit regarding the
amended regulations. The U.S. Court of
Appeals for the District of Columbia
issued an opinion in that case in favor
of the Department on August 21, 2015.
The Department will not bring
enforcement actions against any
employer for violations of FLSA
obligations resulting from the amended
domestic service regulations for 30 days
after the date the Court of Appeals
issues a mandate making its opinion
effective.
SUMMARY:
2. Add § 170.17 to read as follows:
This policy statement was signed
on September 9, 2015.
FOR FURTHER INFORMATION CONTACT:
Mary Ziegler, Assistant Administrator,
Office of Policy, U.S. Department of
Labor, Wage and Hour Division, 200
Constitution Avenue NW., Room S–
3502, FP Building, Washington, DC
20210; telephone: (202) 343–5940 (this
is not a toll-free number), email:
HomeCare@dol.gov. Copies of this
Policy Statement may be obtained in
alternative formats (Large Print, Braille,
Audio Tape, or Disc), upon request, by
calling (202) 693–0675 (not a toll-free
number). TTY/TTD callers may dial tollfree (877) 889–5627 to obtain
information or request materials in
alternative formats.
SUPPLEMENTARY INFORMATION:
DATES:
I. 30-Day Non-Enforcement Period After
Mandate Issues
The Department’s Final Rule
amending regulations regarding
domestic service employment, 78 FR
60454, which extends FLSA protections
to most home care workers, had an
VerDate Sep<11>2014
16:26 Sep 11, 2015
Jkt 235001
PO 00000
Frm 00015
Fmt 4700
Sfmt 4700
55029
effective date of January 1, 2015. The
Department has not begun enforcement
of the Final Rule both because of its
time-limited non-enforcement policy, 79
FR 60974 (October 9, 2014), and because
it is a party to a federal lawsuit
regarding the amended regulations in
which the U.S. District Court for the
District of Columbia issued opinions
and orders vacating the rule’s major
provisions. Home Care Ass’n of Am. v.
Weil, 76 F. Supp. 3d 138 (D.D.C. 2014);
Home Care Ass’n of Am. v. Weil, 78 F.
Supp. 3d 123 (D.D.C. 2015). On August
21, 2015, the U.S. Court of Appeals for
the District of Columbia Circuit reversed
the district court’s judgment. Home Care
Ass’n of America v. Weil, . . . F.3d
. . . , No. 15–5018, 2015 WL 4978980
(D.C. Cir. Aug. 21, 2015). The Court of
Appeals opinion will become effective
when that court issues a mandate
directing the district court to enter a
new judgment in favor of the
Department. Although it is not yet
known on what date the mandate will
issue, the Department will not bring
enforcement actions against any
employer for violations of FLSA
obligations resulting from the amended
domestic service regulations for 30 days
after the date the mandate issues.
This 30-day non-enforcement policy
does not replace or affect the timeline of
the Department’s existing time-limited
non-enforcement policy announced in
October 2014. 79 FR 60974. Under that
policy, through December 31, 2015, the
Department will exercise prosecutorial
discretion in determining whether to
bring enforcement actions, with
particular consideration given to the
extent to which States and other entities
have made good faith efforts to bring
their home care programs into
compliance with the FLSA since the
promulgation of the Final Rule. The
Department will also continue to
provide intensive technical assistance to
the regulated community, as it has since
promulgation of the Final Rule.
II. Regulatory Requirements
This Policy Statement is guidance
articulating considerations relevant to
the Department’s exercise of its
enforcement authority under the FLSA.
It is therefore exempt from the noticeand-comment rulemaking requirements
under the Administrative Procedure Act
pursuant to 5 U.S.C. 553(b).
Because no notice of proposed
rulemaking is required, the Regulatory
Flexibility Act does not require an
initial or final regulatory flexibility
analysis. 5 U.S.C. 603(a), 604(a). The
Department has determined that this
guidance does not impose any new or
revise any existing recordkeeping,
E:\FR\FM\14SER1.SGM
14SER1
]]>Agencies
[Federal Register Volume 80, Number 177 (Monday, September 14, 2015)]
[Rules and Regulations]
[Pages 55022-55029]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-23046]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 170
RIN 3038-AE09
Membership in a Registered Futures Association
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is adopting a new rule (``Final Rule'') to require that all
persons registered with the Commission as introducing brokers (``IB''),
commodity pool operators (``CPO''), or commodity trading advisors
(``CTA''), subject to an exception for those persons who are exempt
from registration as a CTA pursuant to a particular provision of the
Commission's regulations, must, in each case, become and remain a
member of at least one registered futures association (``RFA'').
DATES: The Final Rule will become effective November 13, 2015. All
persons subject to the Final Rule must comply with the Final Rule by
not later than December 31, 2015.
FOR FURTHER INFORMATION CONTACT: Katherine Driscoll, Associate Chief
[[Page 55023]]
Counsel, 202-418-5544, kdriscoll@cftc.gov; or Jacob Chachkin, Special
Counsel, 202-418-5496, jchachkin@cftc.gov, Division of Swap Dealer and
Intermediary Oversight, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
Part 170 of the Commission's regulations relates to RFAs. An RFA is
an association of persons registered with the Commission as such
pursuant to Section 17 of the Commodity Exchange Act (``CEA'' or
``Act'').\1\ Subject to Commission oversight, RFAs serve a vital self-
regulatory role by functioning as frontline regulators of their members
(which members also remain subject to Commission oversight).
---------------------------------------------------------------------------
\1\ 7 U.S.C. 21.
---------------------------------------------------------------------------
An RFA cannot enforce its rules over Commission registrants who are
not members of the RFA.\2\ As such, the Commission promulgated
regulations 170.15 and 170.16 to require each registered futures
commission merchant (``FCM''), and each registered swap dealer (``SD'')
and major swap participant (``MSP''), respectively, to be an RFA
member, subject to an exception for certain notice registered
securities brokers or dealers.\3\ Because the National Futures
Association (``NFA'') was the only RFA under Section 17(a) of the CEA
\4\ at the time Sec. 170.15 and Sec. 170.16, respectively, were
promulgated, these registered FCMs, SDs, and MSPs were required to be
NFA members and, thus, were subject to NFA's rules. The Commission did
not promulgate regulations requiring other Commission registrants,
including IBs,\5\ CPOs,\6\ and CTAs,\7\ to be members of an RFA. One of
the NFA rules to which NFA members are subject, however, is NFA's Bylaw
1101. NFA Bylaw 1101 requires that, generally, no NFA member may
``carry an account, accept an order or handle a transaction in
commodity futures contracts'' for, or on behalf of, any non-member of
NFA that is required to be registered with the Commission as, among
other things, an IB, CPO, or CTA.\8\ Accordingly, any IB, CPO, or CTA
required to be registered with the Commission that desires to conduct
business with respect to commodity futures contracts directly with an
FCM that is an NFA member must also become an NFA member, and
derivatively, must ensure that it only conducts such business with
those IBs, CPOs, or CTAs that also are NFA members. Therefore, Sec.
