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2017-01232

  • Federal Register, Volume 82 Issue 13 (Monday, January 23, 2017)

    [Federal Register Volume 82, Number 13 (Monday, January 23, 2017)]

    [Proposed Rules]

    [Pages 7738-7751]

    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

    [FR Doc No: 2017-01232]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Parts 3 and 9

    RIN 3038-AE15

    Technical Amendments to Rules on Registration and Review of

    Exchange Disciplinary, Access Denial or Other Adverse Actions

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Notice of proposed rulemaking.

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    SUMMARY: The Commodity Futures Trading Commission (``CFTC'' or

    ``Commission'') is proposing technical amendments to its regulations

    that govern registration and review of exchange disciplinary, access

    denial or other adverse actions. The amendments would integrate

    existing advisory guidance and the amendments to part 9 would also

    incorporate swap execution facilities (``SEFs'') and update provisions

    currently applicable to designated contract markets (``DCMs''). The

    proposal revises existing rules to delete numerous cross-references to

    previously deleted regulations and adds citations to applicable

    parallel provisions for SEFs and DCMs.

    [[Page 7739]]

    Additionally, the proposal addresses the publication of final

    disciplinary and access denial actions taken by the SEFs and DCMs on

    their exchange Web sites.

    DATES: Comments must be received on or before March 24, 2017.

    ADDRESSES: You may submit comments, identified by RIN 3038-AE15, by any

    of the following methods:

    CFTC Web site: https://comments.cftc.gov. Follow the

    instructions for submitting comments through the Comments Online

    process on the Web site.

    Mail: Christopher Kirkpatrick, Secretary of the

    Commission, Commodity Futures Trading Commission, Three Lafayette

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

    Hand Delivery/Courier: Same as Mail, above.

    Federal eRulemaking Portal: http://www.regulations.gov.

    Follow the instructions for submitting comments.

    Please submit your comments using only one method.

    All comments must be submitted in English, or if not, accompanied

    by an English translation. Comments will be posted as received to

    www.cftc.gov. You should submit only information that you wish to make

    available publicly. If you wish the Commission to consider information

    that you believe is exempt from disclosure under the Freedom of

    Information Act (``FOIA''), a petition for confidential treatment of

    the exempt information may be submitted according to the procedures

    established in Commission regulation 145.9.

    The Commission reserves the right, but shall have no obligation, to

    review, pre-screen, filter, redact, refuse or remove any or all of your

    submission from www.cftc.gov that it may deem to be inappropriate for

    publication, such as obscene language. All submissions that have been

    redacted or removed that contain comments on the merits of the

    rulemaking will be retained in the public comment file and will be

    considered as required under the Administrative Procedure Act and other

    applicable laws, and may be accessible under the FOIA.

    FOR FURTHER INFORMATION CONTACT: Rachel Berdansky, Deputy Director,

    Division of Market Oversight, at 202-418-5429 or rberdansky@cftc.gov;

    or David Steinberg, Associate Director, Division of Market Oversight,

    at 202-418-5102 or dsteinberg@cftc.gov, in each case, at the Commodity

    Futures Trading Commission, Three Lafayette Centre, 1151 21st Street

    NW., Washington, DC 20581.

    SUPPLEMENTARY INFORMATION:

    Table of Contents

    I. Background

    A. Description of Part 9

    B. DCM Final Rules and Part 8 Removal

    C. SEF Final Rules

    II. Proposed Amendments to Regulations

    A. Introduction

    B. Part 9

    1. Commission Regulation 9.1: Scope of Rules

    2. Commission Regulation 9.2: Definitions

    3. Commission Regulation 9.4: Filing and Service; Official

    Docket

    4. Commission Regulation 9.11: Form, Contents and Delivery of

    Notice of Disciplinary or Access Denial Action

    5. Commission Regulation 9.12: Effective Date of Disciplinary or

    Access Denial Action

    6. Commission Regulation 9.13: Publication of Notice

    7. Commission Regulation 9.24: Petition for Stay Pending Review

    8. Commission Regulation 9.31: Commission Review of Disciplinary

    or Access Denial Action on Its Own Motion

    9. Minor Changes to Commission Regulations 9.3, 9.4, 9.8, and

    9.9

    C. Part 3

    1. Commission Regulation 3.31: Deficiencies, Inaccuracies, and

    Changes To Be Reported

    III. Related Matters

    A. Regulatory Flexibility Act

    B. Paperwork Reduction Act

    C. Cost-Benefit Considerations

    IV. Request for Comments

    I. Background

    A. Description of Part 9

    On December 20, 1978, the Commission adopted part 9 rules relating

    to the review of exchange disciplinary, access denial, or other adverse

    actions.\1\ The rules govern the process and procedures by which the

    Commission may review exchange disciplinary and access denial actions,

    detailing the appellate process under which such review will be

    instituted and conducted in cases where a person applies to the

    Commission for review. In addition to setting forth procedures and

    standards governing filing and service, motions, and settlement, the

    rules also cover the process by which exchanges must provide notice of

    the final disciplinary action to the subject of the disciplinary action

    and to the Commission, as well as the publication of such notice. As

    discussed below, DCMs and SEFs are already required to comply with the

    part 9 regulations.

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    \1\ 43 FR 59343 (Dec. 20, 1978).

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    B. DCM Final Rules and Part 8 Removal

    In June 2012, the Commission implemented Core Principles and Other

    Requirements for Designated Contract Markets (``DCM Final Rules'').\2\

    Commission regulation 38.2 of the DCM Final Rules provides that DCMs

    shall comply with all applicable regulations under Title 17 of the Code

    of Federal Regulations, except for certain exempt provisions.\3\ Part 9

    is not included in the list of exempt provisions. Furthermore, part 9

    applies to DCMs by defining ``exchange'' in Commission regulation

    9.2(c) for purposes of the rules as any board of trade which has been

    designated as a contract market.\4\

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    \2\ 77 FR 36612 (June 19, 2012).

    \3\ 77 FR 36697 (June 19, 2012); 17 CFR 38.2.

    \4\ 17 CFR 9.2(c).

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    Additionally, in the DCM Final Rules, the Commission adopted

    regulations in ``Subpart N--Disciplinary Procedures'' of part 38 to

    amend the disciplinary procedures applicable to DCMs.\5\ Several of the

    regulations adopted in subpart N of part 38 are similar to the text of

    the disciplinary procedures found in former part 8--exchange procedures

    for disciplinary, summary, and membership denial actions.\6\ In order

    to avoid confusion from the regulations containing two sets of

    disciplinary procedures for DCMs, the Commission removed part 8 from

    the regulations.\7\ As a result of this removal, the current part 9

    rules, which contain cross-references to part 8 throughout, are being

    updated in this rulemaking (``NPRM'' or ``Proposal'') to instead cite

    to parallel provisions now contained in part 37 for SEFs and part 38

    for DCMs.\8\

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    \5\ 17 CFR 38.700 through 38.712.

    \6\ 43 FR 41950 (Sept. 19, 1978); 17 CFR 38.700 through 38.712.

    For example, part 8 contained regulations 8.05 (Enforcement staff);

    8.08 (Disciplinary committee); and 8.20 (Final decision). Subpart N

    of part 38 has corresponding provisions: 38.701 (Enforcement staff);

    38.702 (Disciplinary panels); and 38.709 (Final decisions).

    \7\ Although Commission regulation 38.2 of the DCM Final Rules

    specifies that DCMs are not required to comply with part 8, the

    Commission removed part 8 to avoid any confusion resulting from the

    regulations containing two sets of exchange disciplinary procedures

    as part of the Adaption of Regulations to Incorporate Swaps

    Rulemaking. 17 CFR 38.2; and removal of part 8 at 77 FR 66304 (Nov.

    2, 2012).

    \8\ 17 CFR parts 9, 37, and 38. For example, in Commission

    regulation 9.2(k) the definition of ``summary action'' cites to

    Commission regulations 8.17(b), 8.25, and 8.27 which were removed

    along with the entirety of part 8. Proposed Commission regulation

    9.2(k) will instead cite to part 37, appendix B, Core Principle 2,

    paragraphs (a)(10)(vi), (a)(13), and (a)(14) [for SEFs] and part 38,

    appendix B, Core Principle 13, paragraphs (a)(4), (a)(6), and (a)(7)

    [for DCMs].

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    C. SEF Final Rules

    The Dodd-Frank Wall Street Reform and Consumer Protection Act

    (``Dodd-Frank Act'') repealed some sections of the Commodity Exchange

    Act (``CEA'' or ``Act''), amended others, and established new

    categories of Commission

    [[Page 7740]]

    registrants, including SEFs.\9\ Pursuant to the Dodd-Frank Act, the

    Commission adopted new rules in part 37 Core Principles and Other

    Requirements for Swap Execution Facilities (``SEF Final Rules'').\10\

    The Commission notes that since the advent of the Dodd-Frank Act's new

    statutory framework for regulating swaps, it adopted a rulemaking

    (Adaptation of Regulations to Incorporate Swaps) implementing

    conforming changes to existing regulations to clarify those pre-Dodd-

    Frank provisions, including those applicable to SEFs.\11\ Part 9,

    however, which also applies to SEFs, was not addressed in this

    rulemaking.\12\ As such, in regulation 37.2 of the SEF Final Rules, the

    Commission specified that SEFs shall comply with the requirements of

    part 9.\13\ Accordingly, for clarity purposes, this NPRM amends certain

    part 9 definitions and language which have not yet been addressed, to

    better integrate them into the post-Dodd-Frank regulatory regime.

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    \9\ See generally Dodd-Frank Wall Street Reform and Consumer

    Protection Act, Public Law 111-203, 124 Stat. 1376 (2010) available

    at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm; see

    also Dodd-Frank Act section 721(a)(50), adding CEA section 1a(50),

    codified at 7 U.S.C. 1a(50).

    \10\ 78 FR 33476 (June 4, 2013).

    \11\ 77 FR 66288 (Nov. 2, 2012).

    \12\ Id.

    \13\ See 78 FR 33476, 33479 (June 4, 2013); 17 CFR 37.2.

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    II. Proposed Amendments to Regulations

    A. Introduction

    This Proposal contains amendments of three different types:

    Ministerial, accommodating, and substantive. Most of the proposed

    amendments are purely ministerial--for instance, some of the proposed

    changes would update definitions in Commission regulation 9.2 to

    conform them to the CEA as amended by the Dodd-Frank Act as well as

    other sections of the Commission's regulations. Furthermore, as noted

    above, the citations to part 8 in the current part 9 rules would be

    replaced with the appropriate citations to regulations, guidance, and

    acceptable practices from parts 37 and 38.\14\ In a similar vein, one

    of the proposed amendments to Commission regulation 9.1 would remove

    the reference to section 5a(a)(11) of the CEA, since this section was

    eliminated by the passage of the Commodity Futures Modernization Act of

    2000 (``CFMA'').\15\

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    \14\ 17 CFR parts 37 and 38.

    \15\ Public Law 106-554, 114 Stat. 2763, sec. 110 (2000).

