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e9-18855

  • FR Doc E9-18855[Federal Register: August 6, 2009 (Volume 74, Number 150)]

    [Rules and Regulations]

    [Page 39211-39212]

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

    [DOCID:fr06au09-2]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 7

    Contract Market Rules Altered or Supplemented by the Commission

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rulemaking.

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    SUMMARY: Regulation 7.201 of the Commodity Futures Trading Commission

    (``Commission'') alters and supplements Chicago Board of Trade

    (``CBOT'') Rule 620.01(B) by requiring members of the CBOT to submit to

    arbitration of any customer claim or grievance initiated by the

    customer according to the arbitration rules and regulations of the

    CBOT. On November 25, 2007, following the merger of Chicago Mercantile

    Exchange (``CME'') Holdings, Inc. with CBOT Holdings, Inc., CBOT Rule

    620.01(B) was superseded by new CBOT Rule 600.D. Like Regulation 7.201,

    new Rule 600.D specifically requires exchange members to submit to

    customer-initiated arbitrations. Accordingly, on petition of The CME

    Group Inc., CBOT's parent company, Regulation 7.201 is being repealed

    by the Commission as no longer necessary.

    DATES: Effective Date: Effective August 6, 2009.

    FOR FURTHER INFORMATION CONTACT: Donald Heitman, Senior Special

    Counsel, Division of Market Oversight, Commodity Futures Trading

    Commission, Three Lafayette Center, 1155 21st Street, NW., Washington,

    DC 20581, telephone (202) 418-5041, e-mail dheitman@cftc.gov.

    SUPPLEMENTARY INFORMATION:

    I. Background

    Section 8a(7) of the Commodity Exchange Act (``Act''), 7 U.S.C.

    12a(7), provides in relevant part that the Commission is authorized to

    ``alter or supplement the rules of a registered entity insofar as

    necessary or appropriate * * * for the protection of traders or to

    insure fair dealing in commodities traded for future delivery on such

    registered entity.'' In 1981, pursuant to section 5a(11) of the Act and

    Part 180 of the Commission's regulations, each contract market was

    required to ``provide a fair and equitable procedure through

    arbitration or otherwise * * * for the settlement of customers' claims

    and grievances against any member or employee thereof.'' \1\

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    \1\ Section 5a(11) of the Act, 7 U.S.C. 7a (1981). See also 17

    CFR 180.2 (1981) (implementing section 5a(11) through the

    establishment of minimum requirements). Subsequently, section 5a(11)

    and Part 180 were superseded by amended provisions. However, boards

    of trade are still required to ``establish and enforce rules

    regarding and provide facilities for alternative dispute resolution

    as appropriate for market participants and any market

    intermediaries.'' Section 5(d)(13) of the Act, 7 U.S.C. 7(d)(13)

    (2009). See also 17 CFR Part 38, Appendix B, Core Principle 13

    (application guidance and acceptable practices related to section

    5(d)(13)).

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    In November of 1981, the Commission published a final rule that

    disapproved proposed CBOT Rule 620.01(B), dealing with arbitration, and

    altered and supplemented CBOT's rule by implementing in its place

    Commission Regulation 7.201.\2\ CBOT Rule 620.01(B), as interpreted by

    CBOT, would have restricted the ability of customers to arbitrate

    claims against CBOT members and their employees under CBOT's

    arbitration rules and regulations. The CBOT had argued that the Act did

    not compel its members to participate in customer-initiated arbitration

    proceedings and, during the period of 1980-81, CBOT members had denied

    five customers the right to arbitrate their disputes with members

    because those members refused to participate in the CBOT's arbitration

    procedures.

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    \2\ 46 FR 57457 (November 24, 1981) (adopting Commission

    Regulation 7.201). See also 49 FR 10659 (March 24, 1984) (subsequent

    amendment).

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    The Commission regulation, adopted pursuant to its section 8a(7)

    authority, altered and supplemented CBOT Rule 620.01(B) to implement a

    Commission-drafted version of Rule 620.01(B). The Commission-imposed

    rule assured that CBOT members would submit to arbitration proceedings

    initiated by customers under CBOT rules and regulations. Regulation

    7.201 has remained in place ever since.

    On July 12, 2007, CBOT Holdings, Inc. merged with CME Holdings,

    Inc. to form The CME Group, Inc. On November 25, 2007, as part of the

    harmonization of the rules of the CBOT with those of the CME, the CBOT

    deleted Rule 620.01(B) from its rulebook and adopted new Rule 600.D

    governing permissive arbitrations. New CBOT Rule 600.D, which is

    identical to CME Rule 600.D, provides in relevant part that a CBOT

    member is, ``* * * required to arbitrate * * * claims of a customer

    against a member that relate to or arise out of any transaction on or

    subject to the rules of the Exchange.''

