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  • [Federal Register: October 26, 2007 (Volume 72, Number 207)]

    [Rules and Regulations]

    [Page 60767-60771]

    From the Federal Register Online via GPO Access [wais.access.gpo.gov]

    [DOCID:fr26oc07-7]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 18

    RIN 3038-AC22

    Maintenance of Books, Records and Reports by Traders

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rule.

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    SUMMARY: The Commodity Futures Trading Commission (Commission) is

    amending Commission Regulation 18.05 in two respects: to make it

    explicit that persons holding or controlling reportable positions on a

    designated contract market (DCM) or derivatives transaction execution

    facility (DTEF) 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 on all reporting markets, over-the-counter (OTC)

    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 (ECMs), on exempt boards of trade operating pursuant to Section

    5d of the Act (EBOTs), and on foreign boards of trade (FBOTs); and to

    make the regulation clearer and more complete with respect to hedging

    activity. The amendments will enhance the Commission's ability to deter

    and prevent price manipulation or any other disruptions to the

    integrity of the regulated futures markets, help to ensure the

    avoidance of systemic risk, and clarify the meaning of the regulation.

    DATES: Effective Date: November 26, 2007.

    FOR FURTHER INFORMATION CONTACT: Duane C. Andresen, Special Counsel,

    Division of Market Oversight, Commodity Futures Trading Commission,

    Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581.

    Telephone 202-418-5492; e-mail dandresen@cftc.gov.

    SUPPLEMENTARY INFORMATION:

    I. Purpose of Regulation 18.05 and Statutory Basis

    Section 3(b) of the Act \1\ declares that the purpose of the Act is

    to, among

    [[Page 60768]]

    other things, deter and prevent price manipulation or any other

    disruptions to market integrity and to ensure the financial integrity

    of all transactions subject to the Act and the avoidance of systemic

    risk. Section 4i of the Act \2\ requires persons holding futures or

    option positions at DCMs or DTEFs at or above certain levels to keep

    books and records of all:

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    \1\ 7 U.S.C. Sec. 5(b) (2007). Sec. 3(b) of the Act provides

    in full:

    It is the purpose of this chapter to serve the public interests

    described in subsection (a) of this section through a system of

    effective self-regulation of trading facilities, clearing systems,

    market participants and market professionals under the oversight of

    the Commission. To foster these public interests, it is further the

    purpose of this chapter to deter and prevent price manipulation or

    any other disruptions to market integrity; to ensure the financial

    integrity of all transactions subject to this chapter and the

    avoidance of systemic risk; to protect all market participants from

    fraudulent or other abusive sales practices and misuses of customer

    assets; and to promote responsible innovation and fair competition

    among boards of trade, other markets and market participants.

    \2\ 7 U.S.C.Sec. 6i (2007). Sec. 4i of the Act provides:

    It shall be unlawful for any person to make any contract for the

    purchase or sale of any commodity for future delivery on or subject

    to the rules of any contract market or derivatives transaction

    execution facility--

    (1) if such person shall directly or indirectly make such

    contracts with respect to any commodity or any future of such

    commodity during any one day in an amount equal to or in excess of

    such amount as shall be fixed from time to time by the Commission,

    and

    (2) if such person shall directly or indirectly have or obtain a

    long or short position in any commodity or any future of such

    commodity equal to or in excess of such amount as shall be fixed

    from time to time by the Commission, unless such person files or

    causes to be filed with the properly designated officer of the

    Commission such reports regarding any transactions or positions

    described in clauses (1) and (2) hereof as the Commission may by

    rule or regulation require and unless, in accordance with rules and

    regulations of the Commission, such person shall keep books and

    records of all such transactions and positions and transactions and

    positions in any such commodity traded on or subject to the rules of

    any other board of trade, and of cash or spot transactions in, and

    inventories and purchase and sale commitments of such commodity.

    Such books and records shall show complete details concerning all

    such transactions, positions, inventories, and commitments,

    including the names and addresses of all persons having any interest

    therein, and shall be open at all times to inspection by any

    representative of the Commission or the Department of Justice. For

    the purposes of this section, the futures and cash or spot

    transactions and positions of any person shall include such

    transactions and positions of any persons directly or indirectly

    controlled by such person.