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    The proposed accommodating amendments do not impose any new

    obligations on SEFs; rather they clarify that SEFs, in addition to

    DCMs, must comply with part 9.\16\ This clarification would be

    accomplished by updating part 9's definition of ``exchange'' to include

    SEFs and to add swaps to language discussing the types of transactions

    from which an exchange disciplinary action might arise. These

    amendments are more than ministerial because they require some judgment

    in drafting. Another example of an accommodating amendment is the

    proposed formal codification of the part 3 and part 9 advisories and

    the Commission's delegation to the National Futures Association

    (``NFA'') of the responsibility to receive notice of final exchange

    disciplinary and access denial actions, in which the Commission

    encouraged exchanges to comply with the notice requirements in

    Commission regulation 9.11 (``9.11 notice'') by filing with the

    NFA.\17\ Additionally, the proposed amendment to Commission regulation

    9.11(b)(3)(ii) would codify the clarification contained in the Part 9

    Advisory that an exchange indicate in its notice of disciplinary or

    access denial actions whether the violation underlying the notice

    resulted in financial harm to any customers.\18\

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    \16\ 17 CFR part 9, Sec. Sec. 37.2 and 38.2.

    \17\ 64 FR 39913 (July 23, 1999) (``Part 9 Delegation''); 64 FR

    39912 (July 23, 1999) (``Part 3 Advisory''); 64 FR 39915 (July 23,

    1999) (``Part 9 Advisory''). As discussed more fully below in the

    preamble, the Part 9 Advisory permits exchanges to file 9.11 notices

    of final disciplinary or access denial actions with the Commission

    or with the NFA. The Part 9 Delegation gives the NFA authority to

    receive and process these notices on behalf of the Commission.

    Finally, the Part 3 Advisory relieves registrants and registrant

    applicants from Commission regulation 3.31 Form 3-R reporting

    obligations in instances when the information to be reported is

    solely the result of an exchange disciplinary or access denial

    action.

    \18\ 64 FR 39917 (July 23, 1999).

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    The remaining proposed amendments are generally substantive in that

    they include an additional element required to be included in the

    contents of a 9.11 notice and a material revision to Commission

    regulation 9.13 which currently requires exchanges to post notice of

    final exchange disciplinary action on the exchange's premises.\19\

    First, as part 9 pertains to both DCMs and SEFs which offer a number of

    varied products for trading, the proposed amendment to Commission

    regulation 9.11 would require exchanges to include the type of product

    (as applicable) involved in the adverse action in the contents of the

    final notice. Second, the proposed amendment to Commission regulation

    9.13 would remove the requirement to post notice on the exchange's

    premises and instead require the exchange to post the notice on the

    exchange's Web site. Finally, as addressed above in the discussion of

    accommodating amendments, the Commission is proposing to codify the

    Part 9 Advisory. By specifying in the rule text that exchanges provide

    notice of final exchange disciplinary and access denial actions

    directly to the NFA, the Commission is eliminating the option for

    exchanges to file notice with the Commission.

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    \19\ 17 CFR 9.11 and 9.13.

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    B. Part 9

    1. Commission Regulation 9.1: Scope of Rules

    Commission regulation 9.1 governs the review by the Commission,

    pursuant to section 8c of the CEA, of any suspension, expulsion,

    disciplinary or access denial action, or other adverse action by an

    exchange.\20\ As noted above, the Commission is proposing a ministerial

    amendment to regulation 9.1(b)(1) by removing the reference to section

    5a(a)(11) of the CEA, since this section was eliminated by the passage

    of the CFMA.\21\

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    \20\ 7 U.S.C. 12c.

    \21\ Public Law 106-554, 114 Stat. 2763, sec. 110 (2000).

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    Commission regulation 9.1(b)(2) provides an exclusion from the part

    9 regulations with respect to the Commission's review of summary

    actions imposed by an exchange for a minor penalty for the violation of

    exchange rules relating to decorum, attire, or timely submission of

    accurate records required for clearing or verifying each day's

    transactions or similar activities. The Commission proposes to amend

    regulation 9.1(b)(2) by replacing the reference to regulation 8.27 with

    a reference to part 37 guidance pertaining to violations of rules

    regarding timely submission of records and part 38 guidance pertaining

    to summary fines for violations of rules regarding timely submission of

    records, decorum, or other similar activities.\22\

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    \22\ The proposed references would be to (i) part 37 guidance,

    17 CFR part 37, appendix B, Core Principle 2, paragraph (a)(13); and

    (ii) part 38 guidance, 17 CFR part 38, appendix B, Core Principle

    13, paragraph (a)(6).

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    Commission regulation 9.1(b)(3) provides an exclusion from the part

    9 regulations concerning any exchange action arising from a claim,

    grievance, or dispute involving cash market transactions which are not

    a part of, or directly connected with, any transaction for the

    purchase, sale, delivery or exercise of a commodity for future

    delivery, or a commodity option. The Commission proposes to amend

    regulation 9.1(b)(3) by inserting ``swap'' at the end of the paragraph

    to account

    [[Page 7741]]

    for swap transactions on a DCM or on a SEF as a result of the Dodd-

    Frank Act.\23\ As noted above, the addition of ``swap'' language is a

    conforming amendment as it requires some judgment as to its inclusion.

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    \23\ Section 723(a)(3) of the Dodd-Frank Act added section

    2(h)(8) of the CEA to require, among other things, that execution of

    swaps subject to the clearing requirement of section 2(h)(1) of the

    CEA must occur on either a DCM or a SEF.

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    Commission regulation 9.1(c) provides for the applicability of part

    9 rules to matters filed with the Commission after August 6, 1987. In

    1987, the part 9 rules in place at the time were superseded and

    Commission regulation 9.1(c) governed whether an existing matter would

    be subject to the pre- or post-1987 part 9 rules. Such determination is

    no longer necessary because no pre-1987 matters are pending before the

    Commission. As a result, the Proposal seeks to remove text from

    Commission regulation 9.1(c) that governs whether a matter would be

    subject to the pre- or post-1987 part 9 rules.

    2. Commission Regulation 9.2: Definitions

    The Commission proposes to revise the definition of four terms in

    regulation 9.2. First, the Commission proposes to revise the definition

    of ``disciplinary action'' in regulation 9.2(b) by deleting the

    reference to regulation 8.03(i). The Commission also proposes to remove

    the reference to ``member of an exchange'' and insert ``person'' in its

    place. The Commission believes it is necessary to expand the

    ``disciplinary action'' definition to account for instances where an

    exchange imposes sanctions against a person that is not a member of the

    exchange. The Commission's proposal to include ``person'' in the

    ``disciplinary action'' definition is consistent with the statutory

    language found in Core Principle 2 for DCMs and section 8c(b) of the

    CEA, as amended by the Dodd-Frank Act.\24\

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    \24\ Section 735 of the Dodd-Frank Act amends section 5 of the

    CEA, including DCM Core Principle 2. Paragraph (B)--Capacity of

    Contract Market--of Core Principle 2 specifically requires that the

    board of trade shall have the capacity to detect, investigate, and

    apply appropriate sanctions to any person that violates any rule of

    the contract market. Section 8c(b) of the CEA, 7 U.S.C. 12c(b),

    provides that the Commission may, in its discretion and in

    accordance with such standards and procedures as it deems

    appropriate, review any decision by an exchange whereby a person is

    suspended, expelled, disciplined, or denied access to the exchange.

    In addition, section 8c(b) of the CEA provides that the Commission

    may, in its discretion and upon application of any person who is

    adversely affected by any other exchange action, review such action.

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    Second, the Commission proposes to amend the definition of

    ``exchange'' in regulation 9.2(c) to include SEFs. This change would

    make clear that the Commission has the discretion to review adverse

    actions imposed by a SEF and clarify that SEFs are subject to all of

    the part 9 requirements.\25\

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    \25\ Id. The Commission notes that regulation 37.2 requires,

    among other things, that a SEF shall comply with the part 9

    regulations. 17 CFR 37.2. Additionally, footnote 40 of the SEF Final

    Rules states ``the term `exchange' used in part 9 of the

    Commission's regulations should be interpreted to include a SEF for

    purposes of applying the requirements of part 9 to a SEF.'' 78 FR

    33476, 33479 (June 4, 2013).

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    Third, the Commission proposes to amend regulation 9.2(f) to expand

    the definition of ``member of an exchange'' to include any person who

    has trading privileges on an exchange. This change is necessary to

    conform the part 9 definition of ``member'' to the meaning set forth in

    section 1a(34) of the CEA and in Sec. 1.3(q) of the Commission's

    regulations.\26\

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    \26\ Section 1a(34) of the CEA provides that the term ``member''

    means, among other things, an individual, association, partnership,

    corporation, or trust having trading privileges on the registered

    entity. See also 17 CFR 1.3(q). By amending the definition of

    ``member of an exchange'' to include all persons with trading

    privileges, the Commission is clarifying that the appellate process

    and Commission review, as defined in part 9, would apply to all

    persons with trading privileges.

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    Fourth, the Commission proposes to amend the definition of

    ``summary action'' in regulation 9.2(k) by adding references to part 37

    for SEFs and replacing the part 8 references with the relevant

    provisions from part 38.\27\

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    \27\ Specifically, the proposed definition of ``summary action''

    means a disciplinary action resulting in the imposition of a penalty

    on a person for violation of rules of the exchange permitted under

    the provisions of part 37, appendix B, Core Principle 2, paragraph

    (a)(10)(vi) or part 38, appendix B, Core Principle 13, paragraph

    (a)(4) (penalty for impeding progress of hearing); part 37, appendix

    B, Core Principle 2, paragraph (a)(14) or part 38, appendix B, Core

    Principle 13, paragraph (a)(7) (emergency disciplinary actions);

    part 37, appendix B, Core Principle 2, paragraph (a)(13) (summary

    fines for violations of rules regarding timely submission of

    records); or part 38, appendix B, Core Principle 13, paragraph

    (a)(6) (summary fines for violations of rules regarding timely

    submission of records, decorum, or other similar activities).

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    3. Commission Regulation 9.4: Filing and Service; Official Docket

    Commission regulation 9.4(a) describes the procedures for filing

    any document required by part 9 to be filed with the Commission

    Procedures Clerk, including proof of filing and proof of service. To

    ease the burden on parties, the Commission proposes to amend regulation

    9.4(a) by replacing the requirement of a formal affidavit of service

    with the requirement that parties submit a signed ``statement of

    service'' that: (1) Confirms that service has been made; (2) identifies

    each person served; (3) sets forth the date of service; and (4) recites

    the manner of service. The less formal and less burdensome statement of

    service effectively serves the same purpose as an affidavit of service

    (i.e., promoting and assuring the full exchange of information among

    the parties by requiring service of submissions on all of the parties

    in the proceeding). Additionally, the Commission proposes to amend

    regulation 9.4(b)(1) to reduce the burden on parties by requiring an

    original and one copy (instead of two copies) of all documents filed

    with the Commission.