170.15, at the time it was promulgated, operated in conjunction with
NFA Bylaw 1101 ``to assure essentially complete NFA membership from the
universe of commodity professionals: [FCMs, CPOs, CTAs, and IBs].'' \9\
---------------------------------------------------------------------------
\2\ Those Commission registrants that are not RFA members are
nevertheless subject to the rules and regulations of the Commission.
See 7 U.S.C. 21(e), which specifies that any person registered under
the CEA, who is not an RFA member, ``in addition to the other
requirements and obligations of [the CEA] and the regulations
thereunder shall be subject to such other rules and regulations as
the Commission may find necessary to protect the public interest and
promote just and equitable principles of trade.''
\3\ 17 CFR 170.15 and 170.16. See also Registration of Swap
Dealers and Major Swap Participants, 77 FR 2613 (Jan. 19, 2012).
\4\ 7 U.S.C. 21(a). NFA remains the only RFA under Section 17(a)
of the CEA and is also a self-regulatory organization (``SRO''). Per
Commission regulation 1.3(ee), SROs are designated contract markets,
swap execution facilities, and registered futures associations. 17
CFR 1.3(ee). Certain SROs maintain and update, among other things, a
standardized audit program and coordinate audit and financial
statement surveillance activities over certain types of firms that
are members of more than one SRO. See 17 CFR 1.52.
\5\ IB is defined, subject to certain exclusions and additions,
in CEA Section 1a(31) as any person (except an individual who elects
to be and is registered as an associated person of a futures
commission merchant) (i) who (I) is engaged in soliciting or in
accepting orders for (aa) the purchase or sale of any commodity for
future delivery, security futures product, or swap; (bb) any
agreement, contract, or transaction described in Section
2(c)(2)(C)(i) or Section 2(c)(2)(D)(i); (cc) any commodity option
authorized under Section 4c; or (dd) any leverage transaction
authorized under Section 19; and (II) does not accept any money,
securities, or property (or extend credit in lieu thereof) to
margin, guarantee, or secure any trades or contracts that result or
may result therefrom; or (ii) who is registered with the Commission
as an IB. 7 U.S.C. 1a(31).
IB is further defined, subject to certain exclusions and
additions, in Commission regulation 1.3(mm) as (1) Any person who,
for compensation or profit, whether direct or indirect: (i) Is
engaged in soliciting or in accepting orders (other than in a
clerical capacity) for the purchase or sale of any commodity for
future delivery, security futures product, or swap; any agreement,
contract or transaction described in Section 2(c)(2)(C)(i) or
Section 2(c)(2)(D)(i) of the Act; any commodity option transaction
authorized under Section 4c; or any leverage transaction authorized
under Section 19; or who is registered with the Commission as an IB;
and (ii) Does not accept any money, securities, or property (or
extend credit in lieu thereof) to margin, guarantee, or secure any
trades or contracts that result or may result therefrom. 17 CFR
1.3(mm).
IBs are subject to registration with the Commission under CEA
Section 4d(g) and Commission regulation 3.4(a). 7 U.S.C. 6d(g) and
17 CFR 3.4(a).
\6\ CPO is defined, subject to certain exclusions and additions,
in CEA Section 1a(11) as any person (i) engaged in a business that
is of the nature of a commodity pool, investment trust, syndicate,
or similar form of enterprise, and who, in connection therewith,
solicits, accepts, or receives from others, funds, securities, or
property, either directly or through capital contributions, the sale
of stock or other forms of securities, or otherwise, for the purpose
of trading in commodity interests, including any (I) commodity for
future delivery, security futures product, or swap; (II) agreement,
contract, or transaction described in Section 2(c)(2)(C)(i) or
Section 2(c)(2)(D)(i); (III) commodity option authorized under
Section 4c; or (IV) leverage transaction authorized under Section
19; or (ii) who is registered with the Commission as a CPO. 7 U.S.C.
1a(11).
CPO is further defined, subject to certain exclusions and
additions, in Commission regulation 1.3(cc) as any person engaged in
a business which is of the nature of a commodity pool, investment
trust, syndicate, or similar form of enterprise, and who, in
connection therewith, solicits, accepts, or receives from others,
funds, securities, or property, either directly or through capital
contributions, the sale of stock or other forms of securities, or
otherwise, for the purpose of trading in commodity interests,
including any commodity for future delivery, security futures
product, or swap; any agreement, contract or transaction described
in Section 2(c)(2)(C)(i) or Section 2(c)(2)(D)(i) of the Act; any
commodity option authorized under Section 4c of the Act; any
leverage transaction authorized under Section 19 of the Act; or any
person who is registered with the Commission as a CPO, but does not
include such persons not within the intent of the definition as the
Commission may specify by rule or regulation or by order. 17 CFR
1.3(cc).
CPOs are subject to registration with the Commission under CEA
Section 4m and Commission regulation 3.4(a). 7 U.S.C. 6m and 17 CFR
3.4(a).
\7\ CTA is defined, subject to certain exclusions and additions,
in CEA Section 1(a)(12) as any person who (i) for compensation or
profit, engages in the business of advising others, either directly
or through publications, writings, or electronic media, as to the
value of or the advisability of trading in (I) any contract of sale
of a commodity for future delivery, security futures product, or
swap; (II) any agreement, contract, or transaction described in
Section 2(c)(2)(C)(i) or Section 2(c)(2)(D)(i); (III) any commodity
option authorized under Section 4c; or (IV) any leverage transaction
authorized under Section 19; (ii) for compensation or profit, and as
part of a regular business, issues or promulgates analyses or
reports concerning any of the activities referred to in clause (i);
(iii) is registered with the Commission as a CTA; or (iv) the
Commission, by rule or regulation, may include if the Commission
determines that the rule or regulation will effectuate the purposes
of the Act. 7 U.S.C. 1a(12).
