Foreign Boards of Trade, 66201-66210 [2024-17828]
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Federal Register / Vol. 89, No. 158 / Thursday, August 15, 2024 / Rules and Regulations
FAA Order JO 7400.11H lists Class A,
B, C, D, and E airspace areas, air traffic
service routes, and reporting points.
The Rule
This action amends 14 CFR part 71 by
changing the name of the ‘‘LAANA’’,
NC, WP to ‘‘JOHAR’’ in RNAV Route Q–
109 to overcome the similar-sounding
pronunciation of the LAANA, NC, WP
and the LANNA, NJ, Fix which
contributes to communications errors
resulting from the similar-sounding
route point names in radio
communications. The amendment is
described below.
Q–109: Prior to this final rule, Q–109
extended between the KNOST, OG, WP
and the DFENC, NC, WP. The FAA
replaces the LAANA, NC, WP with the
JOHAR, NC, WP at the same location.
As amended, the route continues to
extend between the KNOST WP and the
DFENC WP.
This action is an administrative
change and does not affect the airspace
boundaries or operating requirements;
therefore, notice and public procedure
under 5 U.S.C. 553(b) is unnecessary.
Regulatory Notices and Analyses
The FAA has determined that this
regulation only involves an established
body of technical regulations for which
frequent and routine amendments are
necessary to keep them operationally
current. It, therefore: (1) is not a
‘‘significant regulatory action’’ under
Executive Order 12866; (2) is not a
‘‘significant rule’’ under DOT
Regulatory Policies and Procedures (44
FR 11034; February 26, 1979); and (3)
does not warrant preparation of a
regulatory evaluation as the anticipated
impact is so minimal. Since this is a
routine matter that only affects air traffic
procedures and air navigation, it is
certified that this rule, when
promulgated, does not have a significant
economic impact on a substantial
number of small entities under the
criteria of the Regulatory Flexibility Act.
Environmental Review
The FAA has determined that this
airspace action of amending RNAV
Route Q–109 by changing the name of
the ‘‘LAANA’’, NC, WP to ‘‘JOHAR’’
qualifies for categorical exclusion under
the National Environmental Policy Act
(42 U.S.C. 4321 et seq.) and its
implementing regulations at 40 CFR part
1500, and in accordance with FAA
Order 1050.1F, Environmental Impacts:
Policies and Procedures, paragraph 5–
6.5a, which categorically excludes from
further environmental impact review
rulemaking actions that designate or
modify classes of airspace areas,
airways, routes, and reporting points
(see 14 CFR part 71, Designation of
Class A, B, C, D, and E Airspace Areas;
Air Traffic Service Routes; and
Reporting Points). As such, this action
is not expected to result in any
potentially significant environmental
impacts. In accordance with FAA Order
1050.1F, paragraph 5–2 regarding
Extraordinary Circumstances, the FAA
has reviewed this action for factors and
66201
circumstances in which a normally
categorically excluded action may have
a significant environmental impact
requiring further analysis. Accordingly,
the FAA has determined that no
extraordinary circumstances exist that
warrant preparation of an
environmental assessment or
environmental impact statement.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference,
Navigation (air).
The Amendment
In consideration of the foregoing, the
Federal Aviation Administration
amends 14 CFR part 71 as follows:
PART 71—DESIGNATION OF CLASS A,
B, C, D, AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND
REPORTING POINTS
1. The authority citation for 14 CFR
part 71 continues to read as follows:
■
Authority: 49 U.S.C. 106(f), 106(g); 40103,
40113, 40120; E.O. 10854, 24 FR 9565, 3 CFR,
1959–1963 Comp., p. 389.
§ 71.1
[Amended]
2. The incorporation by reference in
14 CFR 71.1 of FAA Order JO 7400.11H,
Airspace Designations and Reporting
Points, dated August 11, 2023, and
effective September 15, 2023, is
amended as follows:
■
Paragraph 2006 United States Area
Navigation Routes.
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Q–109 KNOST, OG to DFENC, NC [Amended]
KNOST, OG
WP
(Lat. 28°00′02.55″ N, long. 083°25′23.99″ W)
DEANR, FL
WP
(Lat. 29°15′30.40″ N, long. 083°03′30.24″ W)
BRUTS, FL
WP
(Lat. 29°30′58.00″ N, long. 082°58′57.00″ W)
EVANZ, FL
WP
(Lat. 29°54′12.11″ N, long. 082°52′03.81″ W)
CAMJO, FL
WP
(Lat. 30°30′32.00″ N, long. 082°41′11.00″ W)
HEPAR, GA
WP
(Lat. 31°05′13.00″ N, long. 082°33′46.00″ W)
TEEEM, GA
WP
(Lat. 32°08′41.20″ N, long. 081°54′50.57″ W)
RIELE, SC
WP
(Lat. 32°37′27.14″ N, long. 081°23′34.97″ W)
WP
(Lat. 33°28′29.39″ N, long. 080°26′55.21″ W)
PANDY, SC
RAYVO, SC
WP
(Lat. 33°38′44.12″ N, long. 080°04′00.84″ W)
SESUE, SC
WP
(Lat. 33°52′02.58″ N, long. 079°33′51.88″ W)
BUMMA, SC
WP
(Lat. 34°01′58.09″ N, long. 079°11′07.50″ W)
YURCK, NC
WP
(Lat. 34°11′14.80″ N, long. 078°52′40.62″ W)
JOHAR, NC
WP
(Lat. 34°19′41.35″ N, long. 078°35′37.16″ W)
TINKK, NC
WP
(Lat. 34°51′03.78″ N, long. 078°05′48.08″ W)
DFENC, NC
WP
(Lat. 35°55′11.09″ N, long. 077°03′37.54″ W)
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Issued in Washington, DC, on August 5,
2024.
Frank Lias,
Manager, Rules and Regulations Group.
[FR Doc. 2024–17721 Filed 8–14–24; 8:45 am]
BILLING CODE 4910–13–P
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 48
RIN 3038–AF37
Foreign Boards of Trade
Commodity Futures Trading
Commission.
ACTION: Final rule.
AGENCY:
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The Commodity Futures
Trading Commission (CFTC or
Commission) is amending its
regulations to permit a foreign board of
trade (FBOT) registered with the
Commission to provide direct access to
its electronic trading and order
matching system to an identified
member or other participant located in
the United States and registered with
the Commission as an introducing
SUMMARY:
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Federal Register / Vol. 89, No. 158 / Thursday, August 15, 2024 / Rules and Regulations
broker (IB) for submission of customer
orders to the FBOT’s trading system for
execution. The Commission is also
establishing a procedure for an FBOT to
request revocation of its registration,
and removing certain outdated
references to ‘‘existing no-action relief.’’
DATES: The rules will become effective
September 16, 2024.
FOR FURTHER INFORMATION CONTACT:
Alexandros Stamoulis, Associate
Director, Division of Market Oversight,
Commodity Futures Trading
Commission, (646) 746–9792,
astamoulis@cftc.gov, 290 Broadway, 6th
Floor, New York, NY 10007; Roger
Smith, Associate Chief Counsel,
Division of Market Oversight,
Commodity Futures Trading
Commission, (202) 418–5344, rsmith@
cftc.gov, 77 West Jackson Blvd., Suite
800, Chicago, IL 60604; Jennifer
Diamantis, Special Counsel, (202) 418–
5762, jdiamantis@cftc.gov, Commodity
Futures Trading Commission, Division
of Market Oversight, Three Lafayette
Centre, 1151 21st Street NW,
Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Final Regulations
A. Section 48.4—Registration Eligibility
and Scope
B. Section 48.8—Conditions of Registration
C. Section 48.9—Revocation of Registration
D. Section 48.6—Foreign Boards of Trade
Providing Direct Access Pursuant to
Existing No-Action Relief
III. Related Matters
A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Cost Benefit Considerations
D. Antitrust Considerations
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I. Background
Under part 48 of the Commission’s
regulations, an FBOT must be registered
with the Commission in order to
provide its members or other
participants located in the United States
with direct access to its electronic
trading and order matching system.1
Part 48 is authorized by section 738 of
the Dodd-Frank Act, which amended
section 4(b) of the Commodity Exchange
Act (CEA), to provide that the
Commission may adopt rules and
regulations requiring FBOTs that wish
to provide U.S. persons with direct
1 See Registration of Foreign Boards of Trade,
Final Rule, 76 FR 80674 (Dec. 23, 2011); 17 CFR
part 48. ‘‘Direct access’’ is defined as an explicit
grant of authority by a foreign board of trade to an
identified member or other participant located in
the United States to enter trades directly into the
trade matching system of the foreign board of trade.
CEA section 4(b)(1)(A), 7 U.S.C. 6(b)(1)(A); 17 CFR
48.2(c).
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access to register with the Commission.2
Prior to enactment of the part 48 FBOT
registration procedures in 2011, FBOTs
relied on no-action letters that were
requested by the FBOT and issued by
Commission staff in order to provide
direct access to U.S. persons.3
Part 48 provides the procedures,
requirements, and conditions to be met
by FBOTs that seek to provide their
members and other participants in the
U.S. with direct access to the FBOT’s
trade matching system. The regulations
set forth, among other things,
procedures an FBOT must follow in
applying for registration, requirements
that an FBOT must meet in order to
obtain registration, conditions that an
FBOT must satisfy on a continuing basis
upon obtaining registration, and
provisions for the termination of
registration.
On March 1, 2024, the Commission
released a proposal 4 to amend § 48.4 to
broaden the types of intermediaries
eligible for direct access for submission
of customer orders to the FBOT to
include IBs registered with the
Commission as such and located in the
United States.5 An IB is generally
defined as an individual or organization
that solicits or accepts orders to buy or
sell futures contracts, commodity
options, retail off-exchange forex or
commodity contracts, or swaps, but
does not accept money or other assets
from customers to support these orders.6
2 See Sec. 738, Dodd-Frank Wall Street Reform
and Consumer Protection Act, Public Law 111–203,
124 Stat. 1376, 1726–1728 (2010) (codified at 7
U.S.C. 6(b)).
3 See 76 FR 80674 at 80674–80675.
4 Foreign Boards of Trade, 89 FR 15083 (Mar. 1,
2024) (the Proposal).
5 Intermediaries are entities that act on behalf of
another person with respect to trading derivatives.
They are generally required to register with the
Commission and, depending on the nature of their
activities, may be subject to various financial,
disclosure, reporting, and recordkeeping
requirements.
6 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,
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Currently, § 48.4 only includes certain
futures commission merchants (FCMs),
commodity pool operators (CPOs), and
commodity trading advisors (CTAs) as
intermediaries that are eligible for
entering orders on behalf of customers
or commodity pools (in the case of
CPOs) via direct access on a registered
FBOT.
In addition, the Proposal proposed to
amend § 48.9 to provide registered
FBOTs with a procedure to request
revocation of their FBOT registration.
Further, the Commission proposed to
delete § 48.6, which provides for an
alternate registration procedure for
FBOT’s operating under the preexisting
staff no-action letter process, because
such no-action letter process and noaction letters are no longer in effect.
The Commission received seven
comment letters regarding the
Proposal.7 After considering the
comments, the Commission is adopting
the rule amendments described herein
as proposed. The Commission believes
the amendments are an appropriate
response to market developments that
have occurred since part 48 was
promulgated in 2011, and will benefit
affected markets and their participants
by improving competition, risk
management and liquidity—while also
maintaining the Commission’s
longstanding protections available to
U.S. customers that trade foreign futures
and options.
II. Final Regulations
A. Section 48.4—Registration Eligibility
and Scope
1. Proposed Regulations
The Commission proposed to amend
§ 48.4(b) to permit FBOTs to provide
direct access to eligible IBs to enter
orders directly into an FBOT’s trading
and order matching system on behalf of
U.S. customers.8 Section 48.4(b)
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 CEA; 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).
7 The following persons and entities submitted
relevant comment letters: Everett Mein, Eurex
Deutschland (Eurex), Futures Industry Association
(FIA), Intercontinental Exchange Inc. (ICE), New
Zealand Exchange Limited (NZX), NIBA, and the
Wholesale Markets Brokers’ Association, Americas
(WMBAA).
8 The term ‘‘eligible IB’’ is used in this release to
mean an IB that is located in the United States and
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identifies the types of members or other
participants located in the U.S. that may
enter orders directly into the trading
and order matching system of a
registered FBOT, and the types of
accounts for which orders may be
submitted by such members or other
participants. In this regard, the types of
members or other participants identified
in existing § 48.4(b) represent the types
of members or other participants that
were trading via direct access on FBOTs
that operated in reliance on CFTC staff
no-action letters at the time part 48 was
promulgated.9 Specifically, § 48.4(b)(1)
provides that any member or other
participant located in the U.S. may enter
orders for their proprietary accounts.10
Further, § 48.4(b)(2) provides that
registered FCMs may submit orders on
behalf of their customers. Section
48.4(b)(3) permits certain CPOs to
submit orders on behalf of U.S.
commodity pools and certain CTAs to
submit orders on behalf of U.S.
customers provided, however, all trades
by the CPO or CTA effected through
submission of such orders are
guaranteed by a clearing firm registered
as an FCM or exempt from FCM
registration pursuant to § 30.10.11 The
Commission proposed to amend
§ 48.4(b) by inserting a new paragraph
(b)(4) to provide that eligible IBs may
submit orders on behalf of their
customers, provided that a registered
FCM or firm exempt from FCM
registration pursuant to § 30.10 acts as a
clearing firm and guarantees all trades
of the IB effected through submission of
U.S. customer orders to the trading
system. The Commission also proposed
to amend paragraph (b)(3) to insert the
words ‘‘registered as such’’ following
registered with the Commission as an IB. Direct
access, as defined in the CEA and part 48, refers
explicitly to members or other participants of an
FBOT that are located in the United States. See
footnote 1, supra. For purposes of this rulemaking
and as used herein, the terms ‘‘U.S. customer’’ and
‘‘United States customer’’ refer to customers located
in the United States, its territories or its
possessions.
9 See Registration of Foreign Boards of Trade,
Notice of Proposed Rulemaking, 88 FR 61432,
70977 (Nov. 19, 2010).
10 Under § 48.2(l), member or other participant is
defined as a member or other participant of an
FBOT and any affiliate thereof that has been granted
direct access by the FBOT. 17 CFR 48.2(l).
Proprietary account is defined in § 1.3, 17 CFR 1.3.
11 A § 30.10 exemptive order permits firms
subject to regulation by a foreign regulator to
conduct business from locations outside of the U.S.
for U.S. persons on FBOTs without registering as
FCMs, based upon the firm’s substituted
compliance with a foreign regulatory structure
found comparable to that administered by the
Commission under the CEA. Used herein, U.S.
commodity pool refers to a commodity pool that
does not meet the criteria set forth in
§ 3.10(c)(5)(iii)(A) through (F), 17 CFR
3.10(c)(5)(iii)(A) through (F).
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‘‘futures commission merchant’’ to
clarify that the reference is limited to
FCMs registered with the Commission
as such.12
Direct access is defined in the CEA
and part 48 of the Commission’s
regulations to mean an explicit grant of
authority by an FBOT to an identified
member or other participant located in
the U.S. to enter trades directly into the
trade matching engine of the FBOT.13
This means that the FBOT, as opposed
to its members or participants, has
identified and permitted a member or
participant to enter trades directly into
the FBOT’s order matching and trade
entry system from the United States.14
For example, a registered FBOT may
authorize its members or other
participants eligible to handle U.S.
customer orders to enter orders on
behalf of their U.S. customers or to
otherwise permit their U.S. customers to
access the trading system using the
member’s or participant’s identifier and
grant of authority. In such cases the
FBOT permits an identified exchange
member or other participant to allow
their U.S. customers, who have not been
granted direct access by the FBOT, to
have access to the exchange’s trading
systems, subject to a guarantee from an
exchange member or other participant.