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    (1) Transactions and positions in the exchange-traded commodity;

    (2) Transactions and positions in any such commodity traded on or

    subject to the rules of any other board of trade; and

    (3) Cash or spot transactions in, and inventories and purchase and

    sale commitments of such commodity.

    Such books and records must be open at all times for inspection by

    any representative of the Commission or the Department of Justice.

    Section 8a(5) of the Act \3\ provides explicit authority to the

    Commission to make and promulgate such rules and regulations as, in the

    judgment of the Commission, are reasonably necessary to effectuate any

    of the provisions or to accomplish any of the purposes of the Act. In

    order to accomplish the purposes of Sections 3(b) and 4i set forth

    above, the Commission has promulgated regulations creating market and

    large trader reporting requirements.\4\ Included among these

    regulations is a requirement that persons holding futures or option

    positions at DCMs or DTEFs (reporting markets) \5\ at or above

    reportable levels (reportable positions) \6\ be identified to the

    Commission through the large trader reporting system (LTRS).

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    \3\ 7 U.S.C. 12a(5) (2007).

    \4\ The Commission's market and large trader reporting rules are

    contained in Parts 15 through 21 of the Commission's regulations.

    \5\ Pursuant to Commission Regulation 15.00(m), a reporting

    market means a DCM and, unless determined otherwise by the

    Commission with respect to the facility or a specific contract

    listed by the facility, a DTEF.

    \6\ Pursuant to Commission Regulation 15.00(l), reportable

    position means:

    (1) For reports specified in parts 17, 18 and Sec. 19.00(a)(2)

    and (a)(3) of this chapter any open contract position that at the

    close of the market on any business day equals or exceeds the

    quantity specified in Sec. 15.03 of this part in either:

    (i) Any one future of any commodity on any one reporting market,

    excluding future contracts against which notices of delivery have

    been stopped by a trader or issued by the clearing organization of a

    reporting market; or

    (ii) Long or short put or call options that exercise into the

    same future of any commodity, or long or short put or call options

    for options on physicals that have identical expirations and

    exercise into the same physical, on any one reporting market.

    (2) For the purposes of reports specified in Sec. 19.00(a)(1)

    of this chapter, any combined futures and futures-equivalent option

    open contract position as defined in part 150 of this chapter in any

    one month or in all months combined, either net long or net short in

    any commodity on any one reporting market, excluding futures

    positions against which notices of delivery have been stopped by a

    trader or issued by the clearing organization of a reporting market,

    which at the close of the market on the last business day of the

    week exceeds the net quantity limit in spot, single or in all-months

    fixed in Sec. 150.2 of this chapter for the particular commodity

    and reporting market.

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    The LTRS, which requires that clearing members, futures commission

    merchants (FCM) and foreign brokers file daily reports with the

    Commission, enables the Commission to assess an individual trader's

    activities and potential market power and to enforce the Commission or

    DCM-set limits on speculative positions.\7\ Once a trader holds a

    reportable position, the trader is subject to Commission Regulation

    18.05,\8\ which requires that the trader keep books and records showing

    all details concerning:

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    \7\ The Commission also uses large trader reporting information

    as a means to ensure the avoidance of systemic risk in that such

    information enables Commission staff to determine which FCMs

    carrying accounts might have exposure in particular markets.

    \8\ Regulation 18.05 states in full:

    Every trader who holds or controls a reportable futures or

    option position shall keep books and records showing all details

    concerning all positions and transactions for future delivery in the

    commodity on all reporting markets, all positions and transactions

    in the commodity option, and all positions and transactions in the

    cash commodity, its products and byproducts and, in addition,

    commercial activities that the trader hedges in the commodity

    underlying the futures contract in which the trader is reportable,

    and shall upon request furnish to the Commission any pertinent

    information concerning such positions, transactions or activities.