    4. Commission Regulation 9.11: Form, Contents and Delivery of Notice of

    Disciplinary or Access Denial Action

    Commission regulation 9.11(a) requires that whenever an exchange

    makes a decision, pursuant to which disciplinary action or access

    denial to be imposed has become final, the exchange must provide

    written notice of such action to the person against whom the action was

    taken and to the Commission within 30 days thereafter. In 1999, the

    Commission delegated authority to the NFA to receive and process

    exchange disciplinary and access denial information (``Part 9

    Delegation'').\28\ Consequently, the NFA currently serves as the

    official custodian of records for exchange disciplinary filings. The

    Commission intends to again delegate authority to the NFA, via an

    updated order to be published concurrently with the final rule, to

    receive and process exchange disciplinary and access denial

    information. The Commission proposes to issue an updated order that

    includes specific duties delegated to the NFA, such as: (1) To process

    exchange disciplinary information; (2) to provide the Commission with

    access to a report summarizing all recent exchange disciplinary

    information; (3) to assist the Commission in enforcing exchange

    compliance with regulation 9.11 filing requirements; and (4) to serve

    as the official custodian of a database containing records of the

    exchanges' disciplinary and access denial actions.

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    \28\ 64 FR 39913 (July 23, 1999). The NFA created the Background

    Affiliation Status Information Center (``BASIC'') system through

    which the public can access information pertaining to the types of

    violations committed, penalties imposed, the effective date of the

    action, and, in some cases, the text from the exchange's decision.

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    In 1999, concurrent with the Part 9 Delegation, the Commission

    published an advisory permitting exchanges to file 9.11 notices with

    the Commission or the NFA (``Part 9 Advisory'').\29\ While

    [[Page 7742]]

    permitting filing with the Commission, the Part 9 Advisory encourages

    exchanges to file the required notice with the NFA and to do so

    electronically as the Commission believes such filing to be faster and

    more cost-effective for both the exchanges and the NFA. In an effort to

    codify the Part 9 Advisory and formally replace the regulation 9.11

    requirement that written notice be provided to the Commission, the

    Commission proposes to amend regulation 9.11 to require that notice be

    provided to the NFA via the NFA's BASIC system and eliminate the option

    of filing the notice with the Commission.

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    \29\ 64 FR 39915 (July 23, 1999).

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    Additionally, the Commission proposes to amend regulation 9.11(a)

    by replacing the reference to regulation 8.27 with a reference to part

    38.\30\

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    \30\ Specifically, the reference to Commission regulation 8.27

    would be replaced with a reference to part 38, appendix B, Core

    Principle 13, paragraph (a)(6) (summary fines for violations of

    rules regarding timely submission of records, decorum, or other

    similar activities) for DCMs. Under the current rule and in the

    proposed rule, DCMs would not be required to report summary fines

    with respect to violations related to decorum or attire. Decorum or

    attire violations do not apply to SEFs. Accordingly, SEFs are

    required to report all disciplinary and access denial actions to

    BASIC.

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    Commission regulation 9.11(b) sets forth the content that must be

    included in the disciplinary notice. The Commission proposes

    ministerial and conforming amendments to regulation 9.11(b) by

    inserting references to part 37, replacing the references to part 8

    with references to part 38, codifying the Part 9 Advisory clarification

    that the contents of the notice include whether the violation resulted

    in customer harm, and specifying the content of notices provided to:

    (1) The person against whom the action was taken and (2) the NFA.

    Additionally, for the sake of clarity, the Commission is proposing to

    renumber regulation 9.11(b) by assigning separate paragraphs 9.11(b)(1)

    to specify the notice to be provided by DCMs, 9.11(b)(2) to specify the

    notice to be provided by SEFs, and 9.11(b)(3) to detail the list of

    items to be included in the contents of the notice.

    Furthermore, the Commission is proposing a substantive amendment to

    regulation 9.11(b)(3)(ii) by adding an additional element required to

    be included in the contents of the notice. Because part 9 pertains to

    both DCMs and SEFs, which offer a number of varied products for

    trading, the Commission believes that requiring exchanges to detail the

    type of product (as applicable) involved in the adverse action as part

    of the 9.11 notice will provide the Commission, market participants,

    the public, and other exchanges with greater transparency concerning

    where market abuses originate and whether the abuses are concentrated

    among certain product types.\31\ Specifically, proposed Commission

    regulation 9.11(b) provides that for purposes of part 9, the notice of

    disciplinary action or access denial action provided to the person

    against whom the action was taken may be a copy of a decision which

    accords with part 37 and part 38 regulations and guidance.\32\

    Alternatively, the notice provided to the person against whom the

    action was taken must include: (i) The name of the individual against

    whom the action was taken; (ii) a statement of the reasons for the

    action, detailing the exchange product which was involved, as

    applicable, and whether the violation that resulted in the action also

    resulted in financial harm to any customers together with a list of any

    rules which the individual was charged with having violated or which

    otherwise serve as the basis of the action; (iii) a statement of the

    exchange's conclusions and findings regarding each violation charged

    or, in the event of a settlement, a statement specifying those rule

    violations which the exchange believes were committed; (iv) the terms

    of the action; (v) the date the action was taken and the date the

    action will become effective; and (vi) a statement informing the party

    subject to the action of the availability of Commission review pursuant

    to section 8c of the CEA. Additionally, the Commission proposes to

    amend regulation 9.11(b) by requiring that notice provided to the NFA

    include items (i)-(v) immediately above.

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    \31\ For example, a product trading on a DCM might be specified

    as a July 2016 Eurodollar future; while a product trading on a SEF

    may be a CDX North American High Yield Series 26 5 year.

    \32\ The notice required by Commission regulation 9.11 may be

    satisfied by providing a copy of the final decision in accordance

    with part 37, appendix B, Core Principle 2, paragraph (a)(9) or part

    38, appendix B, Core Principle 13, paragraph (a)(3) (settlement

    offers); Commission regulations 37.206(d) or 38.708 (decisions); or

    part 37, appendix B, Core Principle 2, paragraph (a)(11)(iv) or part

    38, appendix B, Core Principle 13, paragraph (a)(5)(iv) (appeal

    decisions).

    ---------------------------------------------------------------------------

    Commission regulation 9.11(c) sets forth the delivery process that

    must be followed when providing notice of disciplinary action or access

    denial action to the person who was the subject to the action, and the

    filing process that must be followed when providing notice of the

    action to the Commission. The Commission proposes to amend regulation

    9.11(c) by deleting instructions for filing notice with the Commission

    and replacing them with instructions for filing notice with the NFA.

    Specifically, proposed Commission regulation 9.11(c) provides that

    filing of the notice with the NFA is accomplished when an authorized

    exchange employee verifies the accuracy of the information entered into

    BASIC.

    Commission regulation 9.11(d) sets forth the effect of delivery and

    filing by mail. The Commission proposes to amend regulation 9.11(d) by

    deleting instructions related to filing notices with the Commission by

    mail since proposed regulation 9.11(c) calls for notice filings be made

    to the NFA via BASIC instead of with the Commission by mail.

    Commission regulation 9.11(e) sets forth the procedures for

    certifying the notice provided pursuant to Commission regulation 9.11.

    The Commission proposes to amend regulation 9.11(e) by adding

    instructions for the certification of notice filed with the NFA.

    Specifically, proposed Commission regulation 9.11(e) provides that

    notice filed with the NFA is deemed certified when an authorized

    exchange employee verifies the accuracy of the information entered into

    BASIC.

    5. Commission Regulation 9.12: Effective Date of Disciplinary or Access

    Denial Action

    Pursuant to Commission regulation 9.12(a), a disciplinary action or

    access denial imposed by an exchange will not become effective until at

    least 15 days after the written notice prescribed by Commission

    regulation 9.11 is delivered to the person disciplined or denied

    access. However, an exchange may cause a disciplinary action to become

    effective prior to that time under certain circumstances that are

    identified in Commission regulation 9.12(a)(1)-(a)(4). The Commission

    proposes to amend regulation 9.12(a)(1)-(a)(4) by adding references to

    part 37 and replacing references to part 8 with references to part

    38.\33\

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    \33\ Specifically, the Commission proposes to amend regulation

    9.12(a)(1) by adding a reference to part 37, appendix B, Core

    Principle 2, paragraph (a)(14) (emergency disciplinary actions) and

    replacing the reference to regulation 8.25 with a reference to Part

    38, appendix B, Core Principle 13, paragraph (a)(7) (emergency

    disciplinary actions). In regulation 9.12(a)(2), the Commission

    proposes to add a reference to part 37, appendix B, Core Principle

    2, paragraph (a)(10)(vi) (hearings) and replace the reference to

    regulation 8.17(b) with a reference to part 38, appendix B, Core

    Principle 13, paragraph (a)(4) (hearings). The Commission proposes

    to amend regulation 9.12(a)(3) by adding a reference to part 37,

    appendix B, Core Principle 2, paragraph (a)(13) (summary fines for

    violations of rules regarding timely submission of records) and

    replacing the reference to regulation 8.27 with a reference to part

    38, appendix B, Core Principle 13, paragraph (a)(6) (summary fines

    for violations of rules regarding timely submission of records,

    decorum, or other similar activities).

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    [[Page 7743]]

    Pursuant to Commission regulation 9.12(b), an exchange that

    determines that a disciplinary action will become effective prior to

    the expiration of 15 days after written notice must notify the person

    disciplined in writing either personally or by telegram or other means

    of written telecommunication. The exchange must also immediately notify

    the Commission by telegram or other means of written telecommunication.

    In order to modernize regulation 9.12(b), the Commission proposes to

    replace references to ``telegram or other means of written

    telecommunication'' with the term ``email'' and provide a Commission

    email address where notice of the early effective date can be sent by

    the exchange.

    6. Commission Regulation 9.13: Publication of Notice

    Pursuant to Commission regulation 9.13, whenever an exchange

    suspends, expels or otherwise disciplines, or denies any person access

    to the exchange, it must make public its findings by disclosing at

    least the information contained in the notice required by Commission

    regulation 9.11(b). An exchange also must make such findings public as

    soon as the disciplinary action or access denial action becomes

    effective in accordance with the provisions of Commission regulation

    9.12 by posting a notice in a conspicuous place on its premises to

    which its members and the public regularly have access for a period of

    five consecutive business days. The exchange must also maintain and

    make available for public inspection a record of the information

    contained in the disciplinary or access denial notice.

    The Commission notes that regulation 9.13 was published in 1987, at

    a time when futures trading occurred primarily in person in the

    exchange's trading pits and on exchange premises. Therefore, posting

    notice of disciplinary action or access denial action on exchange

    premises, where it could be readily viewed by market participants, was

    an effective form of publicizing the disciplinary action. Today, most

    trading on DCMs and some of the trading on SEFs occurs by electronic

    execution. While some SEF trading is executed via a voice component,

    both electronic and voice execution occurs between market participants

    that are in geographically distinct locations and generally do not set

    foot on exchange premises. Consequently, posting a notice of

    disciplinary action on the premises of an exchange does little to

    publicize a disciplinary action. In an effort to modernize Commission

    regulation 9.13, and to provide better notice of a disciplinary action

    or an access denial action, the Commission proposes to amend regulation

    9.13 to require such notice be posted on an exchange's Web site to

    which its members, market participants, and the public regularly have

    access.\34\ In addition, to better inform market participants and

    maintain a public record of disciplinary action taken by an exchange,

    the Commission proposes to amend regulation 9.13 to require that such

    notice of a disciplinary action or an access denial action be

    maintained and readily available on an exchange's Web site.\35\ As a

    result, the existing requirement to maintain and make available for

    public inspection a record of the information contained in the

    disciplinary or access denial notice would be eliminated.