The proposed amendment to § 48.4(b)
would permit registered FBOTs to grant
explicit authority to eligible IBs to act in
such capacity, provided that all trades
effected by the IB through submission of
U.S. customer orders are guaranteed by
a registered FCM or a firm exempt from
FCM registration pursuant to § 30.10.
2. Public Comments
All comment letters received
generally support the proposed
amendment to § 48.4(b) to permit
registered FBOTs to provide direct
access to eligible IBs to enter orders on
behalf of U.S. customers.15 Commenters
agree that permitting eligible IBs to
submit customer orders via direct access
to FBOTs would benefit affected
12 The addition of the words ‘‘registered as such’’
here is intended as a technical change rather than
a substantive change; i.e., that the reference is
intended to refer to registered FCMs is already
implied by the subsequent clause ‘‘or a firm exempt
from such registration . . .’’
13 CEA section 4(b)(1)(A), 7 U.S.C. 6(b)(1)(A); 17
CFR 48.2(c).
14 Conversely, a person located in the U.S. who
accesses an FBOT through an intermediary
(whether such intermediary is located in the United
States or not) and without an explicit grant of
authority by the FBOT (i.e., such person is not an
identified member or other participant of the FBOT)
would not meet the definition of ‘‘direct access’’ for
purposes of part 48. See, e.g., 76 FR 80674 at 80688.
15 See Eurex Letter; FIA Letter; ICE Letter; Mein
Letter; NZX Letter; NIBA Letter; and WMBAA
Letter.
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66203
markets and market participants.16
Several commenters observe that
markets have evolved and the role of IBs
serving as executing brokers has grown
since the Commission’s adoption of part
48 in 2011.17 In light of these changes,
commenters support the Commission’s
efforts to update part 48 to ensure that
its regulations remain current and
reflect changes in the market.18
Commenters further opine that the
Proposal, if adopted, is likely to:
provide greater customer choice in, and
promote fair competition among,
brokers; 19 improve the ability for U.S.
participants to manage risk; 20 and
increase liquidity in affected markets.21
The Commission received several
comments specifically in support of the
proposed condition in § 48.4(b)(4)
requiring U.S. customer orders
submitted by IBs to be guaranteed by a
registered FCM or a firm exempt from
FCM registration pursuant to § 30.10.22
Commenters note that they support the
proposed condition because it would
extend access to IBs located in the U.S.
on the same terms that U.S. CPOs and
CTAs currently access FBOTs.23
16 See Eurex at 1–4; FIA at 2; ICE at 2; Mein at
5–6, 8 NIBA at 2; WMBAA at 2.
17 See Eurex at 3–4; FIA at 2; WMBAA at 2.
18 See Eurex at 2–4; WMBAA at 2.
19 See FIA at 2; NZX at 1; NIBA at 2; WMBAA
at 2–3.
20 See Eurex at 3–4; FIA at 2; WMBAA at 2; NIBA
at 1. Commenters specifically note that the Proposal
would allow U.S. participants to better conduct risk
management by enabling on-exchange trades in
foreign markets through IBs during the U.S.
business day following the close of European
markets. Id.
21 ICE posits that the proposed changes to § 48.4
would enable additional types of market
participants to access FBOTs, which would
improve liquidity and reduce fragmentation while
promoting competitiveness in derivatives markets.
ICE at 2. NIBA and WMBAA generally state that
they believe the Proposal would improve liquidity.
NIBA at 2; WMBAA at 2.
22 See FIA at 2; Eurex at 3–4, 6, 8; ICE at 2; NIBA
at 2; NZX at 1.
23 Id. Eurex further states that it does not believe
there is any reason to require a different standard
for IBs than what is presently required for CPOs or
CTAs, and asserts that the Commission’s framework
for assessing applications for exemptions under
§ 30.10 provides a comprehensive and robust
process to assess whether the foreign jurisdiction
offers a comparable regulatory scheme (including
with respect to the protection of customer funds,
and anti-money laundering (AML)). Eurex at 6–7.
ICE states that the condition reflects the different
ways U.S. customers access clearing and avoids
unnecessary limitations on customers trading
through FBOTs. ICE at 2. Further, Eurex states that
it does not believe there is any additional
information the Commission should receive from
FBOTs that provide direct access to IBs under the
proposed amendment to § 48.4(b)(4). Eurex at 8.
Eurex notes that all quarterly, annual, and promptnotice reporting requirements that pertain to an
FBOT’s members under § 48.8(b)(1) would apply to
IBs as well as existing categories of participants.
Eurex at 8. In addition, Eurex asserts that IBs are
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Two commenters requested
clarification that proposed § 48.4(b)(4)
would permit IBs to submit block trades
to an FBOT (or otherwise not prohibit
them from doing so).24
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3. Commission Determination
The Commission is adopting, as
proposed and as supported by
commenters, the amendment to § 48.4(b)
to permit FBOTs to provide direct
access to eligible IBs to enter orders
directly into an FBOT’s trading and
order matching system on behalf of U.S.
customers.25 The Commission agrees
with commenters that permitting
eligible IBs to submit customer orders
via direct access to FBOTs would
benefit market participants and affected
markets,26 and is an appropriate update
to part 48 of the Commission’s
regulations given the increased role that
IBs now serve in derivatives markets.27
As discussed above, existing § 48.4(b)
permits registered FBOTs to provide
direct access to eligible FCMs, CPOs and
CTAs for submission of client orders.
DCMs may provide for IBs to act as
executing brokers for customer accounts
that in turn use FCM clearing members
to whom executed trades are given up
for clearing and through which such
customer accounts are carried.28 FBOTs
may similarly permit IBs located outside
already subject to a wide range of CFTC and NFA
regulatory record keeping and reporting
requirements, which provides the Commission with
the necessary reporting for oversight. Eurex at 8.
Eurex further opines that it does not believe there
are any additional registration requirements under
§ 48.7 that the Commission should consider for
FBOTs that provide direct access to IBs under
proposed § 48.4(b)(4). Eurex at 7.
24 See Eurex at 4; WMBAA at 3. In addition,
WMBAA requests clarification as to whether
permitting IBs located in the U.S. to engage in block
trades would require an unregistered foreign board
of trade to be registered as an FBOT under part 48.
WMBAA at 3. Generally speaking, a board of trade
that is not a designated contract market (DCM) or
registered FBOT may, depending on the nature of
its activities within the United States, be liable for
violating section 4(a) of the CEA, 7 U.S.C. 6(a).
Without knowing the specifics of how each
potential unregistered foreign board of trade
operates with respect to block trades involving IBs
located in the U.S. as well as other U.S. located
participants, the Commission is not in a position to
opine generally on WMBAA’s request. However, the
Commission notes that unregistered foreign boards
of trade seeking guidance concerning FBOT
registration and its application to their particular
operations may request informal guidance from the
Division of Market Oversight.
25 See Eurex Letter; FIA Letter; ICE Letter; NZX
Letter; NIBA Letter; WMBAA Letter; and Mein
Letter.
26 See Eurex at 1–4; FIA at 2; ICE at 2, NIBA at
2; Mein at 5–6, 8.
27 See Eurex at 3–4; FIA at 2; WMBAA at 2.
28 The Commission also agrees with ICE that the
amendment to 48.4(b) ‘‘would establish a similar
structure that is already in place on [DCMs]
whereby IBs submit customer orders via direct
electronic access.’’ ICE at 2.
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of the United States to enter trades
directly into the trading system of the
FBOT on behalf of their customer
accounts.29 The Commission agrees
with commenters that the amendment to
§ 48.4 will permit registered IBs located
in the U.S. to act in a comparable
capacity on registered FBOTs in cases
where an FBOT grants direct access to
the IB for the purpose of submitting
customer orders for execution.30 The
Commission believes, as supported by
commenters, that allowing eligible IBs
to have direct access to registered
FBOTs to execute transactions on behalf
of their U.S. clients is likely to: provide
U.S. market participants that wish to
trade in foreign derivatives contracts
with greater choice in brokers and
broker arrangements, and increase
competition among firms offering
execution brokerage services to
customers on registered FBOTs; 31
improve the ability for U.S. participants
to manage risk; 32 and increase liquidity
on affected markets.33 The Commission
furthermore believes, as supported by
commenters, that permitting U.S. IBs
access to FBOTs on par with FCMs,
CPOs, CTAs, and foreign brokers will
not undermine or otherwise adversely
affect protections available to U.S.
customers because their trades must be
guaranteed by a registered FCM or firm
exempt from FCM registration under
§ 30.10,34 and will be subject to required
29 See
30 See
Eurex at 3; WMBAA at 3.
WMBAA at 2–3. See also Eurex at 4; FIA
at 2.
31 See FIA at 2; NZX at 1; NIBA at 2; WMBAA
at 2–3.
32 See Eurex at 3–4; FIA at 2; WMBAA at 2; NIBA
at 1.
33 See footnote 21, supra.
34 Including the provision relating to the
guarantee of U.S. customer trades in new
§ 48.4(b)(4) will ensure that U.S. customer trades
executed by eligible IBs via direct access are
guaranteed by a firm that is registered as an FCM
or exempt from FCM registration under § 30.10. In
so doing, the final rule will act to reinforce
adherence with part 30, insofar as part 30 generally
requires intermediaries holding funds of U.S.
customers in connection with the offer or sale of
foreign futures and options to be registered as FCMs
or exempt from FCM registration under § 30.10. Part
30 of the Commission’s regulations governs the
offer and sale of foreign futures and options to
customers located in the United States. These
regulations are designed to carry out Congress’s
intent that foreign futures and options offered or
sold in the U.S. be subject to regulatory safeguards
comparable to those applicable to domestic
transactions. Section 30.4 of the Commission’s
regulations requires that in order to accept any
money, securities or property (or extend credit in
lieu thereof) to margin, guarantee or secure
transactions conducted by U.S. persons on an
FBOT, a person must be registered as an FCM. See
17 CFR 30.4(a). The Commission may grant and has
granted exemptions to this requirement to register
as an FCM based on petitions filed pursuant to 17
CFR 30.10. See footnote 11, supra. See also Eurex
at 5–7; ICE at 2.
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risk disclosures relating to foreign
futures and options transactions.35
Therefore, for the reasons stated
above, the Commission is adopting as
proposed the amendment to § 48.4(b) to
permit FBOTs to provide direct access
to eligible IBs to enter orders directly
into an FBOT’s trading and order
matching system on behalf of U.S.
customers.
Eurex and WMBAA each requested
that the Commission clarify that the
Proposal would permit IBs to submit
block trades to an FBOT (or otherwise
not prohibit them from doing so).36
Section 48.4(b) provides that an FBOT
may apply for registration under part 48
‘‘in order to permit the members and
other participants of the [FBOT] that are
located in the United States to enter
trades directly into the trading and
order matching system of the foreign
board of trade[. . .].’’ 37 The
Commission confirms and clarifies that
this may include block trades submitted
to an FBOT. As such, and for the
avoidance of doubt, an FBOT registered
under part 48 is not prohibited by this
final rule from allowing an eligible IB to
which it has granted direct access to
submit block trades to the FBOT on
behalf of the IB’s U.S. clients.
B. Section 48.8—Conditions of
Registration
1. Proposed Regulations
The Commission proposed
conforming amendments that will
include eligible IBs in §§ 48.8(a)(4)(ii)
and (a)(5)(i) and (iii) alongside FCMs,
CPOs and CTAs.
Section 48.8(a)(4)(ii) requires all
orders transmitted via direct access and
pursuant to an FBOT’s registration to be
for a member’s or other participant’s
proprietary trading account unless
transmitted by a registered FCM, CPO or
CTA (or exempt CPO or CTA). The
Commission proposed to include IBs in
this section along with FCMs, CPOs and
CTAs, to conform with the proposed
changes to § 48.4(b) that would allow
35 Section 30.6 of the Commission’s regulations
requires FCMs and IBs to provide a statement to
customers disclosing the risks of trading foreign
futures and options outside the United States. 17
CFR 30.6. This requirement also applies to exempt
foreign IBs, CPOs, and CTAs. 17 CFR 30.5(c).
Petitions for exemptive relief under § 30.10 for
firms seeking an exemption from FCM registration
must demonstrate that such firms are subject to a
comparable regulatory program that includes,
among other elements, minimum sales practice
standards, including ‘‘disclosure of the risks of
futures and options transactions and, in particular,
the risk of transactions undertaken outside the
jurisdiction of domestic law.’’ 17 CFR part 30,
Appendix A, Sales Practice Standards. See also
Eurex at 4.
36 See Eurex at 4; WMBAA at 3.
37 17 CFR 48.4(b).
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eligible IBs to transmit orders via direct
access on behalf of the accounts of their
customers. The Commission also
proposed to add the words ‘‘registered
as such’’ following the final reference to
‘‘futures commission merchant’’ in
§ 48.8(a)(4)(ii) to conform to the
proposed amendment to § 48.4(b)(3).38
Section 48.8(a)(5)(i) provides that a
registered FBOT must require each
current and prospective member or
other participant granted direct access
and not registered with the Commission
as an FCM, CPO or CTA to agree to and
submit to the jurisdiction of the
Commission with respect to activities
conducted pursuant to the FBOT’s
registration. Registered FCMs, CPOs and
CTAs are excluded from this
requirement because they are otherwise
subject to the jurisdiction of the
Commission as Commission registrants.
Registered IBs are likewise subject to the
jurisdiction of the Commission as
registrants and the Commission
therefore proposed to include IBs
alongside FCMs, CPOs and CTAs in
§ 48.8(a)(5)(i).
Section 48.8(a)(5)(iii) provides that a
registered FBOT, its clearing
organization, and each current and
prospective member or other participant
granted direct access that is not
registered with the Commission as an
FCM, CPO or CTA must maintain with
the FBOT written representations
stating that such entity will provide
prompt access to books, records, and
premises upon the request of the
Commission, U.S. Department of Justice
and, if appropriate, the National Futures
Association (NFA). Registered FCMs,
CPOs and CTAs are excluded from this
requirement because they are otherwise
required to provide such access to
books, records, and premises as
Commission registrants and, where
applicable, NFA members.39 Registered
IBs, as Commission registrants and NFA
members, are likewise required to
provide such access to books, records,
and premises by the Commission, U.S.
Department of Justice, and NFA, and the
Commission therefore proposed to
include IBs alongside FCMs, CPOs and
CTAs in § 48.8(a)(5)(iii).
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2. Public Comments
The Commission received no
comments regarding the proposed
conforming amendments to include
eligible IBs in §§ 48.8(a)(4)(ii) and
footnote 12, supra, and accompanying text.
C of part 170 of the Commission’s
regulations provides for certain exceptions to the
general requirement that Commission-registered
FCMs and CTAs must become NFA members. See
17 CFR 170.15 and 170.17.
(a)(5)(i) and (iii) alongside FCMs, CPOs
and CTAs.
3. Commission Determination
The Commission is adopting, as
proposed, the amendments to
§§ 48.8(a)(4)(ii) and (a)(5)(i) and (iii).
