Commodity Futures Trading Commission June 2007 – Federal Register Recent Federal Regulation Documents

Commission Regulation 18.05 requires that a person holding or controlling a futures or option position in a commodity above a certain level (reportable position) on a designated contract market or registered derivatives transaction execution facility (reporting markets) must retain books and records and make available to the Commission upon request any pertinent information with respect to other positions, transactions or activities in the commodity in which the trader has a reportable position. The Commission is proposing to amend Regulation 18.05 in two respects: To make it explicit that persons holding or controlling reportable positions on a reporting market must retain books and records and make available to the Commission upon request any pertinent information with respect to all other positions and transactions in the commodity in which the trader has a reportable position, including positions held or controlled or transactions executed over-the-counter and/or pursuant to Sections 2(d), 2(g) or 2(h)(1)-(2) of the Commodity Exchange Act (Act) or Part 35 of the Commission's regulations, on exempt commercial markets operating pursuant to Sections 2(h)(3)-(5) of the Act, on exempt boards of trade operating pursuant to Section 5d of the Act, and on foreign boards of trade (hereinafter referred to collectively as non-reporting transactions); and to make the regulation clearer and more complete with respect to hedging activity. The purpose of the amendments is to enhance the Commission's ability to deter and prevent price manipulation or any other disruptions to the integrity of the regulated futures markets, to ensure the avoidance of systemic risk, and to clarify the meaning of the regulation.

On May 14, 2007, the Commodity Futures Trading Commission (``CFTC'' or the ``Commission'') published for pubic comment in the Federal Register \1\ a proposal to exempt for the CEA \2\ the trading and clearing of certain products called credit default options (``CDOs'') and credit default basket options (``CDBOs'') that are proposed to be traded on the Chicago Board Options Exchange (``CBOE''), a natioal securities exchange registered under Section 6 of the Securities Exchange Act of 1934 (``1934 Act''),\3\ and cleared through the Options Clearing Corporation (``OCC''), a registered securities clearing agency registered under Section 17A of the 1934 Act,\4\ and Derivatives Clearing Organization registered under Section 5b of the CEA.\5\ The proposed order was preceded by a request from OCC to approve rules that would permit it to clear these CDOs and CDBOs in its capacity as a registered securities clearing agency. OCC's request presented novel and complex issues of jurisdiction and the Commission determined that an order exempting the trading and clearing of such instruments from pertinent requirements of the CEA may be appropriate. The Commission has reviewed the comments made in response to its proposal and the entire record in this matter and has determined to issue an order exempting the trading and clearing of these contracts from the CEA.