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    \34\ The Commission acknowledges that many DCMs have already

    adopted more modern methods to publicize notices of disciplinary

    action. For example, the CME Group DCMs (Chicago Board of Trade

    (``CBOT''), Chicago Mercantile Exchange (``CME''), Commodity

    Exchange, Inc., (``COMEX''), and New York Mercantile Exchange, Inc.

    (``NYMEX'')) and ICE Futures U.S. notify subscribers of exchange

    disciplinary postings via email. The Commission also notes that the

    proposed amendment generally tracks the Securities and Exchange

    Commission's (``SEC'') standards for Release of Disciplinary

    Complaints, Decisions and Other Information in Financial Industry

    Regulatory Authority, Inc. (``FINRA'') Rule 8313, in which FINRA,

    with SEC approval, has established its standard for releasing to the

    public a copy of FINRA issued disciplinary complaints, decisions,

    and other disciplinary information. See FINRA Rule 8313 ``Release of

    Disciplinary Complaints, Decisions and Other Information,''

    available at http://finra.complinet.com/en/display/display_main.html?rbid=2403&element_id=3892. See also SEC Release

    No. 34-69825; File No. SR-FINRA-2013-018 (June 21, 2013).

    \35\ Some DCMs currently maintain records of disciplinary action

    on their Web sites. For example, CBOE Futures Exchange, LLC

    maintains a disciplinary decision database on its Web site that

    allows the public to review disciplinary decisions dating back to

    2012. The Commission notes that in the securities industry, the New

    York Stock Exchange maintains disciplinary notices as far back as

    1972.

    ---------------------------------------------------------------------------

    The Commission recognizes that NFA BASIC presently acts as the

    central repository of all disciplinary action taken by DCMs and SEFs.

    However, such disciplinary information cannot be queried by a specific

    exchange. In general, the Commission believes that greater access to

    exchange disciplinary actions provides valuable guidance and

    information to market participants and potential market participants.

    Also, maintaining disciplinary actions on an exchange's public Web site

    can serve to further deter and prevent future misconduct and to improve

    overall compliance among market participants. In addition, market

    participants may use such information to educate themselves as to

    compliance matters, potential violations and related sanctions, as well

    as to revise their own compliance procedures involving similar business

    practices. Further, any market participant facing allegations of rule

    violations may access an exchange's existing disciplinary decisions to

    gain greater insight on related facts and sanctions. Finally, in an

    effort to enhance access to disciplinary information, the Commission

    anticipates that upon the effective date of the final part 9 rules, it

    will include links on its SmartCheck Web site to each exchange's Web

    site for posting notice of disciplinary action or access denial

    action.\36\

    ---------------------------------------------------------------------------

    \36\ In November 2014, the CFTC launched the SmartCheck Web

    site. It connects investors to tools to check the registration,

    license, and disciplinary history of certain financial

    professionals. This collection of tools allows the responsible

    investor to confirm the credentials of investment professionals,

    uncover any past disciplinary history, and stay ahead of scam

    artists with news and alerts.

    ---------------------------------------------------------------------------

    7. Commission Regulation 9.24: Petition for Stay Pending Review

    Commission regulation 9.24 provides the procedures that a person

    disciplined or denied access by an exchange must follow in the event

    that a person petitions the Commission to stay a disciplinary or access

    denial action. The Commission proposes to amend regulation 9.24(a)(2)

    by adding a reference to part 37 and replacing the reference to part 8

    with a reference to part 38.\37\ In addition, the Commission proposes

    to remove the reference to regulation 8.26, which provided for

    emergency action hearing procedures, from regulation 9.24(a)(2), as the

    part 37 and 38 emergency disciplinary action guidance (cited above)

    provides for emergency action hearing procedures.

    ---------------------------------------------------------------------------

    \37\ Specifically, the Commission proposes to add a reference to

    part 37, appendix B, Core Principle 2, paragraph (a)(14) (emergency

    disciplinary actions) and replace the reference to regulation 8.25

    with a reference to part 38, appendix B, Core Principle 13,

    paragraph (a)(7) (emergency disciplinary actions).

    ---------------------------------------------------------------------------

    8. Commission Regulation 9.31: Commission Review of Disciplinary or

    Access Denial Action on Its Own Motion

    Commission regulation 9.31(a) permits the specified Divisions at

    the Commission to request that an exchange file the record of an

    exchange proceeding and other documents applicable to an exchange

    proceeding with such Divisions, upon review of the

    [[Page 7744]]

    exchange notice specified in Commission regulation 9.11, in instances

    where the person disciplined or denied access by the exchange has not

    appealed the exchange decision to the Commission. The Commission

    proposes to amend regulation 9.31(a) to delete the reference to the

    Division of Clearing and Risk from the first sentence. This provision

    had previously been amended to replace an earlier reference to the

    Division [of] Clearing and Intermediary Oversight with references to

    the Division of Swap Dealer and Intermediary Oversight and the Division

    of Clearing and Risk, as the successors to the Division of Clearing and

    Intermediary Oversight. Given the current organizational

    responsibilities of the Divisions, it is not necessary to include the

    Division of Clearing and Risk in Commission regulation 9.31(a). The

    Division of Clearing and Risk does not typically review notices of

    exchange disciplinary or access denial actions filed pursuant to

    Commission regulation 9.11 but instead reviews reports regarding rule

    enforcement activities and sanctions imposed against clearing members

    by registered derivatives clearing organizations pursuant to Commission

    regulations 39.17(a)(3) and 39.19(c)(4)(xi). The Commission also

    proposes to amend regulation 9.31(a) by adding language that requires

    the exchange to provide information to the requesting Division in the

    manner requested by the Division and to the person who is the subject

    of the disciplinary or access denial action in the manner prescribed by

    regulation 9.11(c).

    The Commission also proposes to amend regulation 9.31(b) to replace

    reference to the ``Commission'' with ``NFA'' in the second sentence.

    Such replacement is necessary to conform Commission regulation 9.31(b)

    to proposed changes to Commission regulation 9.11 that call for a

    notice of disciplinary or access denial action to be provided to the

    NFA.

    9. Minor Changes to Commission Regulations 9.3, 9.4, 9.8, and 9.9

    The Commission proposes to amend regulation 9.3 by correcting the

    referenced title of regulation 12.7 to read ``Ex parte communications

    in reparation proceedings.'' The Commission also proposes to amend

    regulations 9.4(b)(4) and (c)(3), 9.8(1), and 9.9(b)(3) and (4) to make

    them gender neutral.

    C. Part 3

    1. Commission Regulation 3.31: Deficiencies, Inaccuracies, and Changes

    To Be Reported

    Pursuant to Commission regulation 3.31, an applicant or registrant

    as a futures commission merchant, retail foreign exchange dealer, swap

    dealer, major swap participant, commodity trading advisor, commodity

    pool operator, introducing broker, floor trader that is a non-natural

    person or leverage transaction merchant shall promptly correct any

    deficiency or inaccuracy in Form 7-R or Form 8-R which has rendered the

    information contained therein non-current or inaccurate. These

    corrections must be made on Form 3-R and filed in accordance with the

    form's instructions (such instructions presently require that Form 3-R

    be filed with the NFA).

    In 1999, concurrent with the Part 9 Delegation and Part 9 Advisory,

    the Commission issued an advisory pertaining to part 3 of the

    Commission's regulations (``Part 3 Advisory''). The Part 3 Advisory

    relieves registrants and applicants for registrant status from filing a

    Form 3-R, as required under Commission regulation 3.31, if the

    information to be reported is solely the result of an exchange

    disciplinary or access denial action.\38\ The Part 3 Advisory also

    explains that the Commission has: (1) Permitted exchanges (via the Part

    9 Advisory) to file either electronic or written 9.11 notices with the

    NFA instead of the Commission and (2) delegated to the NFA (via the

    Part 9 Delegation) the duty to receive and process exchange

    disciplinary and access denial action information filed by the

    exchanges in accordance with Commission regulation 9.11. The Commission

    further explained that, as a result of the Part 9 Advisory and Part 9

    Delegation, the NFA possesses the exchange disciplinary and access

    denial action information that registrants and applicants for

    registration status would otherwise be required to include in Form 3-R.

    Therefore, to avoid duplicative reporting, the Part 3 Advisory advises

    all individuals and entities subject to Commission regulation 3.31 that

    they are relieved from Commission regulation 3.31 reporting obligations

    resulting from an exchange disciplinary or access denial action and

    reported by an exchange pursuant to a 9.11 notice.

    ---------------------------------------------------------------------------

    \38\ 64 FR 39912 (July 23, 1999).

    ---------------------------------------------------------------------------

    As discussed above, the Commission intends to again delegate

    authority to the NFA to receive and process exchange disciplinary and

    access denial information. Additionally, the Commission seeks to

    replace the Part 9 Advisory by proposing to amend regulation 9.11 to

    require that notice be provided to the NFA via the NFA's BASIC system.

    Similarly, the Commission intends to codify the Part 3 Advisory by

    proposing to amend the end of the first sentence of regulation

    3.31(a)(1) with language that relieves the following applicants or

    registrants from filing a Form 3-R if the information to be reported is

    solely the result of an exchange disciplinary or access denial action:

    Futures commission merchants (``FCMs''), retail foreign exchange

    dealers (``RFEDs''), swap dealers (``SDs''), major swap participants

    (``MSPs''), commodity trading advisors (``CTAs''), commodity pool

    operators (``CPOs''), introducing brokers (``IBs''), floor traders

    (``FTs'') that are non-natural persons or leverage transaction

    merchants (``LTMs'').

    III. Related Matters

    A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires that agencies

    consider whether the regulations they propose will have a significant

    economic impact on a substantial number of small entities and, if so,

    provide a regulatory flexibility analysis respecting the impact.\39\

    The part 9 rules proposed by the Commission will impact all SEFs and

    DCMs. 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.\40\ The Commission has also determined that DCMs and SEFs are not

    small entities for the purpose of the RFA.\41\

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    \39\ 5 U.S.C. 601 et seq.

    \40\ See 47 FR 18618 through 18621 (Apr. 30, 1982).

    \41\ See 47 FR 18618, 18619 (Apr. 30, 1982) (DCMs); 78 FR 33548

    (June 4, 2013) (SEFs).

    ---------------------------------------------------------------------------

    The part 3 rules proposed herein would affect certain applicant or

    registrant FCMs, RFEDs, SDs, MSPs, CTAs, CPOs, IBs, FTs who are non-

    natural persons, and LTMs who would no longer have to file a Form 3-R

    if the information to be reported is solely the result of an exchange

    disciplinary or access denial action. The Commission has previously

    determined that FCMs, RFEDS, SDs, MSPs, CPOs, and LTMs are not small

    entities for purposes of the RFA.\42\ Therefore, the requirements of

    [[Page 7745]]

    the RFA do not apply to those entities. With respect to CTAs, FTs, and

    IBs, the Commission has found it appropriate to consider whether such

    registrants should be deemed small entities for purposes of the RFA on

    a case-by-case basis, in the context of the particular Commission

    regulation at issue.\43\ As certain of these registrants may be small

    entities for purposes of the RFA, the Commission has considered whether

    this Proposal would have a significant impact on these registrants.