CTA is further defined, subject to certain exclusions and
additions, in Commission regulation 1.3(bb) as any person who, for
compensation or profit, engages in the business of advising others,
either directly or through publications, writings or electronic
media, as to the value of or the advisability of trading in any
contract of sale of a commodity for future delivery, security
futures product, or swap; any agreement, contract or transaction
described in Section 2(c)(2)(C)(i) or Section 2(c)(2)(D)(i) of the
Act; any commodity option authorized under Section 4c of the Act;
any leverage transaction authorized under Section 19 of the Act; any
person registered with the Commission as a CTA; or any person, who,
for compensation or profit, and as part of a regular business,
issues or promulgates analyses or reports concerning any of the
foregoing. 17 CFR 1.3(bb).
CTAs are subject to registration with the Commission under CEA
Section 4m and Commission regulation 3.4(a). 7 U.S.C. 6m and 17 CFR
3.4(a).
\8\ NFA Bylaw 1101 is available at: https://www.nfa.futures.org/nfamanual/NFAManual.aspx?RuleID=BYLAW%201101&Section=3.
\9\ Futures Associations: Futures Commission Merchants:
Mandatory Membership, 48 FR 26304, 26306 and n.22 (June 7, 1983).
---------------------------------------------------------------------------
Title VII of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (``Dodd-Frank Act'') amended the
[[Page 55024]]
CEA to establish a comprehensive new regulatory framework for swaps and
security-based swaps.\10\ The new regulatory framework provides that,
among other things, persons that engage in regulated activity with
respect to swaps will be required to register with the Commission as
IBs, CPOs, or CTAs, as appropriate. Because of these definitional
amendments, the intersection of Sec. 170.15 and NFA Bylaw 1101 no
longer assures NFA membership for IBs, CPOs, or CTAs that are required
to register with the Commission because, as noted above, NFA Bylaw 1101
relates only to commodity futures contracts.\11\
---------------------------------------------------------------------------
\10\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Pub. L. 111-203, 124 Stat. 1376 (2010).
\11\ For example, as noted in the Proposal, currently
Commission-registered CTAs, CPOs, and IBs engaging solely in swap-
related activities are not captured by the intersection of Sec.
170.15 and NFA Bylaw 1101 and, thus, are not required to be NFA
members. As such, these registrants, to the extent that they have
not voluntarily become NFA members, are not being supervised in the
same manner as Commission registrants engaging in similar activities
relating to commodity futures contracts, which registrants are
effectively required to be NFA members.
---------------------------------------------------------------------------
II. Proposed Rule
On November 8, 2013, the Commission proposed to amend part 170 by
adding Sec. 170.17, which would, if adopted, have required each IB,
CPO, and CTA registered with the Commission to become and remain a
member of at least one RFA (``Proposal'').\12\
---------------------------------------------------------------------------
\12\ See Membership in a Registered Futures Association, 78 FR
67078 (Nov. 8, 2013).
---------------------------------------------------------------------------
In the Proposal, the Commission specifically solicited comments
regarding, among other things, the impact of the Proposal on CTAs that
are registered with the Commission despite being eligible to rely on
the exemption from registration set forth in Commission regulation
4.14(a)(9) (``Sec. 4.14(a)(9) Exempted CTAs'').\13\ Regulation
4.14(a)(9) provides that a person is not required to register with the
Commission as a CTA if it does not: (i) Direct any client accounts; or
(ii) provide commodity trading advice based on, or tailored to, the
commodity interest or cash market positions or other circumstances or
characteristics of particular clients.\14\ When the Commission
promulgated regulation 4.14(a)(9), it stated that ``[a] CTA exempt
under rule 4.14(a)(9) that wishes to apply for registration or retain
its current registration may do so.'' \15\ Therefore, CTAs that may
avail themselves of the exemption from registration in regulation
4.14(a)(9) may be currently registered with the Commission and may so
register in the future.
---------------------------------------------------------------------------
\13\ 78 FR 67080 (Nov. 8, 2013).
\14\ 17 CFR 4.14(a)(9). This exemption from CTA registration
generally pertains to persons only providing advice to the general
public, such as in a newsletter, and not to specific clients.
\15\ See Exemption from Registration as a Commodity Trading
Advisor, 65 FR 12938, 12941 (March 10, 2000).
---------------------------------------------------------------------------
The comment period for the Proposal ended on January 7, 2014.\16\
The Commission received two substantive comments in response to the
Proposal \17\ and, in consideration of those comments, is adopting the
Proposal subject to certain changes, as noted below.
---------------------------------------------------------------------------
\16\ The Proposal inaccurately stated the comment period ended
on January 17, 2014. To reflect the accurate date, the Federal
Register published a correction that the comment period ended on
January 7, 2014. See 78 FR 67985 (Nov. 13, 2013). Nonetheless, the
Commission considered all comments received by January 17, 2014.
\17\ See https://comments.cftc.gov/PublicComments/CommentList.aspx?id=1424.
---------------------------------------------------------------------------
III. Summary of Comments
In response to the Proposal, the Commission received two
substantive comments, one from NFA and one from James W. Lovely, Esq.
(``Lovely'').\18\ Both comments related to the impact of the Proposal
on CTAs. No comments were received in response to the CPO and IB
aspects of the Proposal.
---------------------------------------------------------------------------
\18\ NFA Comment Letter and James Lovely, Esq. Comment Letter.
---------------------------------------------------------------------------
A. NFA Comment
NFA supported the Proposal as an appropriate and effective way to
require IBs, CPOs, and CTAs engaging in swaps activities that otherwise
are not captured by the intersection of NFA Bylaw 1101 or NFA
Compliance Rule 2-36 \19\ to become and remain NFA members, and comply
with the applicable NFA requirements. However, NFA recommended that the
Commission exclude Sec. 4.14(a)(9) Exempted CTAs from the Proposal. In
support of its position, NFA stated that its existing rules focus
primarily on an intermediary's conduct with respect to clients and thus
have little applicability to CTAs that do not direct client accounts or
otherwise exercise discretion (i.e., Sec. 4.14(a)(9) Exempted CTAs).