C. Section 48.9—Revocation of
Registration
1. Proposed Regulations
The Commission proposed to amend
§ 48.9 to establish a procedure for
FBOTs to request voluntary revocation
of registration. Section 48.9 addresses
certain events which could lead the
Commission to revoke an FBOT’s
registration, including the failure to
satisfy registration requirements or
conditions, and certain other specified
events.40 However, part 48 presently
does not contain any provisions for an
FBOT to request voluntary revocation of
its registration. In order to allow
registered FBOTs to more easily
ascertain the steps required to request
revocation, the Commission proposed to
amend § 48.9(b) (‘‘Other Events that
Could Result in Revocation’’) by adding
a new paragraph (b)(5).
2. Public Comments
The Commission received one
comment regarding the proposed
amendments to § 48.9 to establish a
procedure for FBOTs to request
voluntary revocation of registration.
NZX commented that it supports the
introduction of a revocation process for
FBOTs because it will provide greater
certainty for entities that no longer wish
to retain their status as a registered
FBOT.41
3. Commission Determination
The Commission agrees with NZX
that the amendment will provide greater
certainty for entities that no longer wish
to retain their status as a registered
FBOT.42 Therefore, for the reasons
stated above and as supported by public
comment, the Commission is adopting
as proposed the addition of § 48.9(b)(5)
which makes clear that the Commission
may revoke an FBOT’s registration in
response to a voluntary request by an
FBOT to do so, and provides that an
FBOT can make such request via email
to the Commission.
38 See
39 Subpart
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40 See
17 CFR 48.9.
at 3.
41 NZX
42 Id.
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66205
D. Section 48.6—Foreign Boards of
Trade Providing Direct Access Pursuant
to Existing No-Action Relief
1. Proposed Regulations
Section 48.6 provides for a limited
registration application procedure for
FBOTs that had been operating under
existing staff no-action letters and
FBOTs that had submitted a complete
application for a staff no-action letter
that was pending as of the effective date
of part 48. Those limited application
provisions are no longer applicable
because all FBOTs with previously
existing staff no-action letters have been
registered under part 48 and all such noaction letters have been revoked.
Accordingly, the Commission proposed
to delete § 48.6. As a conforming
amendment the Commission also
proposed to delete § 48.2(h) (definition
of ‘‘existing no-action relief’’) as that
definition will no longer be applicable
or necessary once existing § 48.6 is
removed.
2. Public Comments
The Commission received one
comment generally in support of the
proposed deletion of § 48.6 and the
conforming deletion of § 48.2(h).43
3. Commission Determination
Therefore, for the reasons stated
above, the Commission is adopting as
proposed the deletion of § 48.6 and the
conforming deletion of § 48.2(h).
III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
requires agencies to consider whether
the regulations they promulgate will
have a significant economic impact on
a substantial number of small entities
and, if so, provide a regulatory
flexibility analysis with respect to such
impact.44 The Commission has
previously established certain
definitions of ‘‘small entities’’ to be used
by the Commission in evaluating the
impact of its regulations on small
entities in accordance with the RFA.45
The amendments to part 48 would
impact FBOTs. The Commission has
previously determined that FBOTs are
not small entities for purposes of the
RFA.46
The amendments to part 48 would
also impact eligible IBs by providing
43 NZX states that it supports the removal of
§ 48.6, which is obsolete, and the removal of
§ 48.2(h) as a conforming amendment. NZX at 3.
44 5 U.S.C. 601 et seq.
45 See Policy Statement and Establishment of
‘‘Small Entities’’ for purposes of the Regulatory
Flexibility Act, 47 FR 18618 (Apr. 30, 1982).
46 76 FR 80698.
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them with the potential to gain direct
access to FBOTs that incorporate the
new regulatory provisions allowing
such IBs direct access. The Commission
has previously established that IBs may
in some cases be deemed ‘‘small
entities’’ for the purposes of the RFA.47
However, the final rules do not impose
any new burden on eligible IBs. Instead,
the final rules would remove a
regulatory barrier preventing these small
entities from accessing FBOTs.
Accordingly, the Commission believes
that the regulation will be less
burdensome to small-entity, eligible IBs
and will not impose any additional
costs on them.
Therefore, the Chairman, on behalf of
the Commission, pursuant to 5 U.S.C.
605(b), hereby certifies that the final
rules will not have a significant
economic impact on a substantial
number of small entities.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA) 48 imposes certain requirements
on Federal agencies (including the
Commission) in connection with
conducting or sponsoring any
‘‘collection of information,’’ 49 as
defined by the PRA. Under the PRA, an
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
displays a currently valid control
number from the Office of Management
and Budget (OMB).50 The PRA is
intended, in part, to minimize the
paperwork burden created for
individuals, businesses, and other
persons as a result of the collection of
information by Federal agencies, to
ensure the greatest possible benefit and
utility of information created, collected,
maintained, used, shared, and
disseminated by or for the Federal
Government.51 The PRA applies to all
information, ‘‘regardless of form or
format,’’ whenever the government is
obtaining, causing to be obtained, or
soliciting information, and includes
required disclosure to third parties or
the public, of facts or opinions, when
the information collection calls for
answers to identical questions posed to,
or identical reporting or recordkeeping
requirements imposed on, ten or more
persons.52
This final rulemaking amends
regulations that contain collections of
information for which the Commission
47 85
FR 78718, 78733 (Dec. 7, 2020).
U.S.C. 3501 et seq.
49 See 44 U.S.C. 3502(3)(A).
50 See 44 U.S.C. 3507(a)(3); 5 CFR 1320.5(a)(3).
51 See 44 U.S.C. 3501.
52 See 44 U.S.C. 3502(3).
48 44
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has previously received a control
number from OMB: 3038–0101,
Registration of Foreign Boards of Trade
(17 CFR part 48).53 This collection
addresses the information collection
requirements associated with part 48’s
registration requirement and related
registration procedures and conditions
that apply to FBOTs that wish to
provide direct access to their electronic
trading and order matching systems.
The final rulemaking allows eligible IBs
to act as direct access participants on
registered FBOTs, provides a process for
FBOTs to request voluntary revocation
of their registration, and removes
outdated references to ‘‘no action
relief.’’
The Commission believes that these
amendments do not contain any new
collections of information and will not
increase the burden associated with the
information collections under part 48.
While the amendments establish a new
process for FBOTs to submit requests for
revocation of their registration, the
regulations allow FBOTs to submit their
requests electronically via email to the
Commission and do not mandate any
specific form or format for such
requests. Accordingly, this new
submission method does not constitute
a collection of information under the
PRA. In addition, the amendments do
not affect the provisions of part 48
covered in the current PRA approval
(§ 48.8 (periodic data submissions to the
Commission), § 48.9 (demonstration of
compliance); and § 48.10 (listing
additional futures and options
contracts)). Accordingly, the
Commission is retaining its existing
estimates for the burden associated with
the information collections under OMB
Collection 3038–0101. The Commission
received no comments related to the
PRA analysis or this determination.
C. Cost-Benefit Considerations
1. Introduction
Section 15(a) of the CEA 54 requires
the Commission to ‘‘consider the costs
and benefits’’ of its actions before
promulgating a regulation under the
CEA or issuing certain orders. CEA
section 15(a) further specifies that the
costs and benefits shall be evaluated in
light of five broad areas of market and
public concern: (1) protection of market
participants and the public; (2)
efficiency, competitiveness, and
financial integrity of futures markets; (3)
price discovery; (4) sound risk
53 The Commission’s most recent burden
estimates for this collection are available at https://
www.reginfo.gov/public/do/PRAViewICR?ref_
nbr=202301-3038-001.
54 7 U.S.C. 19(a).
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management practices; and (5) other
public interest considerations. The
Commission considers the costs and
benefits resulting from its discretionary
determinations with respect to the CEA
section 15(a) factors.
The Commission has endeavored to
assess the expected costs and benefits of
the amendments in quantitative terms,
including Paperwork Reduction Act
(PRA)-related costs, where practicable.
In situations where the Commission is
unable to quantify the costs and
benefits, the Commission identifies and
considers the costs and benefits of the
applicable amendments in qualitative
terms. The Commission did not receive
any comments from commenters which
quantified or attempted to quantify the
costs and benefits of the Proposal.
The Commission notes that this
consideration of costs and benefits is
based on, inter alia, its understanding
that the derivatives markets regulated by
the Commission function
internationally, with (1) transactions
that involve entities organized in the
United States occurring across different
international jurisdictions, (2) some
entities organized outside of the United
States that are prospective Commission
registrants, and (3) some entities that
typically operate both within and
outside the United States, and that
follow substantially similar business
practices wherever located. Where the
Commission does not specifically refer
to matters of location, the discussion of
costs and benefits below refers to the
effects of the regulations on all relevant
derivatives activity, whether based on
their actual occurrence in the United
States or on their connection with
activities in, or effect on, U.S.
commerce.55
In the following consideration of costs
and benefits, the Commission first
identifies and discusses the benefits and
costs attributable to the rule
amendments. The Commission, where
applicable, then considers the costs and
benefits of the rule amendments in light
of the five public interest considerations
set out in section 15(a) of the CEA.
2. Final Regulations
The Commission is amending certain
rules in part 48 of its regulations
relating to FBOTs. The Commission
identifies the costs and benefits of the
amendments relative to the baseline of
the regulatory status quo. In particular,
the baseline against which the
Commission considers the costs and
benefits of these rule amendments is the
statutory and regulatory requirements of
the CEA and Commission regulations
55 See,
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now in effect, in particular CEA section
4(b) and part 48 of the Commission’s
regulations.
Amendments to § 48.6
The final rules delete § 48.6, which
provided for an alternate registration
procedure for FBOTs acting under the
preexisting staff no-action letter process,
because such no-action letter process
and no-action letters are no longer in
effect. Deletion of § 48.6 and elimination
of the alternate registration procedure
will not increase costs to FBOTs
because § 48.6 and the alternate
registration procedure are already in
effect obsolete.
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Amendments to § 48.9
The amendment to § 48.9 establishes
a procedure for FBOTs to request
voluntary revocation of registration.
This amendment would not impose a
new requirement for FBOTs. The
baseline is the current practice of the
Commission, whereby requests for
voluntary revocation are processed on
an ad-hoc basis. The primary benefit
will be to allow registrants to more
easily ascertain the steps required to
request revocation. The amendments are
not expected to increase costs to
registered FBOTs compared to the status
quo.
Amendments to § 48.4 and Conforming
Amendments to § 48.8
The amendments to § 48.4 and
conforming amendments to § 48.8
permit a registered FBOT to provide
direct access to its electronic trading
and order matching system to an
identified member or other participant
located in the U.S. and registered with
the Commission as an IB for submission
of customer orders to the FBOT’s
trading system for execution, provided
that all trades effected through
submission of U.S. customer orders are
guaranteed by a registered FCM or a
firm exempt from FCM registration
pursuant to § 30.10.
There are presently 24 FBOTs
registered with the Commission. Under
the current rules, eligible intermediaries
permitted direct access on registered
FBOTs for purposes of entering trades
on behalf of non-proprietary client
accounts include certain FCMs, CTAs,
and CPOs. The amendments would add
eligible IBs to the existing list of eligible
intermediaries. Similar to trades
submitted by CTAs and CPOs via direct
access, the trades executed by eligible
IBs on behalf of customers located in the
U.S. would be required to be guaranteed
by a registered FCM or a firm exempt
from FCM registration pursuant to
§ 30.10. IBs specialize in soliciting and
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executing orders for their clients. The
field of trade execution is continuously
evolving with technological advances,
and has helped bring down execution
costs. As of July 2024, the following
numbers of intermediaries were
registered with the Commission.56
INTERMEDIARIES REGISTERED
THE COMMISSION AS OF JULY
CTAs 1 .........................................
CPOs 1 ........................................
IBs ...............................................
FCMs ..........................................
Swap Dealers .............................
WITH
2024
1,237
1,188
919
62
107
1 These categories are not mutually exclusive, i.e., a CPO may also be registered as a
CTA.
The table above shows that the
number of IBs is more than one quarter
of all Commission-registered
intermediaries. The Commission does
not know how many FBOTs will choose
to provide direct access to eligible IBs
for purposes of entering trades on behalf
of non-proprietary client accounts or
how many eligible IBs will become
direct access members or participants of
registered FBOTs pursuant to this final
rule. There could also be new IB
entrants that are granted direct access to
registered FBOTs. However, by
permitting FBOTs the option to provide
direct access to eligible IBs for
submission of customer orders, the
amendments could lead to a significant
increase in the number of choices for
U.S. customers with respect to
execution of trades on FBOTs.
Although the Commission lacks the
data and information to quantitatively
estimate the costs and benefits of
permitting IBs located in the U.S. to
have direct access to registered FBOTs
pursuant to this final rule, it has
endeavored to assess the expected costs
and benefits of the proposal in
qualitative terms. The lack of data and
information to estimate costs is
attributable in part to uncertainty
regarding how FBOTs will choose to
respond to the amendments to part 48
and how IBs located in the U.S. will
choose to respond to potential new
opportunities to participate on
registered FBOTs.
The baseline is the status quo in
which § 48.4 permits FBOTs to provide
direct access to certain FCMs, CPOs and
CTAs for purposes of transmission of
orders for certain client accounts.
Furthermore, foreign IBs not located in
the U.S. may have similar arrangements
on FBOTs whereby their customer
56 NFA website, https://www.nfa.futures.org/
registration-membership/membership-anddirectories.html.
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orders are transmitted to an FBOT.57 IBs
are not included in § 48.4 as
intermediaries eligible to have direct
access and transmit trades on behalf of
customers. As such, registered FBOTs
currently do not provide direct access to
IBs located in the United States to enter
orders on behalf of their customers.
Relative to the baseline, the primary
effect of the amendment to § 48.4 is to
allow registered FBOTs to provide
direct access to eligible IBs in order to
transmit orders of U.S. customers. This
could promote competition among
execution-only brokers on registered
FBOTs. There may be advantages to
customers from having additional
choices in brokers and brokerage
arrangements to trade foreign
derivatives on registered FBOTs—for
example, lower trading costs or the use
of advantageous proprietary execution
algorithms developed by such IBs.
Several commenters assert that the
amendments will allow U.S.
participants to better conduct risk
management by enabling trades to be
submitted to FBOTs through IBs during
the U.S. business day following the
close of European markets.58 From the
standpoint of registered FBOTs,
allowing eligible IBs to become direct
access participants for submission of
customer orders will open up potential
new distribution channels that could
lead to additional trading volume. This
in turn could improve the viability of
some traded instruments. Similarly,
eligible IBs may be able to pursue new
business models and/or expand existing
business models onto new foreign
markets.
FBOTs that decide to provide direct
access to eligible IBs pursuant to this
final rule and that do not already have
necessary structures in place to do so
may incur certain costs relating to, for
example, modification of rules,
procedures and/or systems to enable
direct access to eligible IBs to submit
customer orders to the FBOT’s trading
system for execution.
The Commission did not receive any
comments which quantified or
attempted to quantify any of the costs
and benefits described above, or which
quantified or attempted to quantify any
other costs or benefits associated with
eligible IBs having direct access to
registered FBOTs.
Section 15(a) Factors
Section 15(a) of the CEA requires the
Commission to consider the costs and
57 The definition of ‘‘direct access’’ does not
include identified members or other participants of
an FBOT that are located outside of the United
States. See 17 CFR 48.2(c).