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    (1) All positions and transactions for future delivery in the

    commodity on all reporting markets;

    (2) All positions and transactions in the commodity option;

    (3) All positions and transactions in the cash commodity, its

    products and byproducts; and

    (4) Commercial activities that the trader hedges in the commodity

    underlying the futures contract in which the trader is reportable.\9\

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    \9\ In describing the requirements of Regulation 18.05 in 1981,

    the Commission stated:

    The regulation requires reportable traders to maintain books and

    records of futures positions and transactions in the commodity in

    which they are reportable and all positions and transactions in the

    cash commodity and its products and byproducts * * *. [T]he

    Commission wishes to underscore its view that the book and

    recordkeeping requirements and inspection provision contained

    therein are essential to accomplish the purposes of the Act and

    within the Commission's authority to adopt pursuant to section[s] 4i

    and 8a(5) of the Act. These requirements have always applied to the

    traders who hold or control a reportable position, and have not been

    restricted in any way. ``Reporting Requirements for Contract

    Markets, Futures Commission Merchants, Members of Exchanges and

    Large Traders,'' 46 FR 59960, 59963 (December 8, 1981) (footnote

    omitted).

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    A reportable trader is required to furnish to the Commission, upon

    request, any pertinent information concerning these positions,

    transactions or activities. \10\ Traders who do not hold reportable

    positions do not have obligations under Regulation 18.05.

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    \10\ The Commission currently requests such information an

    average of three times per year.

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    II. Proposal

    A. Introduction

    In order to enhance its ability to detect and prevent manipulation

    of regulated markets and products and to ensure the avoidance of

    systemic risk, as well as to clarify the meaning of the regulation and

    bring it up to date, the Commission published in the Federal Register a

    proposal to amend Regulation 18.05 in the following respects: \11\

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    \11\ 72 FR 34413 (June 22, 2007).

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    1. 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 pertinent

    information with respect to all non-reporting transactions, i.e., all

    positions and transactions in the commodity in which the trader is

    reportable, including transactions

    [[Page 60769]]

    executed on all reporting markets, OTC and/or pursuant to Sections

    2(d), 2(g) or 2(h)(1)-(2) of the Act or Part 35 of the Commission's

    regulations, on ECMs operating pursuant to Sections 2(h)(3)-(5) of the

    Act, on EBOTs operating pursuant to Section 5d of the Act, and on

    FBOTs; and

    2. To make the regulation clearer and more complete with respect to

    hedging activity.

    B. Proposed Amendments Related to Recordkeeping and Reporting

    The proposal recognized that there is a close relationship among

    transactions conducted on reporting markets and non-reporting

    transactions and that it is sometimes necessary to determine all

    transactions and positions in the commodity in which the trader is

    reportable in order to more effectively detect and prevent manipulation

    of regulated markets and products and to ensure the avoidance of

    systemic risk.\12\ The Commission recognized that it is particularly

    important that staff be able to assess the reportable trader's overall

    position in the same commodity in light of the growing volume of

    trading on the non-reporting markets, the close relationship among the

    various products and markets, the increasing globalization of the

    futures markets, and the growth of trading on FBOTs.\13\

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    \12\ See sections 6(c), 6c, 6(d) and 9(a)(2) of the Act for the

    Commission's antimanipulation authority.

    \13\ For instance, since 1999, Commission staff, through foreign

    terminal no-action letters, has allowed 19 FBOTs to make their

    trading systems available by direct access to members and other

    participants in the U.S. without requiring the FBOTs to register as

    DCMs or DTEFs.

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    The proposal noted that while Regulation 18.05 explicitly requires

    that a trader holding reportable positions keep books and records and

    provide to the Commission, upon request, pertinent information with

    respect to positions and transactions in the underlying commodity on

    DCMs and DTEFs, it does not explicitly do so with respect to positions

    and transactions in virtually identical contracts executed on ECMs,

    EBOTs or FBOTs or in the same commodity executed OTC and/or pursuant to

    Sections 2(d), 2(g) or 2(h)(1)-(2) of the Act or Part 35 of the

    Commission's regulations. The Commission noted that information

    concerning non-reporting transactions is important to its ability to

    conduct effective market surveillance of the DCM and DTEF contracts.

