Designated contract markets (“DCMs”), registered swap execution facilities (“SEFs”), registered derivatives clearing organizations (“DCOs”), and registered swap data repositories (“SDRs”) generally may implement new rules or rule amendments by filing with the Commission a certification that the new rule or rule amendment complies with the Commodity Exchange Act (“CEA” or “Act”) and the Commission’s regulations and/or by requesting CFTC approval of such rules and amendments.
To meet its statutory mission of ensuring market integrity and customer protection with respect to rules and rule amendments implemented under self-certification procedures, the CFTC places greater reliance on its oversight authorities, including market and trade practice surveillance, rule enforcement reviews, review of new rules and rule amendments, reviews of contract terms, dialogue with the regulated entities, and enforcement actions where violations are detected. For rules and amendments adopted under self-certification procedures, registered entities are expected to assume primary responsibility for ensuring that the rules and rule amendments meet, on a continuing basis, the applicable statutory and regulatory requirements.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) amended Section 5c of the Act to provide a new timeline for the submission to the Commission of rules and rule amendments by DCMs, SEFs, DCOs, and SDRs ("registered entities"). The Commission amended Part 40 of its regulations to implement the amended provisions of Section 5c of the Act.
Initial Rule Submission Review Period: New rules and rule amendments, including amendments to the terms and conditions of an existing product, become effective, pursuant to the certification of the registered entity and notice of such certification to the entity’s members and market participants, on the date that is 10 business days after the date on which the Commission receives the certification unless the Commission extends the submission review period. In implementing an extension, the Commission would notify the registered entity, prior to the expiration of the 10 business days, that it is staying the certification because there exist novel or complex issues that require additional time to analyze, the certification is an inadequate explanation of the rule or rule amendment by the submitting registered entity, or the certification presents a potential inconsistency with any provision of the Act or any of the Commission’s regulations thereunder.
Extended Submission Review Period: The Commission may notify a registered entity that it is staying a certified rule or rule amendment for as many as 90 calendar days from the date of the notification. A rule or rule amendment subject to a stay becomes effective, pursuant to the certification of the registered entity, at the expiration of the additional 90-day period unless the Commission withdraws the stay prior to that time or the Commission notifies the registered entity during the additional 90-day period that it objects to the proposed certification on the grounds that it is inconsistent with any provision of the Act or any of the Commission’s regulations thereunder.
For a rule submission under extended review, the Commission will provide not less than a 30-day public comment period within the 90-day period in which the stay is in effect. Details regarding such public comment period will be posted on the Commission’s website.
Registered entities may place certain rules or rule amendments into effect without a self-certification. A registered entity need only provide a weekly notification of all rule changes involving:
Certain other rules may be implemented without either self-certification or notice to the CFTC, provided only that the registered entity maintain documentation of all rule changes. Rules subject to this procedure include those that govern:
The only rules and rule amendments not eligible for self-certification are those that materially change a term or condition of a contract for future delivery of an enumerated agricultural commodity as listed in Section 1a(9) of the CEA, 7 USC § 1a(9), or an option on such a contract or commodity, in a delivery month having open interest. Under CFTC Regulation 40.4, such rules or rule amendments must be submitted to the CFTC for prior approval under the procedures of CFTC Regulation 40.5. A registered entity may elect to submit any such new rule or rule amendment to the CFTC under the ten-day review procedure of CFTC Regulation 40.4 for a determination as to whether such rule must be submitted for prior approval.
However, CFTC Regulation 40.4 specifies that certain categories of new rules and rule amendments affecting a term or condition of a futures contract on an enumerated agricultural commodity are deemed not to be material and thus do not require prior CFTC approval. DCMs, therefore, may implement any new rule or rule change falling within these categories pursuant to self-certification provisions or notification procedures, as applicable.
The categories of new rules and rule amendments deemed to be not material for this purpose are:
Registered entities may request that the Commission approve new rules or rule amendments by submitting such rules under CFTC Regulation 40.5. The Commission must approve a new rule or rule amendment of a registered entity unless the Commission finds that the new rule or rule amendment is inconsistent with any provision of the Act or any of the Commission’s regulations thereunder.