58 Eurex at 3–4; FIA at 2; NIBA at 1.
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benefits of the amendments to part 48
with respect to the following factors:
protection of market participants and
the public; efficiency, competitiveness,
and financial integrity of markets; price
discovery; sound risk management
practices; and other public interest
considerations.
(i) Protection of Market Participants and
the Public
The changes to part 48 would not
affect the basic protection for customers
with respect to their foreign futures and
options transactions. Under the rule,
U.S. customer assets are required to be
maintained by registered FCMs or
similar entities exempt from FCM
registration pursuant to § 30.10.
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(ii) Efficiency, Competitiveness, and
Financial Integrity of Markets
The current part 48 treats IBs
differently from certain FCMs, CTAs
and CPOs in that certain FCMs, CTAs
and CPOs have the ability to be granted
direct access to registered FBOTs for the
submission of client orders. Similarly,
non-U.S. intermediaries (which are
outside of the scope of part 48) may
also, under the status quo, be granted
similar access to registered FBOTs for
the purpose of offering execution
services to U.S. and non-U.S. customers.
The adopted amendments to part 48
will permit eligible IBs to offer
competing execution services on
registered FBOTs. The adopted
amendments may also open access to
foreign derivatives markets for existing
IB customers that otherwise would not
have access to trading on a registered
FBOT (i.e., customers that choose not to
or cannot become direct access
participants or otherwise seek out an
eligible FCM, CPO, CTA, or foreign
broker to transact on an FBOT). Greater
competition among introducing brokers
and potentially additional and new
types of customers participating in
affected markets may lead to increased
market efficiencies and greater financial
integrity. Furthermore, that trades of
U.S. customers must be guaranteed by
registered FCMs or comparable foreign
firms promotes the financial integrity of
affected markets by ensuring that
intermediaries handling U.S. customer
funds are subject to certain regulatory
safeguards.
(iii) Price Discovery
There is a potential for the adopted
changes to part 48 to positively affect
price discovery in futures markets.
Participation of eligible IBs as direct
access members may lead to increased
participation and volume on registered
FBOTs, in particular during hours when
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16:33 Aug 14, 2024
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U.S. brokers are more active than
foreign brokers.
(iv) Risk Management Practices
As noted above, the changes will not
affect how customer assets are treated.
However, registered FCMs and firms
exempt from FCM registration pursuant
to § 30.10 may need to expand their risk
mitigation processes to ensure that they
have robust processes for managing the
risk associated with eligible IBs
executing trades on registered FBOTs
via direct access.
(v) Other Public Interest Considerations
As noted above, the changes may
enable new and distinct kinds of market
participants to access registered FBOTs,
which could help improve liquidity and
reduce fragmentation in affected
markets.
D. Antitrust Considerations
Section 15(b) of the CEA requires the
Commission to take into consideration
the public interest to be protected by the
antitrust laws and endeavor to take the
least anticompetitive means of
achieving the purposes of this Act, in
issuing any order or adopting any
Commission rule or regulation
(including any exemption under section
4(c) or 4c(b)), or in requiring or
approving any bylaw, rule, or regulation
of a contract market or registered futures
association established pursuant to
section 17 of this Act.59
The Commission believes that the
public interest to be protected by the
antitrust laws is generally to protect
competition. The Commission has
considered the modified rule to
determine whether it is anticompetitive
and has identified no anticompetitive
effects.60 Because the Commission has
determined that the modified rule is not
anticompetitive and has no
anticompetitive effects, the Commission
has not identified any less
anticompetitive means of achieving the
purposes of the Act.
List of Subjects in 17 CFR Part 48
Registration of foreign boards of trade.
59 7
U.S.C. 19(b).
Commission received several comments
stating that the modified rule may increase
competition and/or promote fair competition among
brokers. See FIA at 2 (stating that the rule may
‘‘work to increase competition in brokering foreign
products’’); NIBA at 2 (stating that ‘‘IBs should have
the same access to FBOTs as CPOs and CTAs
currently enjoy’’ and that the modified rule ‘‘can
provide additional market choices for IBs and their
customers’’); WMBAA at 2–3 (stating that the rule
will ‘‘promote competition among firms offering
execution brokerage services to customers on
registered FBOTs,’’ and that the rule ‘‘allows for the
growth of competitive markets without impeding
liquidity formation’’).
60 The
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For the reasons stated in the
preamble, the Commodity Futures
Trading Commission amends 17 CFR
part 48 as follows:
PART 48—REGISTRATION OF
FOREIGN BOARDS OF TRADE
1. The authority citation for part 48
continues to read as follows:
■
Authority: 7 U.S.C. 5, 6 and 12a, unless
otherwise noted.
§ 48.2
[Amended]
2. In § 48.2 remove paragraph (h) and
redesignate paragraphs (i) through (l) as
paragraphs (h) through (k), respectively.
■ 3. In § 48.4 revise paragraph (b) to
read as follows:
■
§ 48.4
Registration eligibility and scope.
*
*
*
*
*
(b) A foreign board of trade may apply
for registration under this part in order
to permit the members and other
participants of the foreign board of trade
that are located in the United States to
enter trades directly into the trading and
order matching system of the foreign
board of trade, to the extent that such
members or other participants are:
(1) Entering orders for the member’s
or other participant’s proprietary
accounts;
(2) Registered with the Commission as
futures commission merchants and are
submitting customer orders to the
trading system for execution;
(3) Registered with the Commission as
a commodity pool operator or
commodity trading advisor, or are
exempt from such registration pursuant
to § 4.13 or § 4.14 of this chapter, and
are submitting orders for execution on
behalf of a United States pool that the
member or other participant operates or
an account of a United States customer
for which the member or other
participant has discretionary authority,
respectively, provided that a futures
commission merchant registered with
the Commission as such or a firm
exempt from such registration pursuant
to § 30.10 of this chapter acts as clearing
firm and guarantees, without limitation,
all such trades of the commodity pool
operator or commodity trading advisor
effected through submission of orders to
the trading system; or
(4) Registered with the Commission as
introducing brokers and are submitting
customer orders to the trading system
for execution, provided that a futures
commission merchant registered with
the Commission as such or a firm
exempt from such registration pursuant
to § 30.10 of this chapter acts as a
clearing firm and guarantees, without
limitation, all trades of the introducing
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Federal Register / Vol. 89, No. 158 / Thursday, August 15, 2024 / Rules and Regulations
broker effected through submission of
orders for United States customers to
the trading system.
§ 48.6
[Removed and Reserved]
4. Remove and reserve § 48.6.
5. In § 48.8, revise paragraphs (a)(4)(ii)
and (a)(5)(i) and (iii) to read as follows:
■
■
§ 48.8
Conditions of registration.
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*
*
*
*
*
(a) * * *
(4) * * *
(ii) All orders that are transmitted to
the foreign board of trade’s trading
system by a foreign board of trade’s
identified member or other participant
that is operating pursuant to the foreign
board of trade’s registration will be
solely for the member’s or trading
participant’s own account unless such
member or other participant is
registered with the Commission as a
futures commission merchant or such
member or other participant is
registered with the Commission as an
introducing broker, commodity pool
operator or commodity trading advisor,
or is exempt from registration as a
commodity pool operator or commodity
trading advisor pursuant to § 4.13 or
§ 4.14 of this chapter, provided that a
futures commission merchant registered
with the Commission as such or a firm
exempt from such registration pursuant
to § 30.10 of this chapter acts as clearing
firm and guarantees, without limitation,
all trades of the introducing broker,
commodity pool operator or commodity
trading advisor effected through
submission of orders for United States
pools or customers to the trading
system.
(5) * * *
(i) Prior to operating pursuant to
registration under this part and on a
continuing basis thereafter, a registered
foreign board of trade will require that
each current and prospective member or
other participant that is granted direct
access to the foreign board of trade’s
trading system and that is not registered
with the Commission as a futures
commission merchant, an introducing
broker, a commodity trading advisor or
a commodity pool operator, file with the
foreign board of trade a written
representation, executed by a person
with the authority to bind the member
or other participant, stating that as long
as the member or other participant is
authorized to enter orders directly into
the trade matching system of the foreign
board of trade, the member or other
participant agrees to and submits to the
jurisdiction of the Commission with
respect to activities conducted pursuant
to the registration.
*
*
*
*
*
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16:33 Aug 14, 2024
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(iii) The foreign board of trade,
clearing organization, and each current
and prospective member or other
participant that is granted direct access
to the foreign board of trade’s trading
system and that is not registered with
the Commission as a futures
commission merchant, an introducing
broker, a commodity trading advisor, or
a commodity pool operator will
maintain with the foreign board of trade
written representations, executed by
persons with the authority to bind the
entity making them, stating that as long
as the foreign board of trade is registered
under this part, the foreign board of
trade, the clearing organization or
member of either or other participant
granted direct access pursuant to this
part will provide, upon the request of
the Commission, the United States
Department of Justice and, if
appropriate, the National Futures
Association, prompt access to the
entity’s, member’s, or other participant’s
original books and records or, at the
election of the requesting agency, a copy
of specified information containing such
books and records, as well as access to
the premises where the trading system
is available in the United States.
*
*
*
*
*
6. In § 48.9, add paragraph (b)(5) to
read as follows:
■
§ 48.9
Revocation of registration.
*
*
*
*
*
(b) * * *
(5) The Commission may revoke a
foreign board of trade’s registration in
response to a voluntary request by the
foreign board of trade to vacate its
registration. A foreign board of trade
may file a request to vacate its
registration with the Secretary of the
Commission at FBOTapplications@
cftc.gov.
*
*
*
*
*
Issued in Washington, DC, on August 6,
2024, by the Commission.
Robert Sidman,
Deputy Secretary of the Commission.
Note: The following appendices will not
appear in the Code of Federal Regulations.
Appendices to Foreign Boards of
Trade—Voting Summary and
Chairman’s and Commissioners’
Statements
Appendix 1—Voting Summary
On this matter, Chairman Behnam and
Commissioners Johnson, and Goldsmith
Romero, Mersinger, and Pham voted in the
affirmative. No Commissioner voted in the
negative.
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66209
Appendix 2—Statement of Chairman
Rostin Behnam
I support this final rule, which amends the
CFTC regulations for foreign boards of trade
(FBOTs). The amendments permit a
registered FBOT to provide direct access to
its electronic trading and order matching
system to a registered introducing broker (IB)
located in the United States for submission
of customer orders to the FBOT’s trading
system for execution. Based upon more than
ten years of Commission experience with the
existing rules for FBOTs, the amendments
also enhance and modernize the ruleset.
The existing FBOT rules were promulgated
in 2011. Today’s amendments demonstrate
the Commission’s ongoing consideration of
its existing rules and my commitment to
ensuring that our rules address the reality of
today’s markets and their structure. The
changes enable new types of market
participants to access registered FBOTs,
improving liquidity and promoting healthier
markets.
I thank staff in the Division of Market
Oversight, Office of the General Counsel, and
the Office of the Chief Economist for all of
their work on this final rule.
Appendix 3—Statement of
Commissioner Kristin N. Johnson
The Commodity Futures Trading
Commission (Commission) approved a final
rule that amends Part 48 to permit a foreign
board of trade (FBOT) registered with the
Commission to provide introducing brokers
(IBs) located in the United States and
registered with the Commission direct access
to submit orders to trade foreign futures and
options on behalf of customers located in the
United States (Final Rule).1 Under the Final
Rule, FBOTs will be able to provide
registered IBs located in the United States
with direct access to execute customer trades,
provided that they submit such orders for
clearing to a Commission-registered FCM or
a firm exempt from FCM registration under
CFTC Regulation 30.10.
Over the course of my tenure as a
Commissioner, I have consistently supported
the Commission’s efforts to advance the
protection of customer funds. I appreciate the
thoughtful comments regarding the
Commission’s 30.10 framework in the
context of the Final Rule and the attention
given to the need to ensure that the foreign
regime has comparable customer protection,
disclosure, and anti-money laundering
requirements.
I support the Final Rule, which includes
important protections for U.S. customers,
while also facilitating market access. I
commend the careful work of the staff of the
Division of Market Oversight, including
Alexandros Stamoulis, Roger Smith, Maura
Dundon, and David Reiffen, on the Final
Rule.
1 The Commission is also establishing a
procedure for an FBOT to request the revocation of
its registration, and removing certain outdated
references to ‘‘existing no-action relief.’’
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Federal Register / Vol. 89, No. 158 / Thursday, August 15, 2024 / Rules and Regulations
Appendix 4—Statement of
Commissioner Caroline D. Pham
khammond on DSKJM1Z7X2PROD with RULES
I support the Foreign Boards of Trade
(FBOT) Final Rule because it promotes access
to markets for U.S. participants, competition,
and liquidity. I would like to thank Maura
Dundon, Roger Smith, and Alexandros
Stamoulis in the CFTC’s Division of Market
Oversight for their work on this rulemaking.
I will reiterate key points from my
statement on the FBOT proposed rule.1 As a
CFTC Commissioner, I have made it clear
that I believe in good policy that enables
growth, progress, and access to markets.2
Accordingly, I am pleased to support
Commission efforts that take a pragmatic
approach to issues that hinder market access
and cross-border activity. I continue to
believe that this rulemaking exemplifies
policy that ensures a level playing field, and
I applaud this step in the right direction for
market structure.
FBOTs have been a critical piece of the
CFTC’s markets for decades and provide
access for U.S. market participants to nonU.S. markets in realization of the global
economy and international business.3 The
main substantive amendment in the FBOT
Final Rule is to Regulation 48.4, which will
now include introducing brokers (IBs) 4 as a
permissible intermediary, in addition to
futures commission merchants (FCMs),
commodity pool operators (CPOs), and
commodity trading advisors (CTAs), to enter
orders on behalf of customers or commodity
pools via direct access on a registered FBOT.5
I believe that the FBOT Final Rule will
provide more choice in brokers and broker
arrangements for U.S. market participants
that trade foreign futures and ensure that
appropriate customer protections are in
place.
As sponsor of the CFTC’s Global Markets
Advisory Committee (GMAC),6 I have
1 Statement of Commissioner Caroline D. Pham in
Support of Foreign Board of Trade Proposal (Feb.
20, 2024), https://www.cftc.gov/PressRoom/
SpeechesTestimony/phamstatement022024.
2 See, e.g., Keynote Address by Commissioner
Caroline D. Pham, 98th Annual Convention of the
American Cotton Shippers Association (June 22,
2022), https://www.cftc.gov/PressRoom/
SpeechesTestimony/opapham2; Statement of
Commissioner Caroline D. Pham on Staff Letter
Regarding ADM Investor Services, Inc. (June 16,
2023), https://www.cftc.gov/PressRoom/Speeches
Testimony/phamstatement061623.
3 While FBOTs initially had operated pursuant to
no-action relief, in 2011, following the Dodd-Frank
Wall Street and Consumer Protection Act of 2010,
the Commission began registering FBOTs. See
Registration of Foreign Boards of Trade, Final Rule,
76 FR 80674 (Dec. 23, 2011), https://www.federal
register.gov/documents/2011/12/23/2011-31637/
registration-of-foreign-boards-of-trade.
4 The Commission generally defines an IB as an
individual or organization that solicits or accepts
orders to buy or sell futures contracts, commodity
options, retail off-exchange forex or commodity
contracts, or swaps, but does not accept money or
other assets from customers to support these orders.
