2020-22874

Federal Register, Volume 85 Issue 218 (Tuesday, November 10, 2020) 
[Federal Register Volume 85, Number 218 (Tuesday, November 10, 2020)]
[Rules and Regulations]
[Pages 71772-71813]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22874]

 

[[Page 71771]]

Vol. 85

Tuesday,

No. 218

November 10, 2020

Part IV

 

 

Commodity Futures Trading Commission

 

 

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17 CFR Part 4

 

 

Compliance Requirements for Commodity Pool Operators on Form CPO-PQR;
Final Rule

Federal Register / Vol. 85 , No. 218 / Tuesday, November 10, 2020 /
Rules and Regulations

[[Page 71772]]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 4

RIN 3038-AE98


Compliance Requirements for Commodity Pool Operators on Form CPO-
PQR

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (CFTC or Commission)
is adopting amendments (the Final Rule) to Commission regulations on
additional reporting by commodity pool operators (CPOs) and commodity
trading advisors and to Form CPO-PQR (also, the form). The Commission
is: Eliminating existing Schedules B and C of Form CPO-PQR, except for
the Pool Schedule of Investments; amending the information requirements
and instructions to request Legal Entity Identifiers (LEIs) for CPOs
and their operated pools that have them, and to delete questions
regarding pool auditors and marketers; and making certain other changes
due to the rescission of Schedules B and C, including the elimination
of all existing reporting thresholds. Pursuant to the Final Rule, all
reporting CPOs will be required to file the revised Form CPO-PQR
(Revised Form CPO-PQR, or the Revised Form) quarterly. The Final Rule
also amends Commission regulations to permit reporting CPOs to file NFA
Form PQR, a comparable form required by the National Futures
Association (NFA), in lieu of filing the Commission's Revised Form.
Conversely, Form PF will no longer be accepted in lieu of the Revised
Form, though it will remain a Commission form.

DATES: Effective Date: The effective date for the Final Rule, including
the adoption of the Revised Form, is December 10, 2020.
    Compliance Date: All reporting CPOs will be required to file the
Revised Form with respect to their operated pools for the first
calendar quarter of 2021, which ends on March 31, 2021. The deadline
for filing the Revised Form for that reporting period is sixty days
after the quarter-end, or May 30, 2021.

FOR FURTHER INFORMATION CONTACT: Joshua B. Sterling, Director, at 202-
418-6700 or [email protected]; Amanda Lesher Olear, Deputy Director,
at 202-418-5283 or [email protected]; Pamela M. Geraghty, Associate
Director, at 202-418-5634 or [email protected]; Elizabeth Groover,
Special Counsel, at (202) 418-5985 or [email protected]; or Christopher
Cummings, Special Counsel, at (202) 418-5445 or [email protected],
Division of Swap Dealer and Intermediary Oversight, Commodity Futures
Trading Commission, Three Lafayette Centre, 1151 21st Street NW,
Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction and Background
    A. Overview of Form CPO-PQR, as Originally Adopted
    B. The Proposal
II. Final Rule
    A. General Comments and Adopting the Revised Form
    B. The Elimination of Schedules B and C From the Revised Form
    C. Adoption of the Proposed Schedule of Investments in the
Revised Form
    D. Retaining the Five Percent Threshold for Reportable Assets
    E. Adding LEI Fields to the Revised Form
    F. The Revised Form's Definitions, Instructions, and Questions
    i. Quarterly Filing Schedule for All CPOs Completing the Revised
Form
    ii. Instructions 3 and 5
    iii. Instruction 4
    iv. Definition of ``Broker''
    v. Elimination of Questions Regarding Auditors and Marketers
    vi. FAQs and Glossary
    G. Substituted Compliance
    i. NFA Form PQR
    ii. Joint Form PF
    iii. Substituted Compliance for CPOs of Registered Investment
Companies
    H. Compliance Date
III. Related Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    i. Overview
    ii. Revisions to the Collection of Information: OMB Control
Number 3038-0005
    C. Cost-Benefit Considerations
    i. The Elimination of Pool-Specific Reporting Requirements in
Schedules B and C
    ii. The Revised Form
    iii. Alternatives
    iv. Section 15(a) Factors
    D. Antitrust Laws