---------------------------------------------------------------------------
\19\ Clause (d) of NFA Compliance Rule 2-36 applies to forex
transactions and requires that no NFA member carry a forex account
for, accept a forex order or account from, handle a forex
transaction for or on behalf of, receive compensation (directly or
indirectly) for forex transactions from, or pay compensation
(directly or indirectly) for forex transactions to any non-member of
NFA, or suspended member, that is required to be registered with the
Commission as, among other things, an FCM, IB, CPO, or CTA in
connection with its forex activities. NFA Compliance Rule 2-36 is
available at: https://www.nfa.futures.org/nfamanual/NFAManual.aspx?RuleID=RULE%202-36&Section=4.
---------------------------------------------------------------------------
B. Lovely Comment
Conversely, Lovely generally stated that the Proposal ``while well-
intentioned, is ill-founded in many respects'' and argued that the
costs associated with further requiring registered CTAs to become and
remain RFA members would be disproportionate to any regulatory benefit.
Lovely discussed those CTAs that register with the Commission even
though they may not be required to so register (e.g., because they may
avail themselves of a registration exception or exclusion provided
under Commission regulation 4.14(a) or Sections 1a(12)(B) or 4m(1) of
the CEA, respectively). According to Lovely, these CTAs register for
legal comfort in light of the ``practical ambiguities around concepts
[related to CTA registration requirements] such as `solely incidental',
`principal business or profession', `holding out' and `tailored
advice''' but do not have to become NFA members, so long as such CTAs
do not manage or exercise discretion over customer accounts or
funds.\20\ He argues that these CTAs' voluntary registration benefits
the CFTC and that such persons will likely deregister if the Commission
adopts the Proposal.\21\
---------------------------------------------------------------------------
\20\ Presumably Lovely means that such CTAs would not be
captured by the intersection of Sec. 170.15 and NFA Bylaw 1101.
\21\ In this regard, Lovely also asserted that if the Commission
adopts the Proposal, the First Amendment rights of these CTAs could
be jeopardized, and, in some cases, such CTAs may drop their CFTC
registration entirely ``in reliance on . . . [their] commercial free
speech rights under the U.S. Constitution.''
---------------------------------------------------------------------------
Lovely further stated that the CFTC ``significantly underestimates
the cost of NFA [membership]'' for these CTAs who are not currently
required to become NFA members. He noted that most of such CTAs ``have
only incidental involvement with commodity interests'' and, if required
to become NFA members, ``would need to retain external legal counsel or
compliance consultants to try to ascertain [which NFA rules] apply to
their activities and, if so, how to comply with the same.''
Notwithstanding that Lovely argues that many NFA rules are not
applicable to such CTAs,\22\ he estimates that ``external
[[Page 55025]]
legal and compliance assistance . . . could easily cost [such a CTA]
$15,000.00 to $20,000.00 per year.''
---------------------------------------------------------------------------
\22\ Lovely provided a non-exhaustive list of what he believes
to be inapposite NFA member rules including rules regarding: (1)
Account opening, risk disclosure and trading authority; (2) bunched
orders and order allocation; (3) suitability or churning security
futures products; (4) CTA program and performance disclosure for
managed accounts or pools; (5) solicitation and execution of
customer orders; (6) disaster recovery protocols (other than in
connection with CFTC mandated record retention); (7) trading
programs, performance and related promotional materials; (8) anti-
money laundering; and (9) quarterly reporting of assets under
management, trading programs, performance, carrying brokers and the
like.
---------------------------------------------------------------------------
IV. Final Rule
The Commission, in consideration of the comments received by it on
the Proposal, is adopting the Proposal but excluding Sec. 4.14(a)(9)
Exempted CTAs from the Final Rule.\23\ The Final Rule will help ensure
the integrity of the swaps and futures market and its participants by
subjecting all registered IBs, CPOs, and CTAs, except for Sec.
4.14(a)(9) Exempted CTAs, to NFA's developed set of rules and oversight
capabilities.\24\ As such, the Commission believes that the markets are
better served, and the public better protected, by having persons
subject to the requirements of the Final Rule become RFA members.\25\
---------------------------------------------------------------------------
\23\ Notwithstanding this exclusion, if a person is a Sec.
4.14(a)(9) Exempted CTA and registered as an IB or CPO, then such
person shall still be subject to the requirements of the Final Rule
in its capacity as a registered IB or CPO, as the case may be.
\24\ The Commission notes that, as a result of the Final Rule,
any person not required to register, and not registered, with the
CFTC would not subsequently become subject to any NFA-imposed
requirement unless such person voluntarily elects to become so
registered. Any adverse financial, commercial, or other impact,
including the potential chilling effect on free speech, which could
result from the Final Rule for such CTAs, could be avoided simply by
relying on the proper regulatory exclusion or exemption without
having to even incur the cost of filing a notice with the CFTC or
NFA.
\25\ This is consistent with the Commission's rationale for
Sec. 170.15; that there should be essentially complete NFA
membership from the universe of commodity professionals. See supra
at n.10.
---------------------------------------------------------------------------
After considering the comments, the Commission is persuaded by
Lovely and NFA that NFA's rules have little applicability to Sec.
4.14(a)(9) Exempted CTAs and, thus, there would be little benefit from
requiring Sec. 4.14(a)(9) Exempted CTAs to become and remain RFA
members.
The Commission, however, is not persuaded that other registered
CTAs, regardless of whether such CTAs are required to register with the
Commission, should be excluded from the requirements of the Final Rule.
Any registered CTA that does not meet the requirements of Sec.
4.14(a)(9) would, by definition, be engaged in either (i) directing
client accounts, or (ii) providing commodity trading advice based on,
or tailored to, the commodity interest or cash market positions or
other circumstances or characteristics of particular clients. As noted
above, and consistent with Sec. 170.15, the Commission believes that
RFA supervision of registered CTAs engaging in these activities is
beneficial to the markets and the clients of such CTAs.
In addition, the Commission believes that Lovely's cost estimates
are very high for retaining advisors in relation to NFA's rules.
Assuming a CTA was to contact an attorney familiar with Commission
regulations and NFA rules applicable to CTAs, the Commission believes
that determining which NFA rules are applicable to such a CTA would be
a routine task that would not take a substantial amount of time.\26\
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\26\ As noted above, Lovely himself refers to many of these
rules as ``inapposite.'' Such a description belies Lovely's argument
that any substantial legal review would be required to determine
whether NFA rules would apply to one of the CTAs about which Lovely
comments.