Commodity Exchange Act (CEA) section 1a(31); 17
CFR 1.3(mm). The Commission registers IBs under
CEA section 4d(g) and CFTC Regulation 3.4(a). 7
U.S.C. 6d(g) and 17 CFR 3.4(a).
5 17 CFR 48.4.
6 CFTC Global Markets Advisory Committee,
https://www.cftc.gov/About/AdvisoryCommittees/
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16:33 Aug 14, 2024
Jkt 262001
devoted a significant part of my
Commissionership to supporting solutions
that will enhance the resiliency and
efficiency of global markets.7 The FBOT
Final Rule is policy that mitigates market
fragmentation and the associated impact on
liquidity, and promotes the overall
competitiveness of our derivatives markets. I
am pleased to support the FBOT Final Rule.
[FR Doc. 2024–17828 Filed 8–14–24; 8:45 am]
BILLING CODE 6351–01–P
DEPARTMENT OF STATE
22 CFR Part 120
[Public Notice: 12422]
RIN 1400–AF26
International Traffic in Arms
Regulations: Amendments to the
Definition of Activities That Are Not
Exports, Reexports, Retransfers, or
Temporary Imports
Department of State.
Final rule.
AGENCY:
ACTION:
The Department of State (the
Department) published a proposed rule
on December 16, 2022, to include two
new entries to the International Traffic
in Arms Regulations (ITAR) to expand
the definition of ‘‘activities that are not
exports, reexports, retransfers, or
temporary imports.’’ The Department is
now responding to the public comments
received in response to that proposed
rule and finalizing the proposed rule
with changes.
DATES: The rule is effective on
September 16, 2024.
FOR FURTHER INFORMATION CONTACT:
Sarah Heidema, Office of Defense Trade
Controls Policy, Department of State,
telephone (202) 634–4981; email
SUMMARY:
GMAC. See Commissioner Pham Announces New
Members and Leadership of the CFTC’s Global
Markets Advisory Committee and Subcommittees
(June 30, 2023), https://www.cftc.gov/PressRoom/
PressReleases/8740-23.
7 E.g., Achieving Growth and Progress: Statement
of Commissioner Caroline D. Pham at the Global
Markets Advisory Committee June 4 Meeting (June
4, 2024), https://www.cftc.gov/PressRoom/Speeches
Testimony/phamstatement060424; Opening
Statement of Commissioner Caroline D. Pham
before the Global Markets Advisory Committee
(Feb. 13, 2023), https://www.cftc.gov/PressRoom/
SpeechesTestimony/phamstatement021323. To
date, the GMAC has advanced 13 recommendations
and reports to the Commission on a broad set of
significant global markets issues, including U.S.
Treasury market liquidity, well-functioning repo
and funding markets, capital and margin
requirements, exchange volatility controls, T+1
securities settlement, improved collateral
management, central counterparty (CCP) default
simulation, streamlining trade reporting data to
monitor systemic risk, and a foundational digital
asset taxonomy to facilitate alignment in regulation
across jurisdictions.
PO 00000
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DDTCCustomerService@state.gov
ATTN: Regulatory Change, ITAR 120.54
additions.
SUPPLEMENTARY INFORMATION: On
December 16, 2022, the Department of
State published a proposed rule (87 FR
77046), to include two new entries to
§ 120.54 of the International Traffic in
Arms Regulations (ITAR) to expand the
definition of ‘‘activities that are not
exports, reexports, retransfers, or
temporary imports.’’ Activities listed in
ITAR § 120.54 do not require an
authorization from the Department’s
Directorate of Defense Trade Controls
(DDTC). The Department has received
delegated authority under section 38 of
the Arms Export Control Act (AECA) (22
U.S.C. 2778) to issue regulations
regarding the export of defense articles
and defense services. It has long used
this authority to define what events are
controlled as exports and what events
are not. Moreover, section 38(b) of the
AECA also provides supporting
authority, as the Department may by
regulation except instances where a
license would otherwise be required.
Accordingly, the Department proposed
this rule to amend ITAR § 120.54 in two
ways. First, the proposed rule provided
that, subject to certain conditions, the
taking of U.S. defense articles outside a
previously approved country by the
armed forces of a foreign government or
United Nations personnel on a
deployment or training exercise is not
an export, reexport, retransfer, or
temporary import. Second, the proposed
rule provided that a foreign defense
article that enters the United States,
either permanently or temporarily, and
that is subsequently exported from the
United States pursuant to a license or
other approval under this subchapter, is
not subject to the reexport and retransfer
requirements of this subchapter,
provided it has not been modified,
enhanced, upgraded, or otherwise
altered or improved or had a U.S.-origin
defense article incorporated into it. In
that proposed rule, the Department
requested comments from the public.
The Department now provides
responses to those comments and
amends the ITAR, with changes from
the proposed rule, through this final
rulemaking.
Summary of Changes From the
Proposed Rule
The following are six changes the
Department made in this final rule since
the development and publication of the
December 16, 2022, proposed rule (87
FR 77046). First, to provide additional
clarity, the Department inverted the
order of proposed paragraphs (a)(6)(i)
E:\FR\FM\15AUR1.SGM
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Agencies
[Federal Register Volume 89, Number 158 (Thursday, August 15, 2024)]
[Rules and Regulations]
[Pages 66201-66210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17828]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 48
RIN 3038-AF37
Foreign Boards of Trade
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (CFTC or Commission)
is amending its regulations to permit a foreign board of trade (FBOT)
registered with the Commission to provide direct access to its
electronic trading and order matching system to an identified member or
other participant located in the United States and registered with the
Commission as an introducing
[[Page 66202]]
broker (IB) for submission of customer orders to the FBOT's trading
system for execution. The Commission is also establishing a procedure
for an FBOT to request revocation of its registration, and removing
certain outdated references to ``existing no-action relief.''
DATES: The rules will become effective September 16, 2024.
FOR FURTHER INFORMATION CONTACT: Alexandros Stamoulis, Associate
Director, Division of Market Oversight, Commodity Futures Trading
Commission, (646) 746-9792, [email protected], 290 Broadway, 6th
Floor, New York, NY 10007; Roger Smith, Associate Chief Counsel,
Division of Market Oversight, Commodity Futures Trading Commission,
(202) 418-5344, [email protected], 77 West Jackson Blvd., Suite 800,
Chicago, IL 60604; Jennifer Diamantis, Special Counsel, (202) 418-5762,
[email protected], Commodity Futures Trading Commission, Division of
Market Oversight, Three Lafayette Centre, 1151 21st Street NW,
Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Final Regulations
A. Section 48.4--Registration Eligibility and Scope
B. Section 48.8--Conditions of Registration
C. Section 48.9--Revocation of Registration
D. Section 48.6--Foreign Boards of Trade Providing Direct Access
Pursuant to Existing No-Action Relief
III. Related Matters
A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Cost Benefit Considerations
D. Antitrust Considerations
I. Background
Under part 48 of the Commission's regulations, an FBOT must be
registered with the Commission in order to provide its members or other
participants located in the United States with direct access to its
electronic trading and order matching system.\1\ Part 48 is authorized
by section 738 of the Dodd-Frank Act, which amended section 4(b) of the
Commodity Exchange Act (CEA), to provide that the Commission may adopt
rules and regulations requiring FBOTs that wish to provide U.S. persons
with direct access to register with the Commission.\2\ Prior to
enactment of the part 48 FBOT registration procedures in 2011, FBOTs
relied on no-action letters that were requested by the FBOT and issued
by Commission staff in order to provide direct access to U.S.
persons.\3\
---------------------------------------------------------------------------
\1\ See Registration of Foreign Boards of Trade, Final Rule, 76
FR 80674 (Dec. 23, 2011); 17 CFR part 48. ``Direct access'' is
defined as an explicit grant of authority by a foreign board of
trade to an identified member or other participant located in the
United States to enter trades directly into the trade matching
system of the foreign board of trade. CEA section 4(b)(1)(A), 7
U.S.C. 6(b)(1)(A); 17 CFR 48.2(c).
\2\ See Sec. 738, Dodd-Frank Wall Street Reform and Consumer
Protection Act, Public Law 111-203, 124 Stat. 1376, 1726-1728 (2010)
(codified at 7 U.S.C. 6(b)).
\3\ See 76 FR 80674 at 80674-80675.
---------------------------------------------------------------------------
Part 48 provides the procedures, requirements, and conditions to be
met by FBOTs that seek to provide their members and other participants
in the U.S. with direct access to the FBOT's trade matching system. The
regulations set forth, among other things, procedures an FBOT must
follow in applying for registration, requirements that an FBOT must
meet in order to obtain registration, conditions that an FBOT must
satisfy on a continuing basis upon obtaining registration, and
provisions for the termination of registration.
On March 1, 2024, the Commission released a proposal \4\ to amend
Sec. 48.4 to broaden the types of intermediaries eligible for direct
access for submission of customer orders to the FBOT to include IBs
registered with the Commission as such and located in the United
States.\5\ An IB is generally defined as an individual or organization
that solicits or accepts orders to buy or sell futures contracts,
commodity options, retail off-exchange forex or commodity contracts, or
swaps, but does not accept money or other assets from customers to
support these orders.\6\ Currently, Sec. 48.4 only includes certain
futures commission merchants (FCMs), commodity pool operators (CPOs),
and commodity trading advisors (CTAs) as intermediaries that are
eligible for entering orders on behalf of customers or commodity pools
(in the case of CPOs) via direct access on a registered FBOT.
---------------------------------------------------------------------------
\4\ Foreign Boards of Trade, 89 FR 15083 (Mar. 1, 2024) (the
Proposal).
\5\ Intermediaries are entities that act on behalf of another
person with respect to trading derivatives. They are generally
required to register with the Commission and, depending on the
nature of their activities, may be subject to various financial,
disclosure, reporting, and recordkeeping requirements.
\6\ 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 CEA; 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).
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In addition, the Proposal proposed to amend Sec. 48.9 to provide
registered FBOTs with a procedure to request revocation of their FBOT
registration. Further, the Commission proposed to delete Sec. 48.6,
which provides for an alternate registration procedure for FBOT's
operating under the preexisting staff no-action letter process, because
such no-action letter process and no-action letters are no longer in
effect.
The Commission received seven comment letters regarding the
Proposal.\7\ After considering the comments, the Commission is adopting
the rule amendments described herein as proposed. The Commission
believes the amendments are an appropriate response to market
developments that have occurred since part 48 was promulgated in 2011,
and will benefit affected markets and their participants by improving
competition, risk management and liquidity--while also maintaining the
Commission's longstanding protections available to U.S. customers that
trade foreign futures and options.
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\7\ The following persons and entities submitted relevant
comment letters: Everett Mein, Eurex Deutschland (Eurex), Futures
Industry Association (FIA), Intercontinental Exchange Inc. (ICE),
New Zealand Exchange Limited (NZX), NIBA, and the Wholesale Markets
Brokers' Association, Americas (WMBAA).
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II. Final Regulations
A. Section 48.4--Registration Eligibility and Scope
1. Proposed Regulations
The Commission proposed to amend Sec. 48.4(b) to permit FBOTs to
provide direct access to eligible IBs to enter orders directly into an
FBOT's trading and order matching system on behalf of U.S.
customers.\8\ Section 48.4(b)
[[Page 66203]]
identifies the types of members or other participants located in the
U.S. that may enter orders directly into the trading and order matching
system of a registered FBOT, and the types of accounts for which orders
may be submitted by such members or other participants. In this regard,
the types of members or other participants identified in existing Sec.
48.4(b) represent the types of members or other participants that were
trading via direct access on FBOTs that operated in reliance on CFTC
staff no-action letters at the time part 48 was promulgated.\9\
Specifically, Sec. 48.4(b)(1) provides that any member or other
participant located in the U.S. may enter orders for their proprietary
accounts.\10\ Further, Sec. 48.4(b)(2) provides that registered FCMs
may submit orders on behalf of their customers. Section 48.4(b)(3)
permits certain CPOs to submit orders on behalf of U.S. commodity pools
and certain CTAs to submit orders on behalf of U.S. customers provided,
however, all trades by the CPO or CTA effected through submission of
such orders are guaranteed by a clearing firm registered as an FCM or
exempt from FCM registration pursuant to Sec. 30.10.\11\ The
Commission proposed to amend Sec. 48.4(b) by inserting a new paragraph
(b)(4) to provide that eligible IBs may submit orders on behalf of
their customers, provided that a registered FCM or firm exempt from FCM
registration pursuant to Sec. 30.10 acts as a clearing firm and
guarantees all trades of the IB effected through submission of U.S.
customer orders to the trading system. The Commission also proposed to
amend paragraph (b)(3) to insert the words ``registered as such''
following ``futures commission merchant'' to clarify that the reference
is limited to FCMs registered with the Commission as such.\12\
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\8\ The term ``eligible IB'' is used in this release to mean an
IB that is located in the United States and registered with the
Commission as an IB. Direct access, as defined in the CEA and part
48, refers explicitly to members or other participants of an FBOT
that are located in the United States. See footnote 1, supra. For
purposes of this rulemaking and as used herein, the terms ``U.S.
customer'' and ``United States customer'' refer to customers located
in the United States, its territories or its possessions.
\9\ See Registration of Foreign Boards of Trade, Notice of
Proposed Rulemaking, 88 FR 61432, 70977 (Nov. 19, 2010).
\10\ Under Sec. 48.2(l), member or other participant is defined
as a member or other participant of an FBOT and any affiliate
thereof that has been granted direct access by the FBOT. 17 CFR
48.2(l). Proprietary account is defined in Sec. 1.3, 17 CFR 1.3.
\11\ A Sec. 30.10 exemptive order permits firms subject to
regulation by a foreign regulator to conduct business from locations
outside of the U.S. for U.S. persons on FBOTs without registering as
FCMs, based upon the firm's substituted compliance with a foreign
regulatory structure found comparable to that administered by the
Commission under the CEA. Used herein, U.S. commodity pool refers to
a commodity pool that does not meet the criteria set forth in Sec.
3.10(c)(5)(iii)(A) through (F), 17 CFR 3.10(c)(5)(iii)(A) through
(F).
\12\ The addition of the words ``registered as such'' here is
intended as a technical change rather than a substantive change;
i.e., that the reference is intended to refer to registered FCMs is
already implied by the subsequent clause ``or a firm exempt from
such registration . . .''
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Direct access is defined in the CEA and part 48 of the Commission's
regulations to mean an explicit grant of authority by an FBOT to an
identified member or other participant located in the U.S. to enter
trades directly into the trade matching engine of the FBOT.\13\ This
means that the FBOT, as opposed to its members or participants, has
identified and permitted a member or participant to enter trades
directly into the FBOT's order matching and trade entry system from the
United States.\14\ For example, a registered FBOT may authorize its
members or other participants eligible to handle U.S. customer orders
to enter orders on behalf of their U.S. customers or to otherwise
permit their U.S. customers to access the trading system using the
member's or participant's identifier and grant of authority. In such
cases the FBOT permits an identified exchange member or other
participant to allow their U.S. customers, who have not been granted
direct access by the FBOT, to have access to the exchange's trading
systems, subject to a guarantee from an exchange member or other
participant. The proposed amendment to Sec. 48.4(b) would permit
registered FBOTs to grant explicit authority to eligible IBs to act in
such capacity, provided that all trades effected by the IB through
submission of U.S. customer orders are guaranteed by a registered FCM
or a firm exempt from FCM registration pursuant to Sec. 30.10.