    On June 8, 2009, The CME Group, Inc., CBOT's parent company,

    submitted a petition pursuant to Commission Regulation 13.2 for the

    repeal of Regulation 7.201.\3\ Given that new CBOT Rule 600.D has,

    since November 25, 2007, compelled members to submit to arbitration

    claims initiated by customers, that Rule 600.D fully

    [[Page 39212]]

    conforms to the Commission's interpretation of section 5a(11) of the

    Act at the time Regulation 7.201 was adopted, and to the Commission's

    interpretation of CBOT's obligations under successor section 5(d)(13)

    of the Act, and that Regulation 7.201 refers to a CBOT rule that is no

    longer in the CBOT rulebook, the Commission has determined to grant the

    CME Group's petition and hereby repeals Regulation 7.201.

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    \3\ Copies of the petition are available on written request from

    David Stawick, Secretary, Commodity Futures Trading Commission,

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

    by telephone request at (202) 418-5100, or by e-mail request to

    secretary@cftc.gov. Reference should be made to ``CME Group petition

    to repeal Regulation 7.201.''

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    II. Related Matters

    A. No Notice Required Under 5 U.S.C. 553

    The Administrative Procedure Act (``APA'') requires rulemakings to

    be commenced with a general notice of public rulemaking, published in

    the Federal Register,\4\ except, among other things, ``when the agency

    for good cause finds * * * that notice and public procedure thereon are

    impracticable, unnecessary, or contrary to the public interest.'' \5\

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    \4\ 5 U.S.C. 553(b).

    \5\ 5 U.S.C. 553. See also Commission Regulations 13.3 through

    13.5, 17 CFR 13.3-13.5 (notice of proposed rulemaking and public

    participation in the rulemaking process required unless the

    Commission finds for good cause that notice and public procedure

    thereon are impracticable, unnecessary, or contrary to the public

    interest).

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    The repeal of Commission Regulation 7.201 will not cause new

    regulatory requirements to be effected, because new CBOT Rule 600.D

    imposes the same requirements on CBOT members that Commission

    Regulation 7.201 was adopted to impose. Therefore, the Commission finds

    for good cause that the notice and public procedure are unnecessary

    before finalizing the repeal of Commission Regulation 7.201.

    B. Regulatory Flexibility Act

    The Commission is required to prepare and make available for public

    comment a regulatory flexibility analysis describing the impact of a

    rule on small entities when the Commission is required by 5 U.S.C. 553

    or any other law to publish a notice of proposed rulemaking.\6\ The

    Commission has found according to the provisions of 5 U.S.C. 553 that a

    notice of proposed rulemaking is unnecessary for the repeal of

    Regulation 7.201. Therefore, the Commission is not required to prepare

    and make available a regulatory flexibility analysis, and the head of

    the agency alternatively is not making a certification as to the

    economic impact of the rule on a substantial number of small

    entities.\7\

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    \6\ 5 U.S.C. 603 and 604.

    \7\ See 5 U.S.C. 605 (certification by the head of an agency

    permitted as an alternative to the regulatory flexibility analyses

    required at 5 U.S.C. 603 and 604).

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    C. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501 et seq.,

    imposes certain requirements on federal agencies (including the

    Commission) in connection with their conducting or sponsoring any

    collection of information as defined by the PRA. The repeal of

    Regulation 7.201 is not associated with a collection of information.

    Accordingly, the Paperwork Reduction Act does not apply.

    D. Cost Benefit Analysis

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

    costs and benefits of its action before promulgating a new regulation

    or order under the Act. Since this action repeals rather than

    promulgates a regulation, by its terms, Sec. 15(a) does not apply. In

    any event, the repeal of Commission Regulation 7.201 will not cause new

    regulatory requirements to be effected, as new CBOT Rule 600.D imposes

    the same requirements on CBOT members that Commission Regulation 7.201

    was adopted to impose. Thus, the repeal of Regulation 7.201 is cost/

    benefit neutral.

    List of Subjects in 17 CFR Part 7

    Arbitration, Commodity exchanges, Commodity futures.

    0

    In consideration of the foregoing, and pursuant to the authority in the

    Commodity Exchange Act and, in particular, sections 5 and 8a of the

    Act, the Commission hereby amends Title 17, part 7, of the Code of

    Federal Regulations as follows:

    PART 7--CONTRACT MARKET RULES ALTERED OR SUPPLEMENTED BY THE

    COMMISSION

    0

    1. The authority citation for part 7 is revised to read as follows:

    Authority: 7 U.S.C. 7(a) and 12a(7).

    Sec. 7.201 [Removed and reserved]

    0

    2. Section 7.201 is removed and reserved.

    Issued in Washington, DC, on July 31, 2009.

    By the Commission.

    David Stawick,

    Secretary of the Commission.

    [FR Doc. E9-18855 Filed 8-5-09; 8:45 am]

    BILLING CODE 6717-01-P

    Last Updated: August 6, 2009



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