Moreover, the Commission believes the costs of compliance review
in subsequent years would be significantly less than the initial
review costs, because it is likely that only the changes to NFA
rules that took place during the prior year would need to be
considered.
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Furthermore, with respect to those CTAs that opt into CFTC
registration to avoid making determinations as to their activities in
relation to their eligibility for the exceptions or exclusions from the
CTA registration requirements noted in Lovely's comments, such persons
should review available guidance from the Commission and consult with
their advisors and Commission staff, as necessary, to determine if
registration is required.\27\
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\27\ The Commission notes that it is not of the view that making
such a definitive determination is impossible or exceedingly
difficult, as Lovely's comment suggests. However, the Commission
does recognize that, once this determination has been made, and
depending on the determination, a Commission registrant may need
time to review and possibly reorganize its business in order to
ensure its compliance with NFA's rules or undertake the
deregistration process, as the case may be. Therefore, the
Commission is providing the extended compliance period described in
the DATES section above.
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In support of the Final Rule, Section 4p of the CEA authorizes the
Commission to ``specify by rules and regulations appropriate standards
with respect to training, experience, and such other qualifications as
the Commission finds necessary or desirable to insure the fitness of
persons required to be registered with the Commission.'' \28\
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\28\ 7 U.S.C. 6p. Also, Section 8a(5) of the CEA authorizes the
Commission ``to make and promulgate such rules and regulations as,
in the judgment of the Commission, are reasonably necessary to
effectuate any of the provisions or to accomplish any of the
purposes'' of the CEA.
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The Final Rule also provides a means for assuring that the purpose
of Section 17(m) of the CEA,\29\ allowing for compulsory RFA
membership, is achieved.\30\ The Commission believes that the Final
Rule is reasonably necessary and desirable to effectuate comprehensive
and effective market oversight by NFA in its capacity as an SRO. As the
only RFA, NFA serves as the frontline regulator of its members, subject
to Commission oversight. Without such mandatory membership in NFA or
another RFA, effective implementation of the programs required by
Section 17 of the CEA and NFA's self-regulatory programs could be
impeded.\31\
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\29\ 7 U.S.C. 21(m).
\30\ See Futures Associations: Futures Commission Merchants:
Mandatory Membership, 48 FR 26304 (June 7, 1983).
\31\ The Commission notes that in addition to the authority
discussed herein, as noted previously, CPOs and CTAs are subject to
registration with the Commission under Section 4m of the CEA, and
IBs are subject to such registration under Section 4d(g) of the CEA.
7 U.S.C. 6m and 6d(g).
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In summary, by mandating RFA membership by each registered IB, CPO,
and CTA, except Sec. 4.14(a)(9) Exempted CTAs, the Final Rule enables
the Commission to further ensure the fitness, and provide for direct
NFA oversight, of these Commission registrants.
V. Administrative Compliance
A. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (``PRA'') \32\ 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. An agency may not conduct or
sponsor, and a registered entity is not required to respond to, a
collection of information unless it displays a currently valid control
number by the Office of Management and Budget (``OMB'').
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\32\ 44 U.S.C. 3501 et seq.
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In connection with the Proposal, the Commission anticipated that,
if adopted, the Final Rule would simply require an amendment to the
number of respondents included in OMB Collection 3038-0023.\33\ The
basis for this preliminary finding was that, at the time of the
Proposal, NFA had indicated that certain CPOs, CTAs, and IBs were
registered with the Commission, but not NFA members. Therefore, because
registration and membership require the filing of Form 7-R, the
Commission initially believed these respondents' paperwork burden would
have been affected by the Proposal.
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\33\ See OMB Control No. 3038-0023, https://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0023.
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As discussed above, the Final Rule does not require IBs, CPOs, or
CTAs to
[[Page 55026]]
register with the Commission. Rather, the Final Rule only requires that
certain of such persons that register with the Commission become and
remain an NFA member. To indicate NFA membership an applicant needs to
``check a box'' on Form 7-R.\34\ Current OMB Collection 3038-0023
captures the burdens associated with the registration process for these
persons, including the filing of and updating of Form 7-R for
registration purposes. Therefore, to comply with the Final Rule, such
registrants that are not NFA members, would be required to ``check-the-
box'' on Form 7-R indicating their status as an NFA member.
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\34\ The Commission has designated NFA to receive Form 7-R
submissions on its behalf. The Commission notes that application for
NFA membership is incorporated in Form 7-R.
---------------------------------------------------------------------------
Accordingly, because the burden associated with updating Form 7-R
is currently captured in OMB Collection 3038-0023, and those persons
who are directly impacted by the Final Rule are either currently
registered with the Commission (i.e., have already filed a Form 7-R) or
will be required to file a Form 7-R in connection with their
registration with the Commission, no adjustment is necessary to take
into account the number of Commission registrants who will have to
become NFA members as a result of the Final Rule. Further, the
Commission believes the additional burden of ``checking the box'' on
Form 7-R to be non-substantive. Therefore, upon further review and for
the reasons stated above, the Final Rule does not require amending
existing OMB Collection 3038-0023.\35\
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\35\ The Commission further believes that many Commission
registrants' recordkeeping obligations associated with preparing for
an NFA audit are already covered by other OMB control numbers. For
example, Sec. Sec. 4.23 and 4.33 of the Commission's regulations
are recordkeeping requirements associated with registered CPOs and
CTAs, respectively, which are covered by OMB control number 3038-
0005.
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B. Regulatory Flexibility Act
The Regulatory Flexibility Act \36\ requires federal agencies, in
promulgating regulations, to consider the impact of those regulations
on small entities. In the Proposal, the Commission certified that the
Proposal would not have a significant economic impact on a substantial
number of small entities.
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\36\ 5 U.S.C. 601 et seq.
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1. CPOs
The Commission has previously determined that CPOs are not small
entities for purposes of the Regulatory Flexibility Act.\37\
Accordingly, the Chairman, on behalf of the Commission, hereby
certifies pursuant to 5 U.S.C. 605(b) that the Final Rule will not have
a significant economic impact on a substantial number of small entities
with respect to CPOs.