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\13\ CEA section 4(b)(1)(A), 7 U.S.C. 6(b)(1)(A); 17 CFR
48.2(c).
\14\ Conversely, a person located in the U.S. who accesses an
FBOT through an intermediary (whether such intermediary is located
in the United States or not) and without an explicit grant of
authority by the FBOT (i.e., such person is not an identified member
or other participant of the FBOT) would not meet the definition of
``direct access'' for purposes of part 48. See, e.g., 76 FR 80674 at
80688.
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2. Public Comments
All comment letters received generally support the proposed
amendment to Sec. 48.4(b) to permit registered FBOTs to provide direct
access to eligible IBs to enter orders on behalf of U.S. customers.\15\
Commenters agree that permitting eligible IBs to submit customer orders
via direct access to FBOTs would benefit affected markets and market
participants.\16\ Several commenters observe that markets have evolved
and the role of IBs serving as executing brokers has grown since the
Commission's adoption of part 48 in 2011.\17\ In light of these
changes, commenters support the Commission's efforts to update part 48
to ensure that its regulations remain current and reflect changes in
the market.\18\ Commenters further opine that the Proposal, if adopted,
is likely to: provide greater customer choice in, and promote fair
competition among, brokers; \19\ improve the ability for U.S.
participants to manage risk; \20\ and increase liquidity in affected
markets.\21\
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\15\ See Eurex Letter; FIA Letter; ICE Letter; Mein Letter; NZX
Letter; NIBA Letter; and WMBAA Letter.
\16\ See Eurex at 1-4; FIA at 2; ICE at 2; Mein at 5-6, 8 NIBA
at 2; WMBAA at 2.
\17\ See Eurex at 3-4; FIA at 2; WMBAA at 2.
\18\ See Eurex at 2-4; WMBAA at 2.
\19\ See FIA at 2; NZX at 1; NIBA at 2; WMBAA at 2-3.
\20\ See Eurex at 3-4; FIA at 2; WMBAA at 2; NIBA at 1.
Commenters specifically note that the Proposal would allow U.S.
participants to better conduct risk management by enabling on-
exchange trades in foreign markets through IBs during the U.S.
business day following the close of European markets. Id.
\21\ ICE posits that the proposed changes to Sec. 48.4 would
enable additional types of market participants to access FBOTs,
which would improve liquidity and reduce fragmentation while
promoting competitiveness in derivatives markets. ICE at 2. NIBA and
WMBAA generally state that they believe the Proposal would improve
liquidity. NIBA at 2; WMBAA at 2.
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The Commission received several comments specifically in support of
the proposed condition in Sec. 48.4(b)(4) requiring U.S. customer
orders submitted by IBs to be guaranteed by a registered FCM or a firm
exempt from FCM registration pursuant to Sec. 30.10.\22\ Commenters
note that they support the proposed condition because it would extend
access to IBs located in the U.S. on the same terms that U.S. CPOs and
CTAs currently access FBOTs.\23\
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\22\ See FIA at 2; Eurex at 3-4, 6, 8; ICE at 2; NIBA at 2; NZX
at 1.
\23\ Id. Eurex further states that it does not believe there is
any reason to require a different standard for IBs than what is
presently required for CPOs or CTAs, and asserts that the
Commission's framework for assessing applications for exemptions
under Sec. 30.10 provides a comprehensive and robust process to
assess whether the foreign jurisdiction offers a comparable
regulatory scheme (including with respect to the protection of
customer funds, and anti-money laundering (AML)). Eurex at 6-7. ICE
states that the condition reflects the different ways U.S. customers
access clearing and avoids unnecessary limitations on customers
trading through FBOTs. ICE at 2. Further, Eurex states that it does
not believe there is any additional information the Commission
should receive from FBOTs that provide direct access to IBs under
the proposed amendment to Sec. 48.4(b)(4). Eurex at 8. Eurex notes
that all quarterly, annual, and prompt-notice reporting requirements
that pertain to an FBOT's members under Sec. 48.8(b)(1) would apply
to IBs as well as existing categories of participants. Eurex at 8.
In addition, Eurex asserts that IBs are already subject to a wide
range of CFTC and NFA regulatory record keeping and reporting
requirements, which provides the Commission with the necessary
reporting for oversight. Eurex at 8. Eurex further opines that it
does not believe there are any additional registration requirements
under Sec. 48.7 that the Commission should consider for FBOTs that
provide direct access to IBs under proposed Sec. 48.4(b)(4). Eurex
at 7.
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[[Page 66204]]
Two commenters requested clarification that proposed Sec.
48.4(b)(4) would permit IBs to submit block trades to an FBOT (or
otherwise not prohibit them from doing so).\24\
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\24\ See Eurex at 4; WMBAA at 3. In addition, WMBAA requests
clarification as to whether permitting IBs located in the U.S. to
engage in block trades would require an unregistered foreign board
of trade to be registered as an FBOT under part 48. WMBAA at 3.
Generally speaking, a board of trade that is not a designated
contract market (DCM) or registered FBOT may, depending on the
nature of its activities within the United States, be liable for
violating section 4(a) of the CEA, 7 U.S.C. 6(a). Without knowing
the specifics of how each potential unregistered foreign board of
trade operates with respect to block trades involving IBs located in
the U.S. as well as other U.S. located participants, the Commission
is not in a position to opine generally on WMBAA's request. However,
the Commission notes that unregistered foreign boards of trade
seeking guidance concerning FBOT registration and its application to
their particular operations may request informal guidance from the
Division of Market Oversight.
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3. Commission Determination
The Commission is adopting, as proposed and as supported by
commenters, the amendment to Sec. 48.4(b) to permit FBOTs to provide
direct access to eligible IBs to enter orders directly into an FBOT's
trading and order matching system on behalf of U.S. customers.\25\ The
Commission agrees with commenters that permitting eligible IBs to
submit customer orders via direct access to FBOTs would benefit market
participants and affected markets,\26\ and is an appropriate update to
part 48 of the Commission's regulations given the increased role that
IBs now serve in derivatives markets.\27\ As discussed above, existing
Sec. 48.4(b) permits registered FBOTs to provide direct access to
eligible FCMs, CPOs and CTAs for submission of client orders. DCMs may
provide for IBs to act as executing brokers for customer accounts that
in turn use FCM clearing members to whom executed trades are given up
for clearing and through which such customer accounts are carried.\28\
FBOTs may similarly permit IBs located outside of the United States to
enter trades directly into the trading system of the FBOT on behalf of
their customer accounts.\29\ The Commission agrees with commenters that
the amendment to Sec. 48.4 will permit registered IBs located in the
U.S. to act in a comparable capacity on registered FBOTs in cases where
an FBOT grants direct access to the IB for the purpose of submitting
customer orders for execution.\30\ The Commission believes, as
supported by commenters, that allowing eligible IBs to have direct
access to registered FBOTs to execute transactions on behalf of their
U.S. clients is likely to: provide U.S. market participants that wish
to trade in foreign derivatives contracts with greater choice in
brokers and broker arrangements, and increase competition among firms
offering execution brokerage services to customers on registered FBOTs;
\31\ improve the ability for U.S. participants to manage risk; \32\ and
increase liquidity on affected markets.\33\ The Commission furthermore
believes, as supported by commenters, that permitting U.S. IBs access
to FBOTs on par with FCMs, CPOs, CTAs, and foreign brokers will not
undermine or otherwise adversely affect protections available to U.S.
customers because their trades must be guaranteed by a registered FCM
or firm exempt from FCM registration under Sec. 30.10,\34\ and will be
subject to required risk disclosures relating to foreign futures and
options transactions.\35\
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\25\ See Eurex Letter; FIA Letter; ICE Letter; NZX Letter; NIBA
Letter; WMBAA Letter; and Mein Letter.
\26\ See Eurex at 1-4; FIA at 2; ICE at 2, NIBA at 2; Mein at 5-
6, 8.
\27\ See Eurex at 3-4; FIA at 2; WMBAA at 2.
\28\ The Commission also agrees with ICE that the amendment to
48.4(b) ``would establish a similar structure that is already in
place on [DCMs] whereby IBs submit customer orders via direct
electronic access.'' ICE at 2.
\29\ See Eurex at 3; WMBAA at 3.
\30\ See WMBAA at 2-3. See also Eurex at 4; FIA at 2.
\31\ See FIA at 2; NZX at 1; NIBA at 2; WMBAA at 2-3.
\32\ See Eurex at 3-4; FIA at 2; WMBAA at 2; NIBA at 1.
\33\ See footnote 21, supra.
\34\ Including the provision relating to the guarantee of U.S.
customer trades in new Sec. 48.4(b)(4) will ensure that U.S.
customer trades executed by eligible IBs via direct access are
guaranteed by a firm that is registered as an FCM or exempt from FCM
registration under Sec. 30.10. In so doing, the final rule will act
to reinforce adherence with part 30, insofar as part 30 generally
requires intermediaries holding funds of U.S. customers in
connection with the offer or sale of foreign futures and options to
be registered as FCMs or exempt from FCM registration under Sec.
30.10. Part 30 of the Commission's regulations governs the offer and
sale of foreign futures and options to customers located in the
United States. These regulations are designed to carry out
Congress's intent that foreign futures and options offered or sold
in the U.S. be subject to regulatory safeguards comparable to those
applicable to domestic transactions. Section 30.4 of the
Commission's regulations requires that in order to accept any money,
securities or property (or extend credit in lieu thereof) to margin,
guarantee or secure transactions conducted by U.S. persons on an
FBOT, a person must be registered as an FCM. See 17 CFR 30.4(a). The
Commission may grant and has granted exemptions to this requirement
to register as an FCM based on petitions filed pursuant to 17 CFR
30.10. See footnote 11, supra. See also Eurex at 5-7; ICE at 2.
\35\ Section 30.6 of the Commission's regulations requires FCMs
and IBs to provide a statement to customers disclosing the risks of
trading foreign futures and options outside the United States. 17
CFR 30.6. This requirement also applies to exempt foreign IBs, CPOs,
and CTAs. 17 CFR 30.5(c). Petitions for exemptive relief under Sec.
30.10 for firms seeking an exemption from FCM registration must
demonstrate that such firms are subject to a comparable regulatory
program that includes, among other elements, minimum sales practice
standards, including ``disclosure of the risks of futures and
options transactions and, in particular, the risk of transactions
undertaken outside the jurisdiction of domestic law.'' 17 CFR part
30, Appendix A, Sales Practice Standards. See also Eurex at 4.
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Therefore, for the reasons stated above, the Commission is adopting
as proposed the amendment to Sec. 48.4(b) to permit FBOTs to provide
direct access to eligible IBs to enter orders directly into an FBOT's
trading and order matching system on behalf of U.S. customers.
Eurex and WMBAA each requested that the Commission clarify that the
Proposal would permit IBs to submit block trades to an FBOT (or
otherwise not prohibit them from doing so).\36\ Section 48.4(b)
provides that an FBOT may apply for registration under part 48 ``in
order to permit the members and other participants of the [FBOT] that
are located in the United States to enter trades directly into the
trading and order matching system of the foreign board of trade[. .
.].'' \37\ The Commission confirms and clarifies that this may include
block trades submitted to an FBOT. As such, and for the avoidance of
doubt, an FBOT registered under part 48 is not prohibited by this final
rule from allowing an eligible IB to which it has granted direct access
to submit block trades to the FBOT on behalf of the IB's U.S. clients.
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\36\ See Eurex at 4; WMBAA at 3.
\37\ 17 CFR 48.4(b).
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B. Section 48.8--Conditions of Registration
1. Proposed Regulations
The Commission proposed conforming amendments that will include
eligible IBs in Sec. Sec. 48.8(a)(4)(ii) and (a)(5)(i) and (iii)
alongside FCMs, CPOs and CTAs.
Section 48.8(a)(4)(ii) requires all orders transmitted via direct
access and pursuant to an FBOT's registration to be for a member's or
other participant's proprietary trading account unless transmitted by a
registered FCM, CPO or CTA (or exempt CPO or CTA). The Commission
proposed to include IBs in this section along with FCMs, CPOs and CTAs,
to conform with the proposed changes to Sec. 48.4(b) that would allow
[[Page 66205]]
eligible IBs to transmit orders via direct access on behalf of the
accounts of their customers. The Commission also proposed to add the
words ``registered as such'' following the final reference to ``futures
commission merchant'' in Sec. 48.8(a)(4)(ii) to conform to the
proposed amendment to Sec. 48.4(b)(3).\38\
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\38\ See footnote 12, supra, and accompanying text.
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Section 48.8(a)(5)(i) provides that a registered FBOT must require
each current and prospective member or other participant granted direct
access and not registered with the Commission as an FCM, CPO or CTA to
agree to and submit to the jurisdiction of the Commission with respect
to activities conducted pursuant to the FBOT's registration. Registered
FCMs, CPOs and CTAs are excluded from this requirement because they are
otherwise subject to the jurisdiction of the Commission as Commission
registrants. Registered IBs are likewise subject to the jurisdiction of
the Commission as registrants and the Commission therefore proposed to
include IBs alongside FCMs, CPOs and CTAs in Sec. 48.8(a)(5)(i).
Section 48.8(a)(5)(iii) provides that a registered FBOT, its
clearing organization, and each current and prospective member or other
participant granted direct access that is not registered with the
Commission as an FCM, CPO or CTA must maintain with the FBOT written
representations stating that such entity will provide prompt access to
books, records, and premises upon the request of the Commission, U.S.
Department of Justice and, if appropriate, the National Futures
Association (NFA). Registered FCMs, CPOs and CTAs are excluded from
this requirement because they are otherwise required to provide such
access to books, records, and premises as Commission registrants and,
where applicable, NFA members.\39\ Registered IBs, as Commission
registrants and NFA members, are likewise required to provide such
access to books, records, and premises by the Commission, U.S.
Department of Justice, and NFA, and the Commission therefore proposed
to include IBs alongside FCMs, CPOs and CTAs in Sec. 48.8(a)(5)(iii).
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\39\ Subpart C of part 170 of the Commission's regulations
provides for certain exceptions to the general requirement that
Commission-registered FCMs and CTAs must become NFA members. See 17
CFR 170.15 and 170.17.
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2. Public Comments
The Commission received no comments regarding the proposed
conforming amendments to include eligible IBs in Sec. Sec.
48.8(a)(4)(ii) and (a)(5)(i) and (iii) alongside FCMs, CPOs and CTAs.
3. Commission Determination
The Commission is adopting, as proposed, the amendments to
Sec. Sec. 48.8(a)(4)(ii) and (a)(5)(i) and (iii).
C. Section 48.9--Revocation of Registration
1. Proposed Regulations
The Commission proposed to amend Sec. 48.9 to establish a
procedure for FBOTs to request voluntary revocation of registration.
Section 48.9 addresses certain events which could lead the Commission
to revoke an FBOT's registration, including the failure to satisfy
registration requirements or conditions, and certain other specified
events.\40\ However, part 48 presently does not contain any provisions
for an FBOT to request voluntary revocation of its registration. In
order to allow registered FBOTs to more easily ascertain the steps
required to request revocation, the Commission proposed to amend Sec.
48.9(b) (``Other Events that Could Result in Revocation'') by adding a
new paragraph (b)(5).
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\40\ See 17 CFR 48.9.
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2. Public Comments
The Commission received one comment regarding the proposed
amendments to Sec. 48.9 to establish a procedure for FBOTs to request
voluntary revocation of registration. NZX commented that it supports
the introduction of a revocation process for FBOTs because it will
provide greater certainty for entities that no longer wish to retain
their status as a registered FBOT.\41\
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\41\ NZX at 3.