    ---------------------------------------------------------------------------

    \42\ See Policy Statement and Establishment of Definitions of

    ``Small Entities'' for Purposes of the Regulatory Flexibility Act,

    47 FR 18618 (Apr. 30, 1982) (FCMs and CPOs); Leverage Transactions,

    54 FR 41068 (Oct. 5, 1989) (LTMs); Regulation of Off-Exchange Retail

    Foreign Exchange Transactions and Intermediaries, 75 FR 55410, 55416

    (Sept. 10, 2010) (RFEDs); and Registration of Swap Dealers and Major

    Swap Participants, 77 FR 2613, 2620 (Jan. 19, 2012) (SDs and MSPs).

    \43\ See 47 FR 18620 (Apr. 30, 1982) (CTAs); Registration of

    Floor Traders; Mandatory Ethics Training for Registrants; Suspension

    of Registrants Charged With Felonies, 58 FR 19575, 19588 (Apr. 15,

    1993) (FTs); and Introducing Brokers and Associated Persons of

    Introducing Brokers, Commodity Trading Advisors and Commodity Pool

    Operators; Registration and Other Regulatory Requirements, 48 FR

    35248, 35276 (Aug. 3, 1983) (IBs).

    ---------------------------------------------------------------------------

    The proposed amendment to Commission regulation 3.31 is technical

    and not substantive in nature. In 1999, the Commission published the

    Part 3 Advisory which relieved all applicants and registrants from

    filing a Form 3-R, as required under Commission regulation 3.31, if the

    information to be reported is solely the result of an exchange

    disciplinary or access denial action.\44\ As discussed in the preamble,

    the proposed amendment codifies the filing relief set forth in the Part

    3 Advisory and would not impose any new regulatory obligations on any

    registrant, including CTAs, FTs, and IBs. The Commission does not,

    therefore, expect small entities to incur any additional costs as a

    result of this Proposal. Consequently, the Commission finds that no

    significant economic impact on small entities will result from this

    Proposal.

    ---------------------------------------------------------------------------

    \44\ 64 FR 39912 (July 23, 1999).

    ---------------------------------------------------------------------------

    Accordingly, the Chairman, on behalf of the Commission pursuant to

    5 U.S.C. 605(b), certifies that the proposed rules will not have a

    significant economic impact on a substantial number of small entities.

    B. Paperwork Reduction Act

    1. Introduction

    The Paperwork Reduction Act of 1995 (``PRA'') 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.\45\ 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 issued

    by the Office of Management and Budget (``OMB''). This NPRM contains

    recordkeeping and reporting requirements that are collections of

    information within the meaning of the PRA.

    ---------------------------------------------------------------------------

    \45\ 44 U.S.C. 3501 et seq.

    ---------------------------------------------------------------------------

    The Proposal contains provisions that would qualify as collections

    of information, for which the Commission has already sought and

    obtained control numbers from the OMB. The titles for these collections

    of information are ``Part 38--Core Principles and Other Requirements

    for Designated Contract Markets'' (OMB Control Number 3038-0052) and

    ``Part 37--Core Principles and Other Requirements for Swap Execution

    Facilities'' (OMB Control Number 3038-0074). If adopted, responses to

    these collections of information would be mandatory.

    As discussed below, the Commission is not seeking to amend

    information collections 3038-0052 or 3038-0074 because the Commission

    believes that the rule modifications proposed herein will not impose

    any new information collection requirements that require approval from

    OMB under the PRA. Accordingly, the Commission invites public comment

    on the accuracy of its estimate regarding the impact of proposed

    Commission regulation 9.11 on collections 3038-0052 and 3038-0074 and

    its determination that no additional recordkeeping or information

    collection requirements or changes to existing collection requirements

    would result from the Proposal.\46\

    ---------------------------------------------------------------------------

    \46\ For collection 3038-0052, see OMB Control No. 3038-0052,

    available at http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0052. For collection 3038-0074,

    see OMB Control No. 3038-0074, available at http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=3038-0074.

    ---------------------------------------------------------------------------

    2. Section 9.11 Amendments

    As discussed above, the proposed Commission regulation 9.11

    amendments are primarily technical and not substantive in nature.

    Commission regulation 9.11 currently requires that whenever an exchange

    makes a decision, pursuant to which disciplinary action or access

    denial to be imposed has become final, the exchange must provide

    written notice of such action to the person against whom the action was

    taken and to the Commission within 30 days thereafter. Among the

    proposed amendments to regulation 9.11, the Commission is clarifying

    the existing rules to formally incorporate SEFs under the requirements

    and therefore include references to the part 37 SEF regulations.\47\

    ---------------------------------------------------------------------------

    \47\ 17 CFR part 37. As explained earlier in the preamble, SEFs

    are already subject to the part 9 reporting requirements under

    regulation 37.2, in which the Commission specified that SEFs shall

    comply with the requirements of part 9.

    ---------------------------------------------------------------------------

    Furthermore, the Commission is proposing to add an additional

    element required to be included in the contents of the notice

    specifying which product type (as applicable) was involved in the

    adverse action. The Commission believes that by adding such additional

    element to the contents of the notice its impact on the burden would be

    de minimis. For example, to describe a product trading on a DCM, the

    notice might include the description, ``July 2016 Eurodollar future;''

    while a product trading on a SEF may be a ``CDX North American High

    Yield Series 26 5 year.'' Additionally, as a result of the Commission's

    removal of part 8, the Commission is proposing to remove all cross-

    references in regulation 9.11 to the part 8 regulations and replace

    these references with applicable regulations, guidance, and acceptable

    practices from parts 37 and 38.\48\ Finally, in 1999, the Commission

    published the Part 9 Advisory permitting exchanges to file 9.11 notices

    with the Commission or with the NFA.\49\ In an effort to codify the

    Part 9 Advisory and formally replace the regulation 9.11 requirement

    that written notice be provided to the Commission, the Commission

    proposes to amend regulation 9.11 to require notice be provided to the

    NFA via the BASIC system.

    ---------------------------------------------------------------------------

    \48\ Removal of part 8 at 77 FR 66288, (Nov. 2, 2012); and 17

    CFR parts 37 and 38.

    \49\ 64 FR 39915 (July 23, 1999).

    ---------------------------------------------------------------------------

    3. Clarification of Collections 3038-0052 and 3038-0074

    The Commission notes that all DCMs and SEFs are already subject to

    the part 9 reporting requirements.\50\ First, part 9 applies to DCMs,

    by explicitly defining ``exchange'' in Commission regulation 9.2(c) for

    purposes of the rules as ``any board of trade which has been designated

    as a contract market.'' \51\ Furthermore, former regulation 38.2, which

    was adopted by the Commission on August 10, 2001, specifically required

    DCMs to comply with part 9 (``2001 DCM Rulemaking'').\52\ In the 2001

    DCM Rulemaking, the Commission requested an OMB control number for part

    38 to account for the reporting

    [[Page 7746]]

    requirements, including part 9.\53\ The text of Commission regulation

    38.2 that specifically required DCMs to comply with part 9 was amended

    on June 19, 2012, and currently provides that DCMs shall comply with

    all applicable regulations under Title 17 of the Code of Federal

    Regulations, except for certain exempt provisions.\54\ Part 9 is not

    included in the list of exempt provisions. Accordingly, Commission

    regulation 38.2 still requires that DCMs comply with the part 9 rules,

    and therefore, the Commission regulation 9.11 reporting requirements.

    Since the proposed amendments to Commission regulation 9.11 are

    primarily technical, the Commission believes that these amendments

    would not impact the current burden estimates in the DCM 3038-0052

    collection.

    ---------------------------------------------------------------------------

    \50\ 17 CFR part 9 and 38.2 [DCMs]; 17 CFR 37.2 [SEFs].

    \51\ 17 CFR 9.2(c).

    \52\ 66 FR 42277 (August 10, 2001).

    \53\ Id. at 42268.

    \54\ 77 FR 36697 (June 19, 2012); 17 CFR 38.2.

    ---------------------------------------------------------------------------

    As noted above, SEFs are also subject to the part 9 reporting

    requirements.\55\ The pertinent reporting burden of Commission

    regulation 9.11 for SEFs is contained in Commission regulation 37.2,

    which was adopted on June 4, 2013.\56\ Among the applicable provisions

    with which SEFs must comply, Commission regulation 37.2 explicitly

    lists part 9.\57\ Because the proposed amendments to Commission

    regulation 9.11 are primarily technical, the Commission believes these

    amendments would not impact the current burden estimates in the SEF

    3038-0074 collection.\58\

    ---------------------------------------------------------------------------

    \55\ 17 CFR 37.2.

    \56\ 78 FR 33476 (June 4, 2013).

    \57\ 17 CFR 37.2.

    \58\ Supra note 46.

    ---------------------------------------------------------------------------

    4. Information Collection Comments

    The Commission invites comment on any aspect of the proposed

    information collection requirements discussed above. Pursuant to 44

    U.S.C. 3506(c)(2)(B), the Commission will consider public comments on

    such proposed requirements in: (1) Evaluating whether the proposed

    collection of information is necessary for the proper performance of

    the functions of the Commission, including whether the information will

    have a practical use; (2) evaluating the accuracy of the Commission's

    estimate of the burden of the proposed collection of information,

    including the validity of the methodology and assumptions used; (3)

    enhancing the quality, utility, and clarity of the information proposed

    to be collected; and (4) minimizing the burden of collection of

    information on those who are to respond, including through the use of

    appropriate automated, electronic, mechanical, or other technological

    information collection techniques.

    Copies of the submission from the Commission to OMB are available

    from the CFTC Clearance Officer, 1155 21st Street NW., Washington, DC

    20581, (202) 418-5160 or from http://RegInfo.gov. Persons desiring to

    submit comments on the proposed information collection requirements

    should send those comments to: The Office of Information and Regulatory

    Affairs, Office of Management and Budget, Room 10235, New Executive

    Office Building, Washington, DC 20503, Attention: Desk Officer of the

    Commodity Futures Trading Commission; (202) 395-6566 (fax); or

    OIRAsubmissions@omb.eop.gov (email). Please provide the Commission with

    a copy of submitted comments so that all comments can be summarized and

    addressed in the final rulemaking, and please refer to the ADDRESSES

    section of this rulemaking for instructions on submitting comments to

    the Commission. OMB is required to make a decision concerning the

    proposed information collection requirements between thirty (30) and

    sixty (60) days after publication of the Proposal in the Federal

    Register. Therefore, a comment to OMB is best assured of receiving full

    consideration if OMB (as well as the Commission) receives it within

    thirty (30) days of publication of the Proposal.