    Thus, if a trader is reportable because of futures or option positions

    in a contract on a DCM or DTEF, the trader's books and records with

    respect to non-reporting positions and transactions in the same

    commodity are relevant to effective surveillance and supervision of the

    DCM or DTEF contract in which the trader is reportable.

    The proposal noted that the Act provides ample authority to require

    keeping books and records and providing pertinent information

    concerning non-reporting transactions. Section 4i explicitly

    encompasses non-reporting transactions on ``any other board of trade''

    (such as FBOTs, ECMs operating pursuant to Sections 2(h)(3)-(5) of the

    Act, and EBOTs operating pursuant to Section 5d of the Act) and in the

    form of cash or spot transactions, inventories, and purchase and sale

    commitments. Further, Section 3(b) of the Act declares that the purpose

    of the Act is to, among other things, deter and prevent price

    manipulation or any other disruptions to market integrity and to ensure

    the avoidance of systemic risk. Section 8a(5) of the Act authorizes the

    Commission to promulgate such regulations as, in its judgment, are

    reasonably necessary to accomplish any of the purposes of the Act. As

    noted in the proposal, amending Regulation 18.05 to clearly require

    that reportable traders keep books and records showing all details

    concerning non-reporting transactions in the reportable commodity is a

    reasonably necessary means of accomplishing the purposes of Section

    3(b) of the Act.

    The proposal also noted that although non-reporting transactions

    themselves generally are not subject to most regulatory provisions of

    the Act, the futures or option transactions executed and maintained on

    a DCM or DTEF that result in a reportable position are subject to such

    provisions and, pursuant to Section 3(a) of the Act, are affected with

    a national public interest. It is the purpose of the Act pursuant to

    Section 3(b) that the Commission deter and prevent price manipulation

    of all commodities traded on these regulated markets. The proposal

    stated that to accomplish this purpose, it is necessary that the

    Commission have the ability to review all activities in commodities

    traded on these markets, regardless of where the transactions are

    executed. By taking a position on a regulated market, a trader agrees

    to abide by the rules of the market and the Commission, including

    prohibitions against manipulation. To enhance its ability to detect and

    deter manipulation and other threats to market integrity, the

    Commission requires persons holding reportable positions to maintain

    books and records of transactions that could impact the regulated

    market and related cash market, including non-reporting transactions.

    Finally, the proposal noted that staff has interpreted Regulation

    18.05 to include position and transaction data for non-reporting

    transactions and has received such information in response to requests

    made pursuant to the Regulation. Thus, consistent with the Act and

    Commission practice, the Commission proposed to amend Regulation 18.05

    to make explicit that a trader with a reportable position must keep

    books and records showing all details concerning all non-reporting

    transactions in the same commodity and provide pertinent information to

    the Commission upon request.

    C. Amendments Related to Clarity and Completeness

    The proposal also noted that there are two issues that arise in

    connection with the Regulation 18.05 requirement that traders keep

    books and records showing all details concerning ``commercial

    activities that the trader hedges in the commodity underlying the

    futures contract in which the trader is reportable.'' First, the phrase

    has led to some confusion. Originally inserted into the paragraph as

    ``commercial activities that the trader hedges in the futures commodity

    in which the trader is reportable,'' its purpose was to require that,

    ``in addition to books and records of positions or transactions in a

    cash commodity, a reportable trader must also maintain records of

    commercial activities which the trader hedges.'' \14\ Second, the

    proposal stated that reportable positions can be option positions, as

    well as futures positions, but it is not clear that the current

    language also addresses commercial activities that the trader hedges in

    the commodity underlying any option contract in which the trader is

    reportable.

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    \14\ 46 FR 42463, 42466 (August 21, 1981).

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    The Commission therefore proposed to amend the regulation to revert

    to the original approach and include hedges in the option contract in

    which the trader is reportable. By modifying the phrase to read

    ``commercial activities that the trader hedges in the futures or option

    contract in which the trader is reportable,'' Regulation 18.05 captures

    information with respect to hedges in other than the cash commodity,

    its products or byproducts (i.e., a trader with a reportable position

    in gold futures or options that is a hedge of a cash position in silver

    would be required to comply with the Regulation 18.05 requirements with

    respect to the silver position).