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3. Commission Determination
The Commission agrees with NZX that the amendment will provide
greater certainty for entities that no longer wish to retain their
status as a registered FBOT.\42\ Therefore, for the reasons stated
above and as supported by public comment, the Commission is adopting as
proposed the addition of Sec. 48.9(b)(5) which makes clear that the
Commission may revoke an FBOT's registration in response to a voluntary
request by an FBOT to do so, and provides that an FBOT can make such
request via email to the Commission.
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\42\ Id.
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D. Section 48.6--Foreign Boards of Trade Providing Direct Access
Pursuant to Existing No-Action Relief
1. Proposed Regulations
Section 48.6 provides for a limited registration application
procedure for FBOTs that had been operating under existing staff no-
action letters and FBOTs that had submitted a complete application for
a staff no-action letter that was pending as of the effective date of
part 48. Those limited application provisions are no longer applicable
because all FBOTs with previously existing staff no-action letters have
been registered under part 48 and all such no-action letters have been
revoked. Accordingly, the Commission proposed to delete Sec. 48.6. As
a conforming amendment the Commission also proposed to delete Sec.
48.2(h) (definition of ``existing no-action relief'') as that
definition will no longer be applicable or necessary once existing
Sec. 48.6 is removed.
2. Public Comments
The Commission received one comment generally in support of the
proposed deletion of Sec. 48.6 and the conforming deletion of Sec.
48.2(h).\43\
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\43\ NZX states that it supports the removal of Sec. 48.6,
which is obsolete, and the removal of Sec. 48.2(h) as a conforming
amendment. NZX at 3.
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3. Commission Determination
Therefore, for the reasons stated above, the Commission is adopting
as proposed the deletion of Sec. 48.6 and the conforming deletion of
Sec. 48.2(h).
III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires agencies to consider
whether the regulations they promulgate will have a significant
economic impact on a substantial number of small entities and, if so,
provide a regulatory flexibility analysis with respect to such
impact.\44\ The Commission has previously established certain
definitions of ``small entities'' to be used by the Commission in
evaluating the impact of its regulations on small entities in
accordance with the RFA.\45\ The amendments to part 48 would impact
FBOTs. The Commission has previously determined that FBOTs are not
small entities for purposes of the RFA.\46\
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\44\ 5 U.S.C. 601 et seq.
\45\ See Policy Statement and Establishment of ``Small
Entities'' for purposes of the Regulatory Flexibility Act, 47 FR
18618 (Apr. 30, 1982).
\46\ 76 FR 80698.
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The amendments to part 48 would also impact eligible IBs by
providing
[[Page 66206]]
them with the potential to gain direct access to FBOTs that incorporate
the new regulatory provisions allowing such IBs direct access. The
Commission has previously established that IBs may in some cases be
deemed ``small entities'' for the purposes of the RFA.\47\ However, the
final rules do not impose any new burden on eligible IBs. Instead, the
final rules would remove a regulatory barrier preventing these small
entities from accessing FBOTs. Accordingly, the Commission believes
that the regulation will be less burdensome to small-entity, eligible
IBs and will not impose any additional costs on them.
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\47\ 85 FR 78718, 78733 (Dec. 7, 2020).
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Therefore, the Chairman, on behalf of the Commission, pursuant to 5
U.S.C. 605(b), hereby certifies that the final rules will not have a
significant economic impact on a substantial number of small entities.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA) \48\ imposes certain
requirements on Federal agencies (including the Commission) in
connection with conducting or sponsoring any ``collection of
information,'' \49\ as defined by the PRA. Under the PRA, an agency may
not conduct or sponsor, and a person is not required to respond to, a
collection of information unless it displays a currently valid control
number from the Office of Management and Budget (OMB).\50\ The PRA is
intended, in part, to minimize the paperwork burden created for
individuals, businesses, and other persons as a result of the
collection of information by Federal agencies, to ensure the greatest
possible benefit and utility of information created, collected,
maintained, used, shared, and disseminated by or for the Federal
Government.\51\ The PRA applies to all information, ``regardless of
form or format,'' whenever the government is obtaining, causing to be
obtained, or soliciting information, and includes required disclosure
to third parties or the public, of facts or opinions, when the
information collection calls for answers to identical questions posed
to, or identical reporting or recordkeeping requirements imposed on,
ten or more persons.\52\
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\48\ 44 U.S.C. 3501 et seq.
\49\ See 44 U.S.C. 3502(3)(A).
\50\ See 44 U.S.C. 3507(a)(3); 5 CFR 1320.5(a)(3).
\51\ See 44 U.S.C. 3501.
\52\ See 44 U.S.C. 3502(3).
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This final rulemaking amends regulations that contain collections
of information for which the Commission has previously received a
control number from OMB: 3038-0101, Registration of Foreign Boards of
Trade (17 CFR part 48).\53\ This collection addresses the information
collection requirements associated with part 48's registration
requirement and related registration procedures and conditions that
apply to FBOTs that wish to provide direct access to their electronic
trading and order matching systems. The final rulemaking allows
eligible IBs to act as direct access participants on registered FBOTs,
provides a process for FBOTs to request voluntary revocation of their
registration, and removes outdated references to ``no action relief.''
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\53\ The Commission's most recent burden estimates for this
collection are available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202301-3038-001.
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The Commission believes that these amendments do not contain any
new collections of information and will not increase the burden
associated with the information collections under part 48. While the
amendments establish a new process for FBOTs to submit requests for
revocation of their registration, the regulations allow FBOTs to submit
their requests electronically via email to the Commission and do not
mandate any specific form or format for such requests. Accordingly,
this new submission method does not constitute a collection of
information under the PRA. In addition, the amendments do not affect
the provisions of part 48 covered in the current PRA approval (Sec.
48.8 (periodic data submissions to the Commission), Sec. 48.9
(demonstration of compliance); and Sec. 48.10 (listing additional
futures and options contracts)). Accordingly, the Commission is
retaining its existing estimates for the burden associated with the
information collections under OMB Collection 3038-0101. The Commission
received no comments related to the PRA analysis or this determination.
C. Cost-Benefit Considerations
1. Introduction
Section 15(a) of the CEA \54\ requires the Commission to ``consider
the costs and benefits'' of its actions before promulgating a
regulation under the CEA or issuing certain orders. CEA section 15(a)
further specifies that the costs and benefits shall be evaluated in
light of five broad areas of market and public concern: (1) protection
of market participants and the public; (2) efficiency, competitiveness,
and financial integrity of futures markets; (3) price discovery; (4)
sound risk management practices; and (5) other public interest
considerations. The Commission considers the costs and benefits
resulting from its discretionary determinations with respect to the CEA
section 15(a) factors.
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\54\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------
The Commission has endeavored to assess the expected costs and
benefits of the amendments in quantitative terms, including Paperwork
Reduction Act (PRA)-related costs, where practicable. In situations
where the Commission is unable to quantify the costs and benefits, the
Commission identifies and considers the costs and benefits of the
applicable amendments in qualitative terms. The Commission did not
receive any comments from commenters which quantified or attempted to
quantify the costs and benefits of the Proposal.
The Commission notes that this consideration of costs and benefits
is based on, inter alia, its understanding that the derivatives markets
regulated by the Commission function internationally, with (1)
transactions that involve entities organized in the United States
occurring across different international jurisdictions, (2) some
entities organized outside of the United States that are prospective
Commission registrants, and (3) some entities that typically operate
both within and outside the United States, and that follow
substantially similar business practices wherever located. Where the
Commission does not specifically refer to matters of location, the
discussion of costs and benefits below refers to the effects of the
regulations on all relevant derivatives activity, whether based on
their actual occurrence in the United States or on their connection
with activities in, or effect on, U.S. commerce.\55\
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\55\ See, e.g., 7 U.S.C. 2(i).
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In the following consideration of costs and benefits, the
Commission first identifies and discusses the benefits and costs
attributable to the rule amendments. The Commission, where applicable,
then considers the costs and benefits of the rule amendments in light
of the five public interest considerations set out in section 15(a) of
the CEA.
2. Final Regulations
The Commission is amending certain rules in part 48 of its
regulations relating to FBOTs. The Commission identifies the costs and
benefits of the amendments relative to the baseline of the regulatory
status quo. In particular, the baseline against which the Commission
considers the costs and benefits of these rule amendments is the
statutory and regulatory requirements of the CEA and Commission
regulations
[[Page 66207]]
now in effect, in particular CEA section 4(b) and part 48 of the
Commission's regulations.
Amendments to Sec. 48.6
The final rules delete Sec. 48.6, which provided for an alternate
registration procedure for FBOTs acting under the preexisting staff no-
action letter process, because such no-action letter process and no-
action letters are no longer in effect. Deletion of Sec. 48.6 and
elimination of the alternate registration procedure will not increase
costs to FBOTs because Sec. 48.6 and the alternate registration
procedure are already in effect obsolete.
Amendments to Sec. 48.9
The amendment to Sec. 48.9 establishes a procedure for FBOTs to
request voluntary revocation of registration. This amendment would not
impose a new requirement for FBOTs. The baseline is the current
practice of the Commission, whereby requests for voluntary revocation
are processed on an ad-hoc basis. The primary benefit will be to allow
registrants to more easily ascertain the steps required to request
revocation. The amendments are not expected to increase costs to
registered FBOTs compared to the status quo.
Amendments to Sec. 48.4 and Conforming Amendments to Sec. 48.8
The amendments to Sec. 48.4 and conforming amendments to Sec.
48.8 permit a registered FBOT to provide direct access to its
electronic trading and order matching system to an identified member or
other participant located in the U.S. and registered with the
Commission as an IB for submission of customer orders to the FBOT's
trading system for execution, provided that all trades effected through
submission of U.S. customer orders are guaranteed by a registered FCM
or a firm exempt from FCM registration pursuant to Sec. 30.10.
There are presently 24 FBOTs registered with the Commission. Under
the current rules, eligible intermediaries permitted direct access on
registered FBOTs for purposes of entering trades on behalf of non-
proprietary client accounts include certain FCMs, CTAs, and CPOs. The
amendments would add eligible IBs to the existing list of eligible
intermediaries. Similar to trades submitted by CTAs and CPOs via direct
access, the trades executed by eligible IBs on behalf of customers
located in the U.S. would be required to be guaranteed by a registered
FCM or a firm exempt from FCM registration pursuant to Sec. 30.10. IBs
specialize in soliciting and executing orders for their clients. The
field of trade execution is continuously evolving with technological
advances, and has helped bring down execution costs. As of July 2024,
the following numbers of intermediaries were registered with the
Commission.\56\
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\56\ NFA website, https://www.nfa.futures.org/registration-membership/membership-and-directories.html.
Intermediaries Registered With the Commission as of July 2024
------------------------------------------------------------------------
------------------------------------------------------------------------
CTAs \1\.................................................... 1,237
CPOs \1\.................................................... 1,188
IBs......................................................... 919
FCMs........................................................ 62
Swap Dealers................................................ 107
------------------------------------------------------------------------
\1\ These categories are not mutually exclusive, i.e., a CPO may also be
registered as a CTA.
The table above shows that the number of IBs is more than one
quarter of all Commission-registered intermediaries. The Commission
does not know how many FBOTs will choose to provide direct access to
eligible IBs for purposes of entering trades on behalf of non-
proprietary client accounts or how many eligible IBs will become direct
access members or participants of registered FBOTs pursuant to this
final rule. There could also be new IB entrants that are granted direct
access to registered FBOTs. However, by permitting FBOTs the option to
provide direct access to eligible IBs for submission of customer
orders, the amendments could lead to a significant increase in the
number of choices for U.S. customers with respect to execution of
trades on FBOTs.
Although the Commission lacks the data and information to
quantitatively estimate the costs and benefits of permitting IBs
located in the U.S. to have direct access to registered FBOTs pursuant
to this final rule, it has endeavored to assess the expected costs and
benefits of the proposal in qualitative terms. The lack of data and
information to estimate costs is attributable in part to uncertainty
regarding how FBOTs will choose to respond to the amendments to part 48
and how IBs located in the U.S. will choose to respond to potential new
opportunities to participate on registered FBOTs.
The baseline is the status quo in which Sec. 48.4 permits FBOTs to
provide direct access to certain FCMs, CPOs and CTAs for purposes of
transmission of orders for certain client accounts. Furthermore,
foreign IBs not located in the U.S. may have similar arrangements on
FBOTs whereby their customer orders are transmitted to an FBOT.\57\ IBs
are not included in Sec. 48.4 as intermediaries eligible to have
direct access and transmit trades on behalf of customers. As such,
registered FBOTs currently do not provide direct access to IBs located
in the United States to enter orders on behalf of their customers.
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\57\ The definition of ``direct access'' does not include
identified members or other participants of an FBOT that are located
outside of the United States. See 17 CFR 48.2(c).
---------------------------------------------------------------------------
Relative to the baseline, the primary effect of the amendment to
Sec. 48.4 is to allow registered FBOTs to provide direct access to
eligible IBs in order to transmit orders of U.S. customers. This could
promote competition among execution-only brokers on registered FBOTs.
There may be advantages to customers from having additional choices in
brokers and brokerage arrangements to trade foreign derivatives on
registered FBOTs--for example, lower trading costs or the use of
advantageous proprietary execution algorithms developed by such IBs.
Several commenters assert that the amendments will allow U.S.
participants to better conduct risk management by enabling trades to be
submitted to FBOTs through IBs during the U.S. business day following
the close of European markets.\58\ From the standpoint of registered
FBOTs, allowing eligible IBs to become direct access participants for
submission of customer orders will open up potential new distribution
channels that could lead to additional trading volume. This in turn
could improve the viability of some traded instruments. Similarly,
eligible IBs may be able to pursue new business models and/or expand
existing business models onto new foreign markets.
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\58\ Eurex at 3-4; FIA at 2; NIBA at 1.
---------------------------------------------------------------------------
FBOTs that decide to provide direct access to eligible IBs pursuant
to this final rule and that do not already have necessary structures in
place to do so may incur certain costs relating to, for example,
modification of rules, procedures and/or systems to enable direct
access to eligible IBs to submit customer orders to the FBOT's trading
system for execution.
The Commission did not receive any comments which quantified or
attempted to quantify any of the costs and benefits described above, or
which quantified or attempted to quantify any other costs or benefits
associated with eligible IBs having direct access to registered FBOTs.
Section 15(a) Factors
Section 15(a) of the CEA requires the Commission to consider the
costs and
[[Page 66208]]
benefits of the amendments to part 48 with respect to the following
factors: protection of market participants and the public; efficiency,
competitiveness, and financial integrity of markets; price discovery;
sound risk management practices; and other public interest
considerations.
(i) Protection of Market Participants and the Public
The changes to part 48 would not affect the basic protection for
customers with respect to their foreign futures and options
transactions. Under the rule, U.S. customer assets are required to be
maintained by registered FCMs or similar entities exempt from FCM
registration pursuant to Sec. 30.10.