    C. Cost-Benefit Considerations

    1. Introduction

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

    costs and benefits of its actions before promulgating a regulation

    under the CEA or issuing certain orders.\59\ 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 the 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 section 15(a) factors.

    ---------------------------------------------------------------------------

    \59\ 7 U.S.C. 19(a).

    ---------------------------------------------------------------------------

    The Commission considers the costs and benefits associated with the

    proposed amendments, including updating the pre-existing regulatory

    framework to incorporate SEFs, removing references to part 8 of the

    Commission's regulations, and revising the reporting and notice

    requirements for DCMs and SEFs. The Commission compares the costs and

    benefits of this rulemaking against a baseline of the status quo, the

    current requirements under part 3 and part 9. As discussed more fully

    below, the Commission preliminarily believes that the only new cost

    that would be imposed by the Proposal is the requirement in Commission

    regulation 9.13 for DCMs and SEFs to publish and maintain disciplinary

    notices on their respective Web sites.

    2. Part 3 and Part 9 Technical Amendments

    As explained above, the proposed amendments to part 3 and part 9

    are primarily technical in nature. The Commission believes that these

    technical amendments will not impose any new costs on DCMs, SEFs, or

    market participants. For example, among the proposed changes, the

    Commission is clarifying the definition of ``exchange'' to include SEFs

    and updating the references to part 8, which was removed by the

    Commission in 2012, to instead cite to parallel provisions now

    contained in parts 37 and 38.\60\ Furthermore, the proposed revisions

    to Commission regulations 3.31 and 9.11 codify existing reporting

    procedures which were already authorized by the Commission in the Part

    3 Advisory and Part 9 Advisory.\61\ These proposed amendments do not

    substantively change the requirements that the Commission currently

    imposes on DCMs and SEFs.\62\ Rather, instead of providing the 9.11

    notices to the Commission, as required under the current part 9 rules,

    proposed regulation 9.11 will instead instruct exchanges to provide the

    notices to the NFA, as is permitted as an alternative method of

    compliance under the Part 9 Advisory.\63\

    ---------------------------------------------------------------------------

    \60\ Removal of part 8 at 77 FR 66288 (Nov. 2, 2012); and 17 CFR

    parts 37 and 38. See, e.g., 17 CFR part 37 appendix B, Core

    Principle 2, paragraph (a)(13) and part 38, appendix B, Core

    Principle 13, paragraph (a)(6).

    \61\ Part 9 Advisory: 64 FR 39915 (July 23, 1999); Part 3

    Advisory: 64 FR 39912 (July 23, 1999).

    \62\ Supra note 46. As noted above in the PRA, the Commission

    believes the proposed substantive amendment to add an additional

    element required to be included in the contents of a 9.11 notice

    will not materially impact the costs imposed by this NPRM.

    \63\ 17 CFR 9.11.

    ---------------------------------------------------------------------------

    There is also the ministerial benefit to codifying the Part 3 and

    Part 9 Advisories. Advisories are staff action and are not rules that

    have been promulgated by the Commission subject to public notice and

    comment. Thus, this rulemaking will achieve the benefit

    [[Page 7747]]

    of codifying the Part 3 Advisory and Part 9 Advisory into rules.

    3. Summary of Proposed Amendments to Commission Regulation 9.13--

    Publication of Notice

    As discussed above, proposed Commission regulation 9.13 would

    require all DCMs and SEFs to maintain and make readily accessible final

    notices of exchange disciplinary and access denial actions on their Web

    sites.\64\ This new requirement would replace the existing requirement

    in Commission regulation 9.13 that exchanges publish the notice in a

    conspicuous place on the exchange's premises.

    ---------------------------------------------------------------------------

    \64\ 17 CFR 9.13.

    ---------------------------------------------------------------------------

    a. Costs

    The Commission believes that posting final disciplinary and access

    denial notices to exchange Web sites will slightly increase the costs

    for DCMs and SEFs. The Commission notes that the additional costs

    incurred by DCMs and SEFs would be offset in part due to the proposed

    amendment in Commission regulation 9.13 that would remove the

    requirement of posting disciplinary and access denial notices on the

    premises of the respective DCM or SEF. In order to estimate the

    additional costs, the Commission queried the NFA's BASIC to determine

    the total number of disciplinary and access denial actions filed by

    DCMs in 2015. Because SEFs did not post any disciplinary or access

    denial actions to BASIC in 2015, the numbers below reflect the

    disciplinary and access denial actions filed by the 15 DCMs presently

    registered with the Commission and provide the basis for estimating the

    number of disciplinary and access denial actions for SEFs annually.\65\

    ---------------------------------------------------------------------------

    \65\ As of November 9, 2016, 10 summary fines had been assessed

    by a total of four SEFs. The notices for such summary fines have

    been posted to BASIC. Because the Commission did not have a complete

    year of data for 2016, the Commission used the 2015 numbers of

    disciplinary and access denial actions to calculate the costs.

    ---------------------------------------------------------------------------

    Total number of reported disciplinary and access denial actions in

    BASIC by all DCMs in 2015: 452.

    In order to estimate the costs for SEFs, the Commission calculated

    the average number of disciplinary and access denial actions filed by

    DCMs, excluding the four DCMs with the largest number of reported

    disciplinary and access denial actions.\66\ The Commission notes that

    SEFs are relatively new entities with significantly less volume and

    fewer participants than the four DCMs that reported the highest number

    of disciplinary and access denial actions.\67\ Therefore, the

    Commission preliminary believes that the average number of disciplinary

    and access denial actions reported by the 11 other DCMs in 2015 provide

    a more appropriate comparison with respect to estimating the number of

    disciplinary and access denial actions for SEFs annually. As the SEFs

    mature, in terms of the number of participants and volume, the

    Commission anticipates that the number of disciplinary and access

    denial actions may increase accordingly.

    ---------------------------------------------------------------------------

    \66\ The DCMs with largest number of reported disciplinary and

    access denial actions are: ICE Futures U.S., CME, NYMEX, and CBOT.

    \67\ 78 FR 33476 (June 4, 2013). The SEF Final Rules implemented

    the SEF framework enacted by section 733 of the Dodd-Frank Act; 7

    U.S.C. 7b-3.

    ---------------------------------------------------------------------------

    Total number of reported disciplinary and access denial actions in

    BASIC by DCMs in 2015, excluding the 4 DCMs with the largest number of

    reported actions: 88.

    Average number of reported disciplinary and access denial actions

    in BASIC per DCM in 2015, excluding the 4 DCMs with the largest number

    of reported actions: 8.

    Currently, there are a total of 23 registered SEFs with the

    Commission. The Commission estimates that each SEF would report at

    least eight disciplinary and access denial actions annually in BASIC

    for an aggregate total of 184 disciplinary and access denial actions

    for all SEFs per year (eight actions multiplied by 23 SEFs equals 184

    actions). Thus, the total number of exchange disciplinary and access

    denial actions per year for all DCMs and SEFs is estimated to be 636

    (184 actions for SEFs plus the 452 actions for DCMs equals 636 total

    actions per year). The Commission anticipates each DCM and SEF would

    spend an additional 15 minutes per disciplinary notice to post on the

    exchange's Web site above the current requirement of posting the notice

    on the exchange's premises. Accordingly, the aggregate new burden of

    Commission regulation 9.13 is estimated to be 159 hours per year for

    the 15 DCMs and 23 SEFs (15 minutes multiplied by 636 anticipated

    actions per year equals 159 burden hours).

    The Commission expects that a compliance officer employed by the

    exchange will be posting the disciplinary or access denial action

    notices to the exchange Web site. According to recent Bureau of Labor

    Statistics National Occupational Employment and Wage Estimates, the

    mean hourly wage of an employee under occupation code 13-1041,

    ``Compliance Officers,'' that is employed by the ``Securities and

    Commodity Exchanges'' industry is $46.01. Because DCMs and SEFs can be

    large, specialized entities that may engage employees with wages above

    the mean, the Commission has conservatively chosen to use a mean hourly

    wage of $50 per hour.\68\ Accordingly, the burden associated with

    posting the disciplinary notices on exchange Web sites will total

    approximately $7,950 per year for all of the 38 DCMs and SEFs, ($50

    multiplied by the anticipated 159 burden hours equals $7,950 per

    year).\69\

    ---------------------------------------------------------------------------

    \68\ Bureau of Labor Statistics, Occupational Employment and

    Wages: 13-1041 Compliance Officers, (May 2014), available at http://www.bls.gov/oes/current/oes131041.htm.

    \69\ The Commission acknowledges that requiring exchanges to

    post final notices of disciplinary and access denial actions on

    their Web sites may necessitate additional bandwidth. The Commission

    anticipates that any increased costs due to added bandwidth would be

    insignificant in its calculation of the total annual burden

    associated with this Proposal.

    ---------------------------------------------------------------------------

    b. Benefits

    The Commission preliminarily believes that greater access to

    information regarding exchange disciplinary and access denial actions

    provides valuable guidance and information to exchange members, market

    participants, and the public. Releasing disciplinary information to the

    public can serve to deter and prevent future misconduct and to improve

    overall compliance standards in the futures and swaps industry. It also

    allows customers to consider member firms' and traders' disciplinary

    histories when considering whether to engage in business with them. In

    addition, firms may use such information to educate their traders and

    associated persons as to compliance matters, highlighting potential

    violations and related sanctions. Further, any firm or individual

    facing allegations of rule violations may access existing disciplinary

    decisions to gain greater insight on related facts and sanctions. The

    Commission believes that the added deterrence of publishing the

    disciplinary notices on the exchange Web sites and the enhanced

    investigative and educational benefits of making such information

    public will ultimately decrease the incidents of wrongdoing and market

    abuses which will benefit both market participants and the general

    public.

    c. Section 15(a) Factors

    As noted above, section 15(a) of the CEA requires the Commission to

    consider the effects of its actions in light of the following five

    factors:

    (1) Protection of market participants and the public. The

    Commission

    [[Page 7748]]

    preliminarily believes that market participants and the public will

    benefit from the ministerial and conforming amendments proposed herein

    since they eliminate obsolete, vestigial provisions and references that

    otherwise could be construed to give rise to confusing inconsistencies

    between the Commission's regulations and the provisions of the CEA.

    Furthermore, the Commission preliminarily believes that the proposed

    substantive amendment to regulation 9.13, which would require exchanges

    to publish notice of final disciplinary and access denial actions on

    exchange Web sites, would increase transparency of exchange

    disciplinary actions and serve as a deterrence of future market abuses.

    These enhancements allow for operational efficiencies in oversight,

    increased deterrence from market abuses, and greater transparency of

    the exchange disciplinary process. Therefore, the Commission

    anticipates that the amendment to regulation 9.13 would result in

    improved protection of market participants and the public.

    (2) The efficiency, competitiveness, and financial integrity of the

    markets. The requirement that exchanges publish disciplinary notices

    and access denial actions on their Web site is intended to improve the

    operational efficiency, competitiveness and financial integrity of the

    futures and swaps markets by enabling the public and those who access

    the exchange Web site to be made aware of any disciplinary and access

    denial actions imposed by the exchange. As discussed above, the vast

    majority of trading no longer occurs in person on the exchange's

    premises. The Commission believes that the current requirement in

    regulation 9.13 of posting disciplinary and access denial actions on

    the exchange's premises provides little to no public notice of these

    actions. By publishing the notice on the exchange's Web site, the

    Commission believes that the efficiency, competitiveness and financial

    integrity of the markets would be bolstered by the deterrent effect

    achieved by posting the notice in a publicly accessible medium.