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\37\ Policy Statement and Establishment of Definitions of
``Small Entities'' for Purposes of the Regulatory Flexibility Act,
47 FR 18618, 18619 (Apr. 30, 1982).
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2. IBs and CTAs
The Commission has previously determined to evaluate within the
context of a particular rule proposal whether all or some IBs or CTAs
should be considered to be small entities and, if so, to analyze the
economic impact on them of any such rule.\38\
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\38\ See, with respect to CTAs, 47 FR at 18620 (Apr. 30, 1982);
and see, with respect to IBs, Introducing Brokers and Associated
Persons of Introducing Brokers, Commodity Trading Advisors and
Commodity Pool Operators; Registration and Other Regulatory
Requirements, 48 FR 35276 (Aug. 3, 1983).
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Since there may be some small entities that are IBs or CTAs and
would be required to become NFA members, the Commission has considered
whether this rulemaking would have a significant economic impact on
these entities.
The Final Rule requires all IBs and CTAs, except Sec. 4.14(a)(9)
Exempt CTAs, who register with the Commission to become RFA members.
This would require such IBs and CTAs to pay membership dues, ``check a
box'' on Form 7-R, and ensure that they are prepared for an NFA
audit.\39\ As noted in the Proposal, the Commission is of the view that
any costs associated with preparing for an audit by the NFA should not
be substantially different from, or significantly exceed, the costs
associated with preparing for an audit by the Commission, which every
registered person would already be responsible to do.\40\ Moreover,
because the Final Rule only pertains to Commission Registrants, any
audit related costs incident to NFA membership would be negligible, and
should not have a significant economic impact on IBs or CTAs that may
be small entities. The Commission also stated its preliminary belief
that NFA membership would impose few additional compliance costs on
affected entities, because these entities are already subject to the
majority of regulations that NFA enforces, whether or not they are NFA
members. The Commission specifically requested comment on any
additional compliance costs beyond those an entity would face as a
result of it being registered with the Commission.
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\39\ See 78 FR 67083 (Nov. 8, 2013). As stated in the booklet
titled ``NFA Regulatory Requirements: For FCMs, IBs, CPOs, and
CTAs,'' NFA audits have two major objectives: (1) To determine
whether the firm is maintaining records in accordance with NFA rules
and applicable CFTC regulations; and (2) to ensure that the firm is
being operated in a professional manner and that customers are
protected against unscrupulous activities and fraudulent or high-
pressure sales practices.
\40\ As noted above, the Commission believes that many of the
recordkeeping obligations associated with preparing for an NFA audit
are already required for Commission registrants. Moreover, given the
average periodicity for NFA audits, the magnitude of annual audit-
related costs is limited.
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a. Comments on Costs to CTAs
In response to the Proposal, a comment from Lovely stated that most
CTAs that opt into CFTC registration and do not manage or exercise
discretion over customer accounts or funds are ``small or one-person
operations or may have only incidental involvement with commodity
interests.'' Further, Lovely asserts that, although many of NFA's rules
are not relevant to such CTAs, the Commission understates the cost of
required NFA membership, including that the costs to these CTAs of
reviewing and complying with such rules would be approximately $15,000
to $20,000 annually.
As discussed above, the Commission believes that Lovely's
compliance cost estimates are very high. Rather, the Commission
believes that the costs faced by a CTA would, at most, be approximately
$2,950 in the first year and $1,476 in subsequent years.\41\ The
Commission does not believe that these amounts plus the $750 membership
dues required of all NFA members that are CTAs, results in an
unreasonable burden on any CTAs (including those that may be small
entities under the Regulatory Flexibility Act).\42\ Further, as
[[Page 55027]]
discussed above, Sec. 4.14(a)(9) Exempted CTAs (i.e., those CTAs that
neither manage nor exercise discretion over customer accounts or funds
and that do provide clients advice described in Sec. 4.14(a)(9)(ii))
will not be required to become or remain RFA members pursuant to the
Final Rule and, thus, will not face any compliance costs from the Final
Rule.
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\41\ This estimate is based on the following labor estimates for
this determination: for the first year, 6 hours of an attorney; in
subsequent years, 3 hours of an attorney, in each case at
approximately $492.21/hour. The estimate of the hourly cost is from
the Securities Industry and Financial Markets Association's Report
on Management and Professional Earnings in the Securities Industry--
2013, modified by CFTC staff to account for an 1800-hour work-year
and multiplied by 5.35 to account for firm size, employee benefits,
and overhead. The Commission believes that the use of this
multiplier is appropriate here because the Commission is assuming
that persons retain outside advisors to assist in complying with NFA
rules. The Commission rounds to two significant digits.
\42\ Assuming that IBs would face similar compliance costs as
CTAs, the Commission does not believe that these costs result in an
unreasonable burden on any IBs (including those that may be small
entities under the Regulatory Flexibility Act). Further, as of June
30, 2015, all registered IBs that are not members of NFA are pending
withdrawal of their Commission registration. Accordingly, the
Commission believes that no currently registered IBs will be
impacted by this rule.
The Commission also notes that, pursuant to Section 17(d) of the
Act, each CTA or IB that is registered with the Commission, but not
an RFA member is required to ``. . . pay to the Commission such
reasonable fees and charges [established by the Commission] as may
be necessary to defray the costs of additional regulatory duties
required to be performed by the Commission because such person is
not a member of an [RFA].'' 7 U.S.C. 21(d). The Commission has not
yet established any such fees or charges, but noted in the release
for Sec. 170.15 that these charges are likely to be greater than
the costs attendant to RFA membership. See 48 FR at 26311.
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b. Commission Determination
Accordingly, for the reasons stated above, the Commission believes
that the Final Rule will not have a significant economic impact on a
substantial number of small entities. Therefore, the Chairman, on
behalf of the Commission, hereby certifies, pursuant to 5 U.S.C.
605(b), that the Final Rule being published today by this Federal
Register release will not have a significant economic impact on a
substantial number of small entities.
C. Considerations of Costs and Benefits
Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its actions before promulgating a regulation
under the CEA or issuing an order. Section 15(a) further specifies that
the costs and benefits shall be evaluated in light of the following
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 considers the costs and benefits
resulting from its discretionary determinations with respect to the
section 15(a) factors.