(ii) Efficiency, Competitiveness, and Financial Integrity of Markets
The current part 48 treats IBs differently from certain FCMs, CTAs
and CPOs in that certain FCMs, CTAs and CPOs have the ability to be
granted direct access to registered FBOTs for the submission of client
orders. Similarly, non-U.S. intermediaries (which are outside of the
scope of part 48) may also, under the status quo, be granted similar
access to registered FBOTs for the purpose of offering execution
services to U.S. and non-U.S. customers. The adopted amendments to part
48 will permit eligible IBs to offer competing execution services on
registered FBOTs. The adopted amendments may also open access to
foreign derivatives markets for existing IB customers that otherwise
would not have access to trading on a registered FBOT (i.e., customers
that choose not to or cannot become direct access participants or
otherwise seek out an eligible FCM, CPO, CTA, or foreign broker to
transact on an FBOT). Greater competition among introducing brokers and
potentially additional and new types of customers participating in
affected markets may lead to increased market efficiencies and greater
financial integrity. Furthermore, that trades of U.S. customers must be
guaranteed by registered FCMs or comparable foreign firms promotes the
financial integrity of affected markets by ensuring that intermediaries
handling U.S. customer funds are subject to certain regulatory
safeguards.
(iii) Price Discovery
There is a potential for the adopted changes to part 48 to
positively affect price discovery in futures markets. Participation of
eligible IBs as direct access members may lead to increased
participation and volume on registered FBOTs, in particular during
hours when U.S. brokers are more active than foreign brokers.
(iv) Risk Management Practices
As noted above, the changes will not affect how customer assets are
treated. However, registered FCMs and firms exempt from FCM
registration pursuant to Sec. 30.10 may need to expand their risk
mitigation processes to ensure that they have robust processes for
managing the risk associated with eligible IBs executing trades on
registered FBOTs via direct access.
(v) Other Public Interest Considerations
As noted above, the changes may enable new and distinct kinds of
market participants to access registered FBOTs, which could help
improve liquidity and reduce fragmentation in affected markets.
D. Antitrust Considerations
Section 15(b) of the CEA requires the Commission to take into
consideration the public interest to be protected by the antitrust laws
and endeavor to take the least anticompetitive means of achieving the
purposes of this Act, in issuing any order or adopting any Commission
rule or regulation (including any exemption under section 4(c) or
4c(b)), or in requiring or approving any bylaw, rule, or regulation of
a contract market or registered futures association established
pursuant to section 17 of this Act.\59\
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\59\ 7 U.S.C. 19(b).
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The Commission believes that the public interest to be protected by
the antitrust laws is generally to protect competition. The Commission
has considered the modified rule to determine whether it is
anticompetitive and has identified no anticompetitive effects.\60\
Because the Commission has determined that the modified rule is not
anticompetitive and has no anticompetitive effects, the Commission has
not identified any less anticompetitive means of achieving the purposes
of the Act.
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\60\ The Commission received several comments stating that the
modified rule may increase competition and/or promote fair
competition among brokers. See FIA at 2 (stating that the rule may
``work to increase competition in brokering foreign products'');
NIBA at 2 (stating that ``IBs should have the same access to FBOTs
as CPOs and CTAs currently enjoy'' and that the modified rule ``can
provide additional market choices for IBs and their customers'');
WMBAA at 2-3 (stating that the rule will ``promote competition among
firms offering execution brokerage services to customers on
registered FBOTs,'' and that the rule ``allows for the growth of
competitive markets without impeding liquidity formation'').
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List of Subjects in 17 CFR Part 48
Registration of foreign boards of trade.
For the reasons stated in the preamble, the Commodity Futures
Trading Commission amends 17 CFR part 48 as follows:
PART 48--REGISTRATION OF FOREIGN BOARDS OF TRADE
0
1. The authority citation for part 48 continues to read as follows:
Authority: 7 U.S.C. 5, 6 and 12a, unless otherwise noted.
Sec. 48.2 [Amended]
0
2. In Sec. 48.2 remove paragraph (h) and redesignate paragraphs (i)
through (l) as paragraphs (h) through (k), respectively.
0
3. In Sec. 48.4 revise paragraph (b) to read as follows:
Sec. 48.4 Registration eligibility and scope.
* * * * *
(b) A foreign board of trade may apply for registration under this
part in order to permit the members and other participants of the
foreign board of trade that are located in the United States to enter
trades directly into the trading and order matching system of the
foreign board of trade, to the extent that such members or other
participants are:
(1) Entering orders for the member's or other participant's
proprietary accounts;
(2) Registered with the Commission as futures commission merchants
and are submitting customer orders to the trading system for execution;
(3) Registered with the Commission as a commodity pool operator or
commodity trading advisor, or are exempt from such registration
pursuant to Sec. 4.13 or Sec. 4.14 of this chapter, and are
submitting orders for execution on behalf of a United States pool that
the member or other participant operates or an account of a United
States customer for which the member or other participant has
discretionary authority, respectively, provided that a futures
commission merchant registered with the Commission as such or a firm
exempt from such registration pursuant to Sec. 30.10 of this chapter
acts as clearing firm and guarantees, without limitation, all such
trades of the commodity pool operator or commodity trading advisor
effected through submission of orders to the trading system; or
(4) Registered with the Commission as introducing brokers and are
submitting customer orders to the trading system for execution,
provided that a futures commission merchant registered with the
Commission as such or a firm exempt from such registration pursuant to
Sec. 30.10 of this chapter acts as a clearing firm and guarantees,
without limitation, all trades of the introducing
[[Page 66209]]
broker effected through submission of orders for United States
customers to the trading system.
Sec. 48.6 [Removed and Reserved]
0
4. Remove and reserve Sec. 48.6.
0
5. In Sec. 48.8, revise paragraphs (a)(4)(ii) and (a)(5)(i) and (iii)
to read as follows:
Sec. 48.8 Conditions of registration.
* * * * *
(a) * * *
(4) * * *
(ii) All orders that are transmitted to the foreign board of
trade's trading system by a foreign board of trade's identified member
or other participant that is operating pursuant to the foreign board of
trade's registration will be solely for the member's or trading
participant's own account unless such member or other participant is
registered with the Commission as a futures commission merchant or such
member or other participant is registered with the Commission as an
introducing broker, commodity pool operator or commodity trading
advisor, or is exempt from registration as a commodity pool operator or
commodity trading advisor pursuant to Sec. 4.13 or Sec. 4.14 of this
chapter, provided that a futures commission merchant registered with
the Commission as such or a firm exempt from such registration pursuant
to Sec. 30.10 of this chapter acts as clearing firm and guarantees,
without limitation, all trades of the introducing broker, commodity
pool operator or commodity trading advisor effected through submission
of orders for United States pools or customers to the trading system.
(5) * * *
(i) Prior to operating pursuant to registration under this part and
on a continuing basis thereafter, a registered foreign board of trade
will require that each current and prospective member or other
participant that is granted direct access to the foreign board of
trade's trading system and that is not registered with the Commission
as a futures commission merchant, an introducing broker, a commodity
trading advisor or a commodity pool operator, file with the foreign
board of trade a written representation, executed by a person with the
authority to bind the member or other participant, stating that as long
as the member or other participant is authorized to enter orders
directly into the trade matching system of the foreign board of trade,
the member or other participant agrees to and submits to the
jurisdiction of the Commission with respect to activities conducted
pursuant to the registration.
* * * * *
(iii) The foreign board of trade, clearing organization, and each
current and prospective member or other participant that is granted
direct access to the foreign board of trade's trading system and that
is not registered with the Commission as a futures commission merchant,
an introducing broker, a commodity trading advisor, or a commodity pool
operator will maintain with the foreign board of trade written
representations, executed by persons with the authority to bind the
entity making them, stating that as long as the foreign board of trade
is registered under this part, the foreign board of trade, the clearing
organization or member of either or other participant granted direct
access pursuant to this part will provide, upon the request of the
Commission, the United States Department of Justice and, if
appropriate, the National Futures Association, prompt access to the
entity's, member's, or other participant's original books and records
or, at the election of the requesting agency, a copy of specified
information containing such books and records, as well as access to the
premises where the trading system is available in the United States.
* * * * *
0
6. In Sec. 48.9, add paragraph (b)(5) to read as follows:
Sec. 48.9 Revocation of registration.
* * * * *
(b) * * *
(5) The Commission may revoke a foreign board of trade's
registration in response to a voluntary request by the foreign board of
trade to vacate its registration. A foreign board of trade may file a
request to vacate its registration with the Secretary of the Commission
at [email protected].
* * * * *
Issued in Washington, DC, on August 6, 2024, by the Commission.
Robert Sidman,
Deputy Secretary of the Commission.
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendices to Foreign Boards of Trade--Voting Summary and Chairman's
and Commissioners' Statements
Appendix 1--Voting Summary
On this matter, Chairman Behnam and Commissioners Johnson, and
Goldsmith Romero, Mersinger, and Pham voted in the affirmative. No
Commissioner voted in the negative.
Appendix 2--Statement of Chairman Rostin Behnam
I support this final rule, which amends the CFTC regulations for
foreign boards of trade (FBOTs). The amendments permit a registered
FBOT to provide direct access to its electronic trading and order
matching system to a registered introducing broker (IB) located in
the United States for submission of customer orders to the FBOT's
trading system for execution. Based upon more than ten years of
Commission experience with the existing rules for FBOTs, the
amendments also enhance and modernize the ruleset.
The existing FBOT rules were promulgated in 2011. Today's
amendments demonstrate the Commission's ongoing consideration of its
existing rules and my commitment to ensuring that our rules address
the reality of today's markets and their structure. The changes
enable new types of market participants to access registered FBOTs,
improving liquidity and promoting healthier markets.
I thank staff in the Division of Market Oversight, Office of the
General Counsel, and the Office of the Chief Economist for all of
their work on this final rule.
Appendix 3--Statement of Commissioner Kristin N. Johnson
The Commodity Futures Trading Commission (Commission) approved a
final rule that amends Part 48 to permit a foreign board of trade
(FBOT) registered with the Commission to provide introducing brokers
(IBs) located in the United States and registered with the
Commission direct access to submit orders to trade foreign futures
and options on behalf of customers located in the United States
(Final Rule).\1\ Under the Final Rule, FBOTs will be able to provide
registered IBs located in the United States with direct access to
execute customer trades, provided that they submit such orders for
clearing to a Commission-registered FCM or a firm exempt from FCM
registration under CFTC Regulation 30.10.
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\1\ The Commission is also establishing a procedure for an FBOT
to request the revocation of its registration, and removing certain
outdated references to ``existing no-action relief.''
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Over the course of my tenure as a Commissioner, I have
consistently supported the Commission's efforts to advance the
protection of customer funds. I appreciate the thoughtful comments
regarding the Commission's 30.10 framework in the context of the
Final Rule and the attention given to the need to ensure that the
foreign regime has comparable customer protection, disclosure, and
anti-money laundering requirements.
I support the Final Rule, which includes important protections
for U.S. customers, while also facilitating market access. I commend
the careful work of the staff of the Division of Market Oversight,
including Alexandros Stamoulis, Roger Smith, Maura Dundon, and David
Reiffen, on the Final Rule.
[[Page 66210]]
Appendix 4--Statement of Commissioner Caroline D. Pham
I support the Foreign Boards of Trade (FBOT) Final Rule because
it promotes access to markets for U.S. participants, competition,
and liquidity. I would like to thank Maura Dundon, Roger Smith, and
Alexandros Stamoulis in the CFTC's Division of Market Oversight for
their work on this rulemaking.
I will reiterate key points from my statement on the FBOT
proposed rule.\1\ As a CFTC Commissioner, I have made it clear that
I believe in good policy that enables growth, progress, and access
to markets.\2\ Accordingly, I am pleased to support Commission
efforts that take a pragmatic approach to issues that hinder market
access and cross-border activity. I continue to believe that this
rulemaking exemplifies policy that ensures a level playing field,
and I applaud this step in the right direction for market structure.
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\1\ Statement of Commissioner Caroline D. Pham in Support of
Foreign Board of Trade Proposal (Feb. 20, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement022024.
\2\ See, e.g., Keynote Address by Commissioner Caroline D. Pham,
98th Annual Convention of the American Cotton Shippers Association
(June 22, 2022), https://www.cftc.gov/PressRoom/SpeechesTestimony/opapham2; Statement of Commissioner Caroline D. Pham on Staff Letter
Regarding ADM Investor Services, Inc. (June 16, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement061623.
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FBOTs have been a critical piece of the CFTC's markets for
decades and provide access for U.S. market participants to non-U.S.
markets in realization of the global economy and international
business.\3\ The main substantive amendment in the FBOT Final Rule
is to Regulation 48.4, which will now include introducing brokers
(IBs) \4\ as a permissible intermediary, in addition to futures
commission merchants (FCMs), commodity pool operators (CPOs), and
commodity trading advisors (CTAs), to enter orders on behalf of
customers or commodity pools via direct access on a registered
FBOT.\5\ I believe that the FBOT Final Rule will provide more choice
in brokers and broker arrangements for U.S. market participants that
trade foreign futures and ensure that appropriate customer
protections are in place.
---------------------------------------------------------------------------
\3\ While FBOTs initially had operated pursuant to no-action
relief, in 2011, following the Dodd-Frank Wall Street and Consumer
Protection Act of 2010, the Commission began registering FBOTs. See
Registration of Foreign Boards of Trade, Final Rule, 76 FR 80674
(Dec. 23, 2011), https://www.federalregister.gov/documents/2011/12/23/2011-31637/registration-of-foreign-boards-of-trade.
\4\ The Commission generally defines an IB as an individual or
organization that solicits or accepts orders to buy or sell futures
contracts, commodity options, retail off-exchange forex or commodity
contracts, or swaps, but does not accept money or other assets from
customers to support these orders. Commodity Exchange Act (CEA)
section 1a(31); 17 CFR 1.3(mm). The Commission registers IBs under
CEA section 4d(g) and CFTC Regulation 3.4(a). 7 U.S.C. 6d(g) and 17
CFR 3.4(a).
\5\ 17 CFR 48.4.
---------------------------------------------------------------------------
As sponsor of the CFTC's Global Markets Advisory Committee
(GMAC),\6\ I have devoted a significant part of my Commissionership
to supporting solutions that will enhance the resiliency and
efficiency of global markets.\7\ The FBOT Final Rule is policy that
mitigates market fragmentation and the associated impact on
liquidity, and promotes the overall competitiveness of our
derivatives markets. I am pleased to support the FBOT Final Rule.
---------------------------------------------------------------------------
\6\ CFTC Global Markets Advisory Committee, https://www.cftc.gov/About/AdvisoryCommittees/GMAC. See Commissioner Pham
Announces New Members and Leadership of the CFTC's Global Markets
Advisory Committee and Subcommittees (June 30, 2023), https://www.cftc.gov/PressRoom/PressReleases/8740-23.
\7\ E.g., Achieving Growth and Progress: Statement of
Commissioner Caroline D. Pham at the Global Markets Advisory
Committee June 4 Meeting (June 4, 2024), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement060424; Opening Statement
of Commissioner Caroline D. Pham before the Global Markets Advisory
Committee (Feb. 13, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/phamstatement021323. To date, the GMAC has
advanced 13 recommendations and reports to the Commission on a broad
set of significant global markets issues, including U.S. Treasury
market liquidity, well-functioning repo and funding markets, capital
and margin requirements, exchange volatility controls, T+1
securities settlement, improved collateral management, central
counterparty (CCP) default simulation, streamlining trade reporting
data to monitor systemic risk, and a foundational digital asset
taxonomy to facilitate alignment in regulation across jurisdictions.
[FR Doc. 2024-17828 Filed 8-14-24; 8:45 am]
BILLING CODE 6351-01-P