    (3) Price discovery. The Commission has not identified an impact on

    price discovery as a result of the proposed regulations, but seeks

    comment as to any potential impact. Will the proposed regulations

    impact, positively or negatively, the price discovery process?

    (4) Sound risk management practices. The Commission has not

    identified an impact on risk management practices as a result of the

    proposed regulations, but seeks comment as to any potential impact.

    Will the proposed regulations impact, positively or negatively, sound

    risk management practices?

    (5) Other public interest considerations. The Commission has not

    identified any other public interest considerations, but welcomes

    comment on whether this Proposal would promote public confidence in the

    integrity of derivatives markets by making notice of exchange

    disciplinary and access denial actions more readily available to the

    public. Will this Proposal impact, positively or negatively, any

    unidentified matter of interest to the public?

    d. Request for Comments

    The Commission seeks additional information regarding the costs and

    benefits of the Proposal. Beyond the specific questions interspersed

    throughout its discussion above, the Commission requests comment on all

    aspects of its consideration of costs and benefits, including:

    Identification and assessment of any costs and benefits not discussed

    therein; data and any other information to assist or otherwise inform

    the Commission's ability to quantify or qualitatively describe the

    benefits and costs of the proposed rules; and substantiating data,

    statistics, and any other information to support positions posited by

    commenters with respect to the Commission's consideration of costs and

    benefits. Commenters also may suggest other alternatives to the

    proposed approach where the commenters believe that the alternatives

    would be appropriate under the CEA and provide a superior cost-benefit

    profile.

    IV. Request for Comments

    The Commission requests comment on all aspects of the Proposal.

    Commenters are specifically encouraged to include any considerations

    related to the Commission's proposed notice and order delegating

    regulation 9.11 authority to the NFA.

    List of Subjects

    17 CFR Part 3

    Administrative practice and procedure, Brokers, Commodity futures,

    Major swap participants, Reporting and recordkeeping requirements, Swap

    dealers.

    17 CFR Part 9

    Administrative practice and procedure, Commodity exchanges,

    Commodity futures.

    For the reasons stated in the preamble, the Commodity Futures

    Trading Commission proposes to amend 17 CFR chapter I as follows:

    PART 3--REGISTRATION

    0

    1. The authority citation for part 3 continues to read as follows:

    Authority: 5 U.S.C. 552, 552b; 7 U.S.C. 1a, 2, 6a, 6b, 6b-1, 6c,

    6d, 6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 6o, 6p, 6s, 8, 9, 9a, 12, 12a,

    13b, 13c, 16a, 18, 19, 21, and 23, as amended by Title VII of Pub.

    L. 111-203, 124 Stat. 1376.

    0

    2. In Sec. 3.31, revise paragraph (a)(1) to read as follows:

    Sec. 3.31 Deficiencies, inaccuracies, and changes, to be reported.

    (a)(1) Each applicant or registrant as a futures commission

    merchant, retail foreign exchange dealer, swap dealer, major swap

    participant, commodity trading advisor, commodity pool operator,

    introducing broker, floor trader that is a non-natural person or

    leverage transaction merchant shall, in accordance with the

    instructions thereto, promptly correct any deficiency or inaccuracy in

    Form 7-R or Form 8-R that no longer renders accurate and current the

    information contained therein, with the exception of any change that

    requires withdrawal from registration under Sec. 3.33 or any change

    resulting from an exchange disciplinary or access denial action. Each

    such correction shall be prepared and filed in accordance with the

    instructions thereto to create a Form 3-R record of such change.

    * * * * *

    PART 9--RULES RELATING TO REVIEW OF EXCHANGE DISCIPLINARY, ACCESS

    DENIAL OR OTHER ADVERSE ACTIONS

    0

    3. The authority citation for part 9 is revised to read as follows:

    Authority: 7 U.S.C. 1a, 2, 6b-1, 6c, 7, 7a-2, 7b-3, 8, 9, 9a,

    12, 12a, 12c, 13b, 16a, 18, 19, 21.

    0

    4. In Sec. 9.1, revise paragraphs (b) and (c) to read as follows:

    Sec. 9.1 Scope of rules.

    * * * * *

    (b) Matters excluded. This part does not apply to and the

    Commission will not accept notices of appeal, or petitions for stay

    pending review, of:

    (1) Any arbitration proceeding, regardless of whether the

    proceeding involved a controversy between members of an exchange;

    (2) Except as provided in Sec. Sec. 9.11(a), 9.11(b)(3)(i) through

    (v), 9.11(c), 9.12(a) and 9.13 (concerning the notice, effective date

    and publication of a disciplinary or access denial action), any summary

    action permitted under the provisions of part 37, appendix B, Core

    Principle 2, paragraph (a)(13) of

    [[Page 7749]]

    this chapter or part 38, appendix B, Core Principle 13, paragraph

    (a)(6) of this chapter imposing a minor penalty for the violation of

    exchange rules relating to decorum or attire, or relating to the timely

    submission of accurate records required for clearing or verifying each

    day's transactions or other similar activities; and

    (3) Any exchange action arising from a claim, grievance, or dispute

    involving cash market transactions which are not a part of, or directly

    connected with, any transaction for the purchase, sale, delivery or

    exercise of a commodity for future delivery, a commodity option, or a

    swap.

    (4) The Commission will, upon its own motion or upon motion filed

    pursuant to Sec. 9.21(b), promptly notify the appellant and the

    exchange that it will not accept the notice of appeal or petition for

    stay of matters specified in this paragraph. The determination to

    decline to accept a notice of appeal will be without prejudice to the

    appellant's right to seek alternate forms of relief that may be

    available in any other forum.

    (c) Applicability of these part 9 rules. Unless otherwise ordered,

    these rules will apply in their entirety to all appeals, and matters

    relating thereto.

    0

    5. In Sec. 9.2, revise paragraphs (b), (c), (f), and (k) to read as

    follows:

    Sec. 9.2 Definitions.

    * * * * *

    (b) Disciplinary action means any suspension, expulsion or other

    penalty imposed on a person by an exchange for violations of rules of

    the exchange, including summary actions.

    (c) Exchange means a swap execution facility or any board of trade

    which has been designated as a contract market.

    * * * * *

    (f) Member of an exchange means

    (1) Any person who is admitted to membership or has been granted

    membership privileges on an exchange; any employee, officer, partner,

    director or affiliate of such member or person with membership

    privileges including any associated person; and any other person under

    the supervision or control of such member or person with membership

    privileges; or

    (2) Any person who has trading privileges on an exchange.

    * * * * *

    (k) Summary action means a disciplinary action resulting in the

    imposition of a penalty on a person for violation of rules of the

    exchange permitted under the provisions of part 37, appendix B, Core

    Principle 2, paragraph (a)(10)(vi) of this chapteror part 38, appendix

    B, Core Principle 13, paragraph (a)(4) (penalty for impeding progress

    of hearing); part 37, appendix B, Core Principle 2, paragraph (a)(14)

    of this chapter or part 38, appendix B, Core Principle 13, paragraph

    (a)(7) (emergency disciplinary actions) of this chapter; part 37,

    appendix B, Core Principle 2, paragraph (a)(13) (summary fines for

    violations of rules regarding timely submission of records) of this

    chapter; or part 38, appendix B, Core Principle 13, paragraph (a)(6)

    (summary fines for violations of rules regarding timely submission of

    records, decorum, or other similar activities) of this chapter.

    0

    6. Revise Sec. 9.3 to read as follows:

    Sec. 9.3 Provisions referenced.

    Except as otherwise provided in this part, the following provisions

    of the Commission's rules relating to reparations contained in part 12

    of this chapter apply to this part: Sec. 12.3 (Business address;

    hours); Sec. 12.5 (Computation of time); Sec. 12.6 (Extensions of

    time; adjournments; postponements); Sec. 12.7 (Ex parte communications

    in reparation proceedings); and Sec. 12.12 (Signature).

    0

    7. In Sec. 9.4, revise paragraphs (a), (b), and (c) to read as

    follows:

    Sec. 9.4 Filing and service; official docket.

    (a) Filing with the Proceedings Clerk; proof of filing; proof of

    service. Any document that is required by this part to be filed with

    the Proceedings Clerk must be filed by delivering it in person or by

    mail to: Proceedings Clerk, Office of Proceedings, Commodity Futures

    Trading Commission, Three Lafayette Centre, 1155 21st Street NW.,

    Washington, DC 20581. To be timely filed under this part, a document

    must be delivered or mailed to the Proceedings Clerk within the time

    prescribed for filing. A party must use a means of filing which is at

    least as expeditious as that used in serving that document upon the

    other parties. Proof of filing must be made by attaching to the

    document for filing a statement of service as provided in Sec.

    10.12(a)(6) of this chapter.

    (b) Formalities of filing--(1) Number of copies. Unless otherwise

    specifically provided, an original and one conformed copy of all

    documents filed with the Commission in accordance with the provisions

    of this part must be filed with the Proceedings Clerk.

    (2) Title page. All documents filed with the Proceedings Clerk must

    include at the head thereof, or on a title page, the name of the

    Commission, the title of the proceeding, the docket number (if one has

    been assigned by the Proceedings Clerk), the subject of the particular

    document and the name of the person on whose behalf the document is

    being filed.

    (3) Paper, spacing, type. All documents filed with the Proceedings

    Clerk must be typewritten, must be on one grade of good white paper no

    less than 8 or more than 8\1/2\ inches wide and no less than 10\1/2\ or

    more than 11\1/2\ inches long, and must be bound on the top only. They

    must be double-spaced, except for long quotations (3 or more lines) and

    footnotes which should be single-spaced.

    (4) Signature. The original copy of all papers must be signed in

    ink by the person filing the same or by his or her duly authorized

    agent or attorney.

    (c) Service--(1) General requirements. All documents filed with the

    Proceedings Clerk must, at or before the time of filing, be served upon

    all parties. A party must use a means of service which is at least as

    expeditious as that used in filing that document with the Proceedings

    Clerk. One copy of all motions, petitions or applications made in the

    course of the proceeding, all notices of appeal, all briefs, and

    letters to the Commission or an employee thereof must be served by a

    party upon all other parties.

    (2) Manner of service. Service may be either personal or by mail.

    Service by mail is complete upon deposit of the document in the mail.

    Where service is effected by mail, the time within which the person

    served may respond thereto will be increased by three days.

    (3) Designation of person to receive service. The first document

    filed in a proceeding by or on behalf of any party must state on the

    first page the name and postal address of the person who is authorized

    to receive service for the party of all documents filed in the

    proceeding. Thereafter, service of documents must be made upon the

    person authorized unless service on a different authorized person or on

    the party himself or herself is ordered by the Commission, or unless

    pursuant to Sec. 9.8 the person authorized is changed by the party

    upon due notice to all other parties. Parties must file and serve

    notification of any changes in the information provided pursuant to

    this subparagraph as soon as practicable after the change occurs.

