[Federal Register: December 13, 2000 (Volume 65, Number 240)]
[Proposed Rules]
[page 77838]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



17 CFR Part 32

RIN 3038-AB61

Trade Options on Enumerated Agricultural Commodities

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rulemaking.


SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC)
is proposing to amend the exemption from its agricultural trade option
rule, to clarify its operation in light of amendments to the exemption
for bilateral transactions, published elsewhere in this issue of the
Federal Register.

DATES: Comments must be received by December 28, 2000.

ADDRESSES: Comments should be sent to the Commodity Futures Trading
Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington,
DC 20581, attention: Office of the Secretariat. Comments may be sent by
facsimile transmission to (202) 418-5521 or by e-mail to
secretary@cftc.gov. Reference should be made to ``Amendment to Rule

FOR FURTHER INFORMATION CONTACT: Paul M. Architzel, Chief Counsel, or
Nancy E. Yanofsky, Assistant Chief Counsel, Division of Economic
Analysis, Commodity Futures Trading Commission, Three Lafayette Centre,
1155 21st Street, NW, Washington, DC 20581. Telephone: (202) 418-5260.
E-mail: PArchitzel@cftc.gov or NYanofsky@cftc.gov.


I. Background

    The Commission is proposing a technical revision to its
agricultural trade option rule to clarify the requirements for an
exemption therefrom. As revised, the exemption from the agricultural
trade option rule will be based only on the net worth requirement in
the current rule. See Rule 32.13(g)(1)(iii).\1\ A revised part 35,
published elsewhere in this issue of the Federal Register, establishes
an exemption from the regulatory requirements of the Commodity Exchange
Act (Act) and the Commission's regulations for certain bilateral
transactions between eligible participants. In adopting part 35,
however, the Commission reserved the applicability of rule 32.13.
Today's proposal is designed to make the operation of the exemption
from rule 32.13 consistent with the broader exemption of part 35.
Transactions between counterparties meeting the net worth requirement
although not subject to the requirements of rule 32.13 remain subject
to the provisions of part 35.

    \1\ The Commission's agricultural trade option rule currently
provides a three-prong test for an exemption therefrom. In addition
to the net worth requirement, the rule requires that: (a) the option
be offered to a producer, processor, or commercial user of, or a
merchant handling, the commodity which is the subject of the option
transaction, or the products or byproducts thereof; and (b) such
producer, processor, commercial user of or merchant is offered or
enters into the option solely for purposes related to its business
as such. See Rule 32.13(g)(1)(i) and (ii). The Commission is
proposing to remove these latter two requirements and make the
exemption from the agricultural trade option rule available to
parties based solely on their ability to meet the net worth

II. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. (RFA),
requires that agencies consider the impact of their rules on small
businesses. The proposed rule amendment simply clarifies the scope of
an existing regulatory exemption available to high net worth entities.
Accordingly, the Chairman, on behalf of the Commission, hereby
certifies, pursuant to 5 U.S.C. 605(b), that this proposed amendment
will not have a significant economic impact on a substantial number of
small entities.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995, 44 U.S.C. 3504(h) (PRA), which
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, does not apply to the
proposed amendment to this rule. The Commission believes the proposed
amendment does not contain information collection requirements which
require the approval of the Office of Management and Budget. The
purpose of the proposed amendment is to clarify the scope of an
existing regulatory exemption.

List of Subjects in 17 CFR Part 32

    Commodity futures, Commodity options, Prohibited transactions,
Trade options.
    In consideration of the foregoing, and pursuant to the authority
contained in the Act, and in particular sections 2(a)(1)(A), 4c and 8a
of the Act, 7 U.S.C. 2, 6c and 12a, as amended, the Commission hereby
proposes to amend Chapter I, Part 32 of Title 17 of the Code of Federal
Regulations as follows:


    1. The authority section for part 32 continues to read as follows:

    Authority: 7 U.S.C. 2, 6c and 12a.

    2. Section 32.13 is proposed to be amended by revising paragraph
(g) to read as follows:

Sec. 32.13  Exemption from prohibition of commodity option transactions
for trade options on certain agricultural commodities.

* * * * *
    (g) Exemption. The provisions of this section shall not apply to a
commodity option entered into between counterparties that have a
reasonable basis to believe that each has a net worth of not less than
$10 million or the party's obligations on the option are guaranteed by
a person which has a net worth of $10 million and has a majority
ownership interest in, is owned by, or is under common ownership with,
the party to the option; provided, however, that part 35 of this
chapter and Sec. 32.9 apply to such option transactions.

    Issued in Washington, D.C., this 7th day of December, 2000, by
the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 00-31732 Filed 12-12-00; 8:45 am]

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