I. Introduction and Background

    Section 1a(11) of the Commodity Exchange Act (CEA or the Act) \1\
defines the term ``commodity pool operator,'' as any person \2\ engaged
in a business that is of the nature of a commodity pool, investment
trust, syndicate, or similar form of enterprise, and who, with respect
to that commodity pool, solicits, accepts, or receives from others,
funds, securities, or property, either directly or through capital
contributions, the sale of stock or other forms of securities, or
otherwise, for the purpose of trading in commodity interests.\3\ CEA
section 4m(1) generally requires each person who satisfies the CPO
definition to register as such with the Commission.\4\ CEA section
4n(3)(A) requires registered CPOs to maintain books and records and
file such reports in such form and manner as may be prescribed by the
Commission.\5\
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    \1\ 7 U.S.C. 1a(11). The Act is found at 7 U.S.C. 1, et seq.
(2018), and is accessible through the Commission's website, https://www.cftc.gov.
    \2\ 7 U.S.C. 1a(38); 17 CFR 1.3, ``person'' (defining ``person''
to include individuals, associations, partnerships, corporations,
and trusts). The Commission's regulations are found at 17 CFR ch. I
(2020), and are accessible through the Commission's website, https://www.cftc.gov.
    \3\ 7 U.S.C. 1a(11); see also 17 CFR 1.3, ``commodity pool
operator.''
    \4\ 7 U.S.C. 6m(1).
    \5\ 7 U.S.C. 6n(3)(A). Registered CPOs have regulatory reporting
obligations with respect to their operated pools. See, e.g., 17 CFR
4.22.
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    Following the enactment in 2010 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act) \6\ and subsequent
joint adoption with the Securities and Exchange Commission (SEC) of
Form PF (Joint Form PF) for advisers to large private funds,\7\ the
CFTC adopted a new reporting requirement for CPOs through Commission
regulation at Sec.  4.27, which, among other things, requires certain
CPOs to report periodically on Form CPO-PQR.\8\ The Commission proposed
this new reporting requirement after reevaluating its regulatory
approach to CPOs due to the 2008 financial crisis and the purposes and
goals of the Dodd-Frank Act in light of the then-current economic
environment. Amendments to the CPO regulatory program adopted at that
time, including Form CPO-PQR and Sec.  4.27, were intended to: (1)
Align the Commission's regulatory structure for CPOs with the purposes
of the Dodd-Frank Act; (2) encourage more congruent and consistent
regulation by Federal financial regulatory agencies of similarly-
situated entities, such as dually registered CPOs required to file
Joint Form PF; (3) improve accountability and increase transparency of
the activities of CPOs and the commodity pools that they operate or
advise; and (4) facilitate a data collection that would potentially
assist the Financial Stability Oversight