    * * * * *

    0

    8. In Sec. 9.8, revise paragraph (a)(1) to read as follows:

    Sec. 9.8 Practice before the Commission.

    (a) Practice--(1) By non-attorneys. An individual may appear pro se

    (on his or her own behalf); a general partner may represent the

    partnership; a bona fide officer of a corporation, trust or

    [[Page 7750]]

    association may represent the corporation, trust or association.

    * * * * *

    0

    9. In Sec. 9.9, revise paragraphs (b)(3) and (b)(4) to read as

    follows:

    Sec. 9.9 Waiver of rules; delegation of authority.

    * * * * *

    (b) * * *

    (3) The General Counsel, or his or her designee, may submit to the

    Commission for its consideration any matter which has been delegated

    pursuant to paragraph (b)(1) of this section.

    (4) Nothing in this section will be deemed to prohibit the

    Commission, at its election, from exercising the authority delegated to

    the General Counsel, or his or her designee, under this section.

    0

    10. Revise Sec. 9.11 to read as follows:

    Sec. 9.11 Form, contents and delivery of notice of disciplinary or

    access denial action.

    (a) When required. Whenever an exchange decision pursuant to which

    a disciplinary action or access denial action is to be imposed has

    become final, the exchange must, within thirty days thereafter, provide

    written notice of such action to the person against whom the action was

    taken and notice to the National Futures Association (``NFA'') through

    the NFA's Background Affiliation Status Information Center (``BASIC'')

    system: Provided, That a designated contract market is not required to

    notify the NFA of any summary action, as permitted under the provisions

    of part 38, appendix B, Core Principle 13, paragraph (a)(6) of this

    chapter, which results in the imposition of minor penalties for the

    violation of exchange rules relating to decorum or attire. No final

    disciplinary or access denial action may be made effective by the

    exchange except as provided in Sec. 9.12.

    (b) Contents of notice. For purposes of this part:

    (1) The written notice of a disciplinary action or access denial

    action provided to the person against whom the action was taken by a

    designated contract market must be a copy of a written decision which

    accords with:

    (i) Part 38, appendix B, Core Principle 13, paragraph (a)(3) of

    this chapter in the case of settlement offers;

    (ii) Section 38.708 of this chapter in the case of decisions; or

    (iii) Part 38, appendix B, Core Principle 13, paragraph (a)(5)(iv)

    of this chapter in the case of appeal decisions of this chapter

    (including copies of any materials incorporated by reference) or other

    written notice which must include items listed in paragraphs (b)(3)(i)-

    (vi) of this section.

    (2) The written notice of a disciplinary action or access denial

    action provided to the person against whom the action was taken by a

    swap execution facility must be a copy of a written decision which

    accords with:

    (i) Part 37, appendix B, Core Principle 2, paragraph (a)(9) of this

    chapter in the case of settlement offers;

    (ii) Section 37.206(d) of this chapter in the case of decisions; or

    (iii) Part 37, appendix B, Core Principle 2, paragraph (a)(11)(iv)

    of this chapter in the case of appeal decisions of this chapter

    (including copies of any materials incorporated by reference) or other

    written notice which must include items listed in paragraphs (b)(3)(i)

    through (vi) of this section.

    (3) The notice of a disciplinary action or access denial action

    provided to the NFA must include only the items listed in the following

    paragraphs (i) through (v):

    (i) The name of the person against whom the disciplinary action or

    access denial action was taken;

    (ii) A statement of the reasons for the disciplinary action or

    access denial action, detailing the exchange product which was

    involved, as applicable, and whether the violation that resulted in the

    action also resulted in financial harm to any customers together with a

    listing of any rules which the person who was the subject of the

    disciplinary action or access denial action was charged with having

    violated or which otherwise serve as the basis of the exchange action;

    (iii) A statement of the conclusions and findings made by the

    exchange with regard to each rule violation charged or, in the event of

    settlement, a statement specifying those rule violations which the

    exchange has reason to believe were committed;

    (iv) The terms of the disciplinary action or access denial action;

    (v) The date on which the action was taken and the date the

    exchange intends to make the disciplinary or access denial action

    effective; and

    (vi) Except as otherwise provided in Sec. 9.1(b), a statement

    informing the party subject to the disciplinary action or access denial

    action of the availability of Commission review of the exchange action

    pursuant to section 8c of the Act and this part.

    (c) Delivery and filing of the notice. Delivery of the notice must

    be made either personally to the person who was the subject of the

    disciplinary action or access denial action or by mail to such person

    at that person's last known address. Filing of the notice with the NFA

    is accomplished when an authorized exchange employee verifies the

    accuracy of the information entered into BASIC.

    (d) Effect of delivery by mail. Delivery by mail to the person

    disciplined or denied access will be complete upon deposit in the mail

    of a properly addressed and postpaid document. Where delivery to the

    person disciplined or denied access is effected by such mail, the time

    within which a notice of appeal or petition for stay may be filed will

    be increased by three days.

    (e) Certification. Copies of the notice and the submission of any

    additional information provided pursuant to this section must be

    certified as true and correct by a duly authorized officer, agent or

    employee of the exchange. Notice filed with the NFA is deemed certified

    when an authorized exchange employee verifies the accuracy of the

    information entered into BASIC.

    0

    11. Revise Sec. 9.12 to read as follows:

    Sec. 9.12 Effective date of disciplinary or access denial action.

    (a) Effective date. Any disciplinary or access denial action taken

    by an exchange will not become effective until at least fifteen days

    after the written notice prescribed by Sec. 9.11 is delivered to the

    person disciplined or denied access; Provided, however, That the

    exchange may cause a disciplinary action to become effective prior to

    that time if:

    (1) As permitted by part 37, appendix B, Core Principle 2,

    paragraph (a)(14) of this chapter or part 38, appendix B, Core

    Principle 13, paragraph (a)(7) (emergency disciplinary actions) of this

    chapter, the exchange reasonably believes, and so states in its written

    decision, that immediate action is necessary to protect the best

    interests of the marketplace; or

    (2) As permitted by part 37, appendix B, Core Principle 2,

    paragraph (a)(10)(vi) of the chapter or part 38, appendix B, Core

    Principle 13, paragraph (a)(4) (hearings) of this chapter, the exchange

    determines, and so states in its written decision, that the actions of

    a person who is within the exchange's jurisdiction has impeded the

    progress of a disciplinary hearing; or

    (3) As permitted by part 37, appendix B, Core Principle 2,

    paragraph (a)(13) (summary fines for violations of rules regarding

    timely submission of records) of this chapter or part 38, appendix B,

    Core Principle 13, paragraph (a)(6) (summary fines for violations of

    rules regarding timely submission of records, decorum, or other similar

    activities) of

    [[Page 7751]]

    this chapter, the exchange determines that a person has violated

    exchange rules relating to decorum or attire, or timely submission of

    accurate records required for clearing or verifying each day's

    transactions or other similar activities; or

    (4) The person against whom the action is taken has consented to

    the penalty to be imposed and to the timing of its effectiveness.

    (b) Notice of early effective date. If the exchange determines in

    accordance with paragraph (a)(1) of this section that a disciplinary

    action will become effective prior to the expiration of fifteen days

    after written notice thereof, it must notify the person disciplined in

    writing, either personally or by email to the person's last known email

    address, stating the reasons for the determination. The exchange must

    also immediately notify the Commission by email to secretary@cftc.gov.

    Where notice is delivered by email, the time within which the person so

    notified may file a petition for stay pursuant to Sec. 9.24(a)(2) will

    be increased by one day.

    0

    12. Revise Sec. 9.13 to read as follows:

    Sec. 9.13 Publication of notice.

    Whenever an exchange suspends, expels or otherwise disciplines, or

    denies any person access to the exchange, it must make public its

    findings by disclosing at least the information contained in the notice

    required by Sec. 9.11(b). An exchange must make such findings public

    as soon as the disciplinary action or access denial action becomes

    effective in accordance with the provisions of Sec. 9.12 by posting a

    notice on its Web site to which its members and the public regularly

    have access. Such notice must be maintained and readily available on

    the exchange's Web site.

    0

    13. In Sec. 9.24, revise paragraph (a)(2) to read as follows:

    Sec. 9.24 Petition for stay pending review.

    (a) * * *

    (2) Within ten days after a notice of summary action has been

    delivered in accordance with Sec. 9.12(b) to a person who is the

    subject of a summary action permitted by part 37, appendix B, Core

    Principle 2, paragraph (a)(14) or part 38, appendix B, Core Principle

    13, paragraph (a)(7) (emergency disciplinary actions) of this chapter,

    that person may petition the Commission to stay the effectiveness of

    the summary action pending completion of the exchange proceeding.

    * * * * *

    0

    14. Revise Sec. 9.31 to read as follows:

    Sec. 9.31 Commission review of disciplinary or access denial action

    on its own motion.

    (a) Request for additional information. Where a person disciplined

    or denied access has not appealed the exchange decision to the

    Commission, upon review of the notice specified in Sec. 9.11, the

    Division of Market Oversight or the Division of Swap Dealer and

    Intermediary Oversight may request that the exchange file with the

    Division the record of the exchange proceeding, or designated portions

    of the record, a brief statement of the evidence and testimony adduced

    to support the exchange's findings that a rule or rules of the exchange

    were violated and such recordings, transcripts and other documents

    applicable to the particular exchange proceeding as the Division may

    specify. The exchange must promptly advise the person who is the

    subject of the disciplinary or access denial action of the Division's

    request. Within thirty days after service of the Division's request,

    the exchange must file the information requested with the Division in

    the manner requested by the Division and, upon request, deliver that

    information to the person who is the subject of the disciplinary or

    access denial action. Delivery to the person who is the subject of the

    disciplinary or access denial action must be in the manner prescribed

    by Sec. 9.11(c). A person subject to the disciplinary action or access

    denial action requesting a copy of the information furnished to the

    Division must, if the exchange rules so provide, agree to pay the

    exchange reasonable fees for printing the copy.

    (b) Review on motion of the Commission. The Commission may

    institute review of an exchange disciplinary or access denial action on

    its own motion. Other than in extraordinary circumstances, such review

    will be initiated within 180 days after the NFA has received the notice

    of exchange action provided for in Sec. 9.11. If the Commission should

    institute review on its own motion, it will issue an order permitting

    the person who is the subject of the disciplinary or access denial

    action an opportunity to file an appropriate submission, and the

    exchange an opportunity to file a reply thereto.

    Issued in Washington, DC, on January 13, 2017, by the

    Commission.

    Christopher J. Kirkpatrick,

    Secretary of the Commission.

    Note: The following appendix will not appear in the Code of

    Federal Regulations.

    Appendix to Amendments to Parts 3 and 9 of the Commodity Futures

    Trading Commission's Rules--Commission Voting Summary

    On this matter, Chairman Massad and Commissioners Bowen and

    Giancarlo voted in the affirmative. No Commissioner voted in the

    negative.

    [FR Doc. 2017-01232 Filed 1-19-17; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: January 23, 2017