    [[Page 60770]]

    III. Comments Regarding the Proposal

    The Commission received six comment letters on its proposal.

    Commenters included the American Public Gas Association (APGA), the

    Industrial Energy Consumers of America (IECA), the International Swaps

    and Derivatives Association, Inc. (ISDA), the Managed Funds Association

    (MFA), the New York Public Service Commission (NYPSC), and the New York

    Mercantile Exchange (NYMEX). Most of the commenters generally endorsed

    the proposal and/or its underlying purpose, but felt that additional

    steps are necessary to resolve the underlying matters that the proposal

    is intended to address. Two commenters raised concerns regarding the

    recordkeeping and reporting aspects of the proposal.

    The APGA commented that it strongly supports the proposed amendment

    but is concerned about the economic links between NYMEX and OTC

    contracts and believes that further steps are necessary for the

    Commission to carry out surveillance of the natural gas markets. It

    expressed concern that the LTRS does not routinely reach traders' large

    OTC positions and noted that it has petitioned Congress to provide the

    Commission with authority for a LTRS with respect to trading in

    financial contracts in natural gas. Further, the APGA commented that

    reliance on special call authority leaves open the potential for

    manipulation or other disruptive behavior with little risk of detection

    until after damage to the market has been done.

    The IECA commented that it supports the proposal but noted that

    requiring companies to keep books and records does not prevent market

    manipulation and that preemptive monitoring of entities with large

    positions that cover both futures and OTC markets is necessary.

    Further, such entities should be required to report daily to the

    Commission. The IECA also recommended that the Commission support the

    establishment of an advisory panel on energy markets with consumer

    participation thereon.

    The NYPSC noted that it supports the proposed rule and its

    underlying purpose and that given the increases in natural gas prices

    over the past several years, the relevant government entities must take

    all available steps to prevent market manipulation and ensure the

    integrity of the natural gas markets. The NYPSC maintained that it is

    essential to evaluate exposure on both NYMEX and the InterContinental

    Exchange (ICE), an ECM, and stated that the Commission's inability to

    directly regulate traders that use ICE exclusively creates a serious

    loophole in effective regulatory oversight of the financial markets.

    Concerned that traders will avoid regulatory oversight by trading

    exclusively on ICE, the NYPSC recommended that the Commission should

    monitor the migration of traders that currently utilize NYMEX to ICE as

    the exclusive means of trading natural gas contracts.

    The ISDA and the MFA voiced support for the proposal but raised

    concerns about the proposal's recordkeeping and reporting obligations.

    The ISDA stated its view that the proposal does not create additional

    recordkeeping or reporting obligations and requested clarification with

    respect to the scope of Regulation 1.35(a), which contains

    recordkeeping and reporting language similar to that in proposed

    Regulation 18.05. Further, the ISDA requested clarification that the

    records required to be retained under proposed Regulation 18.05 are

    subject to Regulation 1.31 retention requirements and consist of

    accurate records of positions and actual transaction documentation

    created in the ordinary course of business. The MFA requested that the

    Commission confirm that the current system of books and records

    maintained by traders in the normal course of business and in the

    format created in the normal course of business would meet the

    proposal's recordkeeping and retention requirements.

    The NYMEX voiced support for the intention underlying the proposal

    but commented that the purpose of the proposal can be met only by

    imposing identical requirements on linked trading facilities meeting

    specified criteria. NYMEX posited that the proposal, if implemented,

    would create an incentive for market participants to do all their

    trading at unregulated or non-transparent venues or to trade at a level

    below the reportable level on the regulated exchange. Further, NYMEX

    commented that the proposal was limited in effectiveness because of the

    anticipated infrequent use of the special call procedure; would impose

    a cost on the regulated exchanges because of the shift in trading

    activity; and would have adverse public policy consequences. NYMEX

    recommended that the Commission defer the amendments to Regulation

    18.05 in favor of a more comprehensive legislative approach that would

    result in the implementation of reporting requirements on organized

    trading facilities that have triggered specified criteria.\15\

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    \15\ As noted above, other commenters also recommended

    legislation action, i.e., to provide the Commission with authority

    for a LTRS with respect to trading in financial contracts in natural

    gas on non-reporting markets and to require entities that control

    large positions in the OTC market to report daily to the Commission.