1. Background
As discussed above, the Dodd-Frank Act amended the CEA to establish
a comprehensive new regulatory framework for swaps markets and, in
doing so, required IBs, CPOs, and CTAs acting in relation to swaps to
register with the Commission. These newly registered persons, however,
are not currently required to become NFA members because, as discussed
above, they are not captured by the intersection of Sec. 170.15 and
NFA Bylaw 1101.
NFA cannot enforce its rules over Commission registrants who do not
become NFA members, including IBs, CPOs, and CTAs active solely in
relation to swap transactions, which are not currently required to
become NFA members. Thus, the Final Rule requires registered IBs, CPOs,
and CTAs, except Sec. 4.14(a)(9) Exempted CTAs, to become NFA members
similarly to how Sec. 170.15 presently requires FCMs to become NFA
members and how Sec. 170.16 requires the same of SDs and MSPs. In
conjunction with Sec. Sec. 170.15 and 170.16, the Commission is
intending to create an oversight regime that ensures more consistent
treatment of its registered intermediaries. The Commission believes
that the Final Rule is reasonably necessary to ensure the fitness and
comprehensive regulation and appropriate oversight of such persons.
In assessing the costs and benefits of the Final Rule, the
Commission employs a status quo baseline. The Commission analyzes the
cost and benefit to those registered persons that, but for the Final
Rule, would not have to become RFA members. As of June 30, 2015, the
following numbers of Commission registered IBs, CPOs, and CTAs
(registered in the below categories) were not NFA members (``Non-member
Registrants''): \43\
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\43\ See NFA's daily directory of CFTC Registrants and Members
available at: https://www.nfa.futures.org/NFA-registration/NFA-directories.HTML.
------------------------------------------------------------------------
Non-member
Registration category registrants
------------------------------------------------------------------------
IB only................................................. 21
CPO only................................................ 61
CTA only................................................ 573
IB & CPO................................................ 1
IB & CTA................................................ 2
CTA & CPO............................................... 41
FCM & CPO............................................... 1
---------------
Total............................................... 700
------------------------------------------------------------------------
Of these Non-member Registrants, however, approximately 138 are pending
withdrawal of their Commission registration. The Commission is assuming
that these Non-member Registrants will withdraw their registration and,
thus, will not be impacted by the Final Rule. In addition, only
approximately one percent of the Non-member Registrants registered
solely as CTAs reported to the Commission in the most recent reporting
cycle that they had directed client accounts.\44\ As such, the
Commission believes that many of the Non-member Registrants registered
solely as CTAs will be Sec. 4.14(a)(9) Exempted CTAs and, thus, will
not be required to comply with the Final Rule.\45\ Accordingly, the
Commission estimates that 296 \46\ persons registered with the CFTC as
a CPO, CTA, or IB will be required to become and remain NFA members as
a result of the Final Rule.\47\
\44\ The Commission is assuming that all Non-member Registrants
registered solely as CTAs have reported to the Commission the amount
of assets they have directed, if any.
\45\ For purposes of its analysis, the Commission is assuming
that approximately half of the 573 Non-member Registrants registered
solely as CTAs (286 Non-member Registrants) will be Sec. 4.14(a)(9)
Exempted CTAs and will not be required to comply with the Final
Rule, and 20 of these 286 Non-member Registrants will be pending
withdrawal of their Commission registration.
\46\ To arrive at the estimate, the 700 figure was reduced by
the sum of (i) 138 (the Non-member Registrants whose withdrawal from
Commission registration is pending) and (ii) 266 (the Non-member
Registrants that the Commission assumes will be Sec. 4.14(a)(9)
Exempted CTAs net of those pending withdrawal, as described above).
\47\ For purposes of assessing the costs of this rule, the
Commission is assuming that no Non-member Registrant is, absent the
Final Rule, required to be an NFA member.
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Because at this time the Commission cannot reasonably estimate the
number of Non-member Registrants that may deregister with the
Commission as a result of the Final Rule, the Commission is assuming
that no Non-member Registrants will deregister as a result of the Final
Rule. The Commission believes that this will lead to an overstatement
of the compliance costs relating to the Final Rule.
2. Costs
a. Costs to IBs, CPOs, and CTAs
As discussed above, the process for a Non-member Registrant to
become an NFA member amounts to checking a box on the CFTC registration
form and updating some contact information. Thus, the Commission
believes the cost of filing for membership to be non-substantive.\48\
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\48\ See Form 7-R, https://www.nfa.futures.org/NFA-registration/templates-and-forms/form7-r.HTML. Applications forms for NFA
membership and Associate membership are incorporated in Forms 7-R
and 8-R. See NFA Membership and Dues, https://www.nfa.futures.org/NFA-registration/NFA-membership-and-dues.HTML.
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Affected persons are also subject to certain membership fees. NFA
imposes initial membership dues and annual membership dues for IBs,
CPOs, and CTAs. Currently, such initial membership dues are $750 for
the first year, and the annual dues to maintain membership are $750 per
year
[[Page 55028]]
thereafter.\49\ Thus, the 296 affected Non-member Registrants, in the
aggregate, will incur an initial and ongoing annual registration/
membership cost of approximately $222,000.\50\
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\49\ See NFA Membership and Dues, https://www.nfa.futures.org/NFA-registration/NFA-membership-and-dues.HTML.
\50\ To arrive at the monetary estimate, the 296 figure was
multiplied by the $750.00 per-person annual membership dues.
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The Commission agrees with Lovely that the Final Rule will also
impose certain compliance costs on affected Non-member Registrants.
However, as noted above, the Commission believes that, given the
existing requirements imposed on such registrants, the compliance costs
of becoming an NFA member and complying with NFA's rules (including
preparing for an audit by NFA) will be partially offset by the costs
already incurred by these registrants (i.e., the costs associated with
complying with Commission regulations and preparing for examinations by
the Commission). In that regard, as discussed above, the Commission
disagrees with Lovely's cost estimates and estimates that an affected
registrant may, at most, face additional compliance costs of
approximately $2,950 initially and $1,476 in subsequent years, equating
to an industry total of $873,200 in the first year and $436,896 in
subsequent years,\51\ plus the indirect costs of the periodic audits.
The Commission cannot reasonably provide an exact estimate of these
costs due to the idiosyncratic nature of the indirect costs
incurred.\52\
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\51\ To arrive at the monetary estimate, the 296 figure was
multiplied by the estimated per-person compliance costs.