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    The Commission has carefully considered the comments submitted and

    has decided, for reasons cited herein and in the proposal, to amend the

    regulation as proposed. As previously stated, staff has interpreted

    Regulation 18.05 to include position and transaction data for non-

    reporting transactions and has received such information in response to

    requests made pursuant to the Regulation. Thus, the proposal to amend

    Regulation 18.05 merely makes explicit what has been implicit.

    NYMEX's comment that the proposal would lead market participants to

    move their trading activity to unregulated or non-transparent venues,

    or trade at a level below the reportable level on the regulated

    exchange in order to avoid the consequences of holding reportable

    positions, is highly speculative and, in the Commission's estimation,

    unlikely. As previously discussed, the amendments to Regulation 18.05

    clarify existing authority and, accordingly, any ``disincentive'' for

    traders to trade on a regulated market already exists, with or without

    the amendments. In addition, the Commission sees little merit in

    following NYMEX's suggestion to defer in favor of a legislative

    approach. The Commission can control neither the timing nor the terms

    of legislation addressing reporting obligations on currently non-

    reporting markets, or even whether such legislation is enacted in the

    first instance. Should legislation in this area be enacted which

    expands the Commission's jurisdiction with respect to transactions that

    are currently non-reportable, further amendments to the regulation

    could be considered.

    With respect to the comments regarding the proposal's recordkeeping

    and reporting obligations, the Commission confirms that the amendments

    should not change current recordkeeping or reporting obligations,

    assuming that traders are currently keeping complete transaction

    records. Records required to be retained under Regulation 18.05 consist

    of accurate records of positions and actual transaction documentation

    created in the ordinary course of business. Thus, books and records

    that currently should be maintained by traders in the normal course of

    business and in the format created in the normal course of business

    would meet the regulation's recordkeeping requirements. Such records

    are subject to the Regulation 1.31 retention requirements. Finally,

    [[Page 60771]]

    Regulation 18.05 does not alter or add to the Regulation 1.35(a)

    recordkeeping and reporting requirements.

    IV. Related Matters

    A. Cost Benefit Analysis

    Section 15(a) of the Act requires the Commission to consider the

    costs and benefits of its action before issuing a new regulation or

    order under the Act. By its terms, Section 15(a) does not require the

    Commission to quantify the costs and benefits of a new regulation or to

    determine whether the benefits of the regulation outweigh its costs.

    Rather, Section 15(a) simply requires the Commission to ``consider the

    costs and benefits'' of its action.

    Section 15(a) further specifies that the costs and benefits of the

    rule or order 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

    may, in its discretion, give greater weight to any one of the five

    enumerated areas of concern and may, in its discretion, determine that,

    notwithstanding its costs, a particular rule or order is necessary or

    appropriate to protect the public interest or to effectuate any of the

    provisions or to accomplish any of the purposes of the Act.

    The Commission's proposal contained an analysis of its

    consideration of these costs and benefits and solicited public comment

    thereon. As previously noted, NYMEX commented that the proposal, by

    adding another incentive for market participants to shift their trading

    activity from regulated and transparent venues to unregulated and non-

    transparent venues, would impose a cost on the regulated exchanges and

    would have adverse public policy consequences. NYMEX also questioned

    the extent of the benefits to be obtained from the proposal in light of

    the acknowledgement that special calls for information would continue

    to be made on an infrequent basis.

    The Commission believes, as it stated in the discussion of NYMEX's

    comments above, that attempting to discern what impact amended

    Regulation 18.05 will have on potential large traders, or what costs to

    the regulated exchanges would be associated with any shift in trading

    activity, is highly speculative. Because the amendments clarify

    existing authority, any ``disincentive'' for traders to trade on a

    regulated market already exists, with or without the amendments.