\52\ The Commission also considered that, in addition to the
Non-member Registrants discussed above, the Final Rule will cause
future persons registering with the Commission as IBs, CPOs, and
CTAs because of their activities in relation to swaps to incur
additional costs similar to those described above. The Commission
expects that many persons will apply for registration under the
Commission's swaps market regime in such capacities, but the
Commission is not able to accurately estimate the exact number of
new Commission registrants that will do so and, thus, be affected by
the Final Rule.
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b. Other Market Costs
In addition to the direct costs to Commission Registrants, the
Commission considered other costs to the markets of the Final Rule. In
particular, the Commission considered the impact the Final Rule will
have on IBs, CPOs, and CTAs (i) election to not register with the
Commission and (ii) optional deregistration, in each case, where such
persons are not required to be registered with the Commission. Further,
the Commission considered that the requirements of the Final Rule may
cause fewer persons to elect to become IBs, CPOs, and CTAs because of
the added burden of being an RFA member. The Commission is unable to
estimate accurately how many IBs, CPOs, and CTAs will deregister with
the Commission or elect not to so register in the future, or how many
persons will choose to not become such an intermediary, in each case,
as a result of the Final Rule. Further, the Commission believes that if
a market participant has chosen not to register with the Commission,
the costs incurred by that participant for not registering would be
less than the costs that would have been incurred to register.
Otherwise, the market participant would likely have chosen to register
instead. However, the Commission cannot make a more accurate
determination of costs beyond this overestimate without knowing more
specifics about a particular market participant.
c. Consideration of the Proposal as an Alternative to the Final Rule
The Commission believes the costs in a. and b. above, respectively,
are reduced from those that would have resulted had the Proposal been
adopted without modification (the Proposal would have required each
registered IB, CPO, and CTA, without exception, to become and remain a
member of an RFA), because the Commission has excepted Sec. 4.14(a)(9)
Exempted CTAs from the requirements of the Final Rule. This exclusion
limits the Commission's ability to oversee these persons through
delegation to an RFA; however, the Commission has determined that this
reduction in the Commission's oversight abilities is reasonable in
light of the burden that the Proposal would otherwise impose on Sec.
4.14(a)(9) Exempted CTAs and the markets. The Commission further notes
that, as discussed above, Sec. 4.14(a)(9) Exempted CTAs that are not
RFA members are still subject to the Commission's rules and
regulations.
3. Benefits
The Final Rule enables the Commission to (i) carry out its
obligations pursuant to Section 17 of the CEA to delegate certain
oversight responsibility for intermediaries, including IBs, CPOs, and
CTAs, to an RFA, and (ii) ensure the fitness of its registrants as
described under Section 4p of the CEA. The Commission believes that by
requiring RFA membership, the Final Rule results in a more efficient
deployment of agency resources which would otherwise have to be used to
oversee these registrants who would, without the Final Rule, not be
overseen by an RFA. Further, the Commission believes that the Final
Rule enables NFA to apply its experience as a SRO to oversee and ensure
the fitness of all registered IBs, CPOs, and CTAs, except Sec.
4.14(a)(9) Exempt CTAs. The markets and the public will benefit from
NFA's developed set of rules and oversight capabilities to ensure the
integrity of the swaps market and its participants.
4. Section 15(a) Factors
The Commission requested comment on all aspects of the Section
15(a) factors. Except as discussed above, the Commission did not
receive any comments relating to costs and benefits of the Final Rule.
Section 15(a) of the CEA requires the Commission to consider the
effects of its actions in light of the following five factors:
a. Protection of Market Participants and the Public
The Final Rule will protect the public by ensuring that registered
IBs, CPOs, and CTAs, except Sec. 4.14(a)(9) Exempt CTAs, are subject
to the same level of comprehensive NFA oversight.
b. Efficiency, Competitiveness, and Financial Integrity of Markets
The Final Rule ensures that all registered IBs, CPOs, and CTAs,
except Sec. 4.14(a)(9) Exempt CTAs, are subject to a similar level of
oversight and regulatory responsibility. In so doing, the Commission
believes the integrity of markets is enhanced. Furthermore, the
Commission also believes that the Final Rule will promote public
confidence in the integrity of derivatives markets by ensuring
consistent and adequate regulation and oversight of registered IBs,
CPOs, and CTAs, except Sec. 4.14(a)(9) Exempt CTAs.
c. Price Discovery
The Commission has not identified an impact on price discovery as a
result of the Final Rule.
d. Sound Risk Management
The Commission has not identified an impact on the risk management
decisions of market participants as a result of the Final Rule.
e. Other Public Interest Considerations
The Commission has not identified an impact on other public
interest considerations as a result of the Final Rule.
List of Subjects in 17 CFR Part 170
Authority delegations (Government agencies), Commodity futures,
Membership in a Registered Futures
[[Page 55029]]
Association, Reporting and recordkeeping requirements.
For the reasons stated in the preamble, the Commodity Futures
Trading Commission amends 17 CFR part 170 as set forth below:
PART 170--REGISTERED FUTURES ASSOCIATIONS
0
1. The authority citation for part 170 is revised to read as follows:
Authority: 7 U.S.C. 6d, 6m, 6p, 6s, 12a, and 21.
0
2. Add Sec. 170.17 to read as follows:
Sec. 170.17 Introducing brokers, commodity pool operators, and
commodity trading advisors.
Each person registered as an introducing broker, commodity pool
operator, or commodity trading advisor must become and remain a member
of at least one futures association that is registered under Section 17
of the Act and that provides for the membership therein of introducing
brokers, commodity pool operators, or commodity trading advisors, as
the case may be, unless no such futures association is so registered;
provided, however that a person registered as a commodity trading
advisor shall not be required to become or remain a member of such a
futures association, solely in respect of its registration as a
commodity trading advisor, if such person is eligible for the exemption
from registration as such pursuant to Sec. 4.14(a)(9) of this chapter.
Issued in Washington, DC, on September 9, 2015, by the
Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.
Note: The following appendix will not appear in the Code of
Federal Regulations.
Appendix to Membership in a Registered Futures Association--Commission
Voting Summary
On this matter, Chairman Massad and Commissioners Bowen and
Giancarlo voted in the affirmative. No Commissioner voted in the
negative.
[FR Doc. 2015-23046 Filed 9-11-15; 8:45 am]
BILLING CODE 6351-01-P