    Additionally, the Commission finds no merit in the contention that the

    extent of the benefits to be obtained from the amendments are

    questionable in light of the acknowledgement that special calls for

    information would continue to be made on an infrequent basis. The

    Commission is confident that such special calls will be made when

    deemed necessary and that the information provided in response to such

    special calls will assist the Commission in meeting its regulatory

    responsibilities.

    After consideration of the costs and benefits and the public

    comments received thereon, the Commission has determined to adopt the

    amendments to Regulation 18.05 set forth below.

    B. The Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq.,

    requires that agencies consider the impact of their rules on small

    businesses. The Commission has previously determined that exchanges,

    futures commission merchants and large traders are not ``small

    entities'' for the purposes of the RFA.\16\ The requirements related to

    the amended recordkeeping and reporting rule fall on large traders.

    Accordingly, the Acting Chairman, on behalf of the Commission, hereby

    certifies, pursuant to 5 U.S.C. 605(b), that the actions adopted herein

    will not have a significant economic impact on a substantial number of

    small entities.

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    \16\ 47 FR 18618, 18618-21 (April 30, 1982).

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    C. The Paperwork Reduction Act

    The Paperwork Reduction Act (PRA) \17\ imposes certain requirements

    on Federal agencies, including the Commission, in connection with

    conducting or sponsoring any collection of information as defined by

    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. In its proposal, the Commission noted

    that the proposed amendments would require traders with reportable

    positions to keep books and records showing all details concerning all

    positions and transactions in the commodity in which the trader is

    reportable and to furnish to the Commission, upon request, any

    pertinent information concerning such positions, transactions or

    activities in a form acceptable to the Commission and that this

    information is part of an approved collection of information. The

    Commission further noted that the proposed amendments would not result

    in any material modifications to this approved collection. Accordingly,

    for purposes of the PRA, the Commission certified that the proposed

    amendment did not impose any new reporting or recordkeeping

    requirements.

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    \17\ Public Law 104-13 (May 13, 1995).

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    The Commission submitted the proposed rule amendments and their

    associated information collection requirements to the Office of

    Management and Budget (OMB) for its review. No comments were received

    in response to the Commission's invitation in the notice of proposed

    rulemaking to comment on the information which would be required by the

    proposed rule amendments.

    List of Subjects in 17 CFR Part 18

    Commodity futures, Reporting and recordkeeping requirements.

    0

    Accordingly, 17 CFR Chapter I is amended as follows:

    PART 18--REPORTS BY TRADERS

    0

    1. The authority citation for part 18 is revised to read as follows:

    Authority: 7 U.S.C. 2, 4, 5, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 12a

    and 19; 5 U.S.C. 552 and 552(b), unless otherwise noted.

    0

    2. Revise Sec. 18.05 to read as follows:

    Sec. 18.05 Maintenance of books and records.

    (a) Every trader who holds or controls a reportable futures or

    option position shall keep books and records showing all details

    concerning all positions and transactions in the commodity:

    (1) On all reporting markets;

    (2) Over the counter and/or pursuant to Sections 2(d), 2(g) or

    2(h)(1)-(2) of the Act or Part 35 of this chapter;

    (3) On exempt commercial markets operating pursuant to Sections

    2(h)(3)-(5) of the Act;

    (4) On exempt boards of trade operating pursuant to Section 5d of

    the Act; and

    (5) On foreign boards of trade.

    (b) Every such trader shall also keep books and records showing all

    details concerning all positions and transactions in the cash

    commodity, its products and byproducts, and all commercial activities

    that the trader hedges in the futures or option contract in which the

    trader is reportable.

    (c) The trader shall upon request furnish to the Commission any

    pertinent information concerning such positions, transactions, or

    activities in a form acceptable to the Commission.

    Issued in Washington, DC, this 22nd day of October, 2007, by the

    Commission.

    David A. Stawick,

    Secretary of the Commission.

    [FR Doc. E7-21077 Filed 10-25-07; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: October 26, 2007



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