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Counsel (FSOC).\9\ To that end, the requirements of Form CPO-PQR were
modeled closely after those of Joint Form PF.\10\
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    \6\ Public Law 111-203, 124 Stat. 1376 (2010).
    \7\ Section 202(a)(29) of the Investment Advisers Act of 1940
(Advisers Act) defines the term ``private fund'' as ``an issuer that
would be an investment company, as defined in section 3 of the
Investment Company Act of 1940 (15 U.S.C. 80a-3), but for section
3(c)(1) or 3(c)(7) of that Act.'' Advisers Act Section 202(a)(29),
15 U.S.C. 80ab-2(a)(29).
    \8\ Commodity Pool Operators and Commodity Trading Advisors:
Compliance Obligations, 77 FR 11252 (Feb. 24, 2012) (Form CPO-PQR
Final Rule); 17 CFR part 4, app. A; 17 CFR 4.27.
    \9\ Commodity Pool Operators and Commodity Trading Advisors:
Compliance Obligations, 76 FR 7976, 7978 (Feb. 11, 2011) (Form CPO-
PQR Proposal).
    \10\ Id. (``The Commission proposes [Form CPO-PQR] to solicit
information that is generally identical to that sought through Form
PF''). Commission regulation at Sec.  4.27 further permits the
filing of Joint Form PF in lieu of Commission filing requirements
(i.e., Form CPO-PQR) for CPOs that are dually registered with the
SEC as investment advisers. 17 CFR 4.27(d).
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    In adopting Form CPO-PQR, the Commission indicated that the
collected data would be used for several broad purposes, including: (1)
Increasing the Commission's understanding of its registrant population;
(2) assessing the market risk associated with pooled investment
vehicles under its jurisdiction; and (3) monitoring for systemic
risk.\11\ Specifically, the Commission was interested in receiving
information regarding the operations of CPOs and their pools, including
their participation in commodity interest markets, their relationships
with intermediaries, and their interconnectedness with the financial
system at large.\12\ In proposing the majority of the more pool-
specific questions in the form, in particular, the Commission believed
the incoming data would assist it in monitoring commodity pools in such
a way as to allow the Commission to identify trends over time,
including a pool's exposure to asset classes, the composition and
liquidity of a commodity pool's portfolio, and a pool's susceptibility
to failure in times of stress.\13\ Although the Commission recognized
that the requested data may have some limitations, it believed that, in
light of the 2008 financial crisis and the sources of risk delineated
in the Dodd-Frank Act with respect to private funds, the detailed,
pool-specific information to be collected by Form CPO-PQR was both
necessary and appropriately balanced to assess the risks posed by a
single pool, or a CPO's operations as a whole.\14\
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    \11\ Form CPO-PQR Final Rule, 77 FR 11253-54 (Feb. 24, 2012).
    \12\ Id. at 77 FR 11266-67 (Feb. 24, 2012).
    \13\ Form CPO-PQR Proposal, 76 FR at 7981 (Feb. 11, 2011).
    \14\ Id.
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    On April 16, 2020, the Commission unanimously approved, and, on May
4, 2020, subsequently published in the Federal Register, a notice of
proposed rulemaking (Proposal or NPRM) that proposed to amend both
Commission Sec.  4.27 and Form CPO-PQR.\15\ In the Proposal, the
Commission stated that, after seven years of experience with the form,
the Commission was reassessing the form's scope and alignment with the
Commission's current regulatory priorities.\16\ The Commission
explained that its ability to make full use of the more detailed
information collected under the form has not met the Commission's
initial expectations.\17\ The Commission emphasized that, since the
form's adoption, it has devoted substantial resources to developing
other data streams and regulatory initiatives, which are designed to
enhance the Commission's ability to broadly surveil financial markets
for risk posed by all manner of market participants, including CPOs and
their operated pools.\18\
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    \15\ Amendments to Compliance Requirements for Commodity Pool
Operators on Form CPO-PQR, 85 FR 26378 (May 4, 2020) (2020 CPO-PQR
NPRM).
    \16\ 2020 CPO-PQR NPRM, 85 FR at 26380 (May 4, 2020).
    \17\ Id.
    \18\ Id.
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    Thus, as further explained in the discussion that follows, the
Commission has concluded that the form should be revised to better
facilitate the Commission's oversight of CPOs and their operated pools,
as well as its coordination of other Commission data streams and
regulatory initiatives, while reducing the overall reporting burdens
for CPOs required to file the Revised Form.

A. Overview of Form CPO-PQR, as Originally Adopted

    Pursuant to Sec.  4.27, any CPO registered or required to be
registered with the Commission is a ``reporting person,'' except for a
CPO that operates only pools for which it maintains an exclusion from
the CPO definition available under Sec.  4.5, and/or an exemption from
CPO registration available under Sec.  4.13.\19\ The amount of
information that a reporting CPO has been required to disclose on the
form varies depending on the size of the operator and the quantity and
size of the operated pools.\20\
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    \19\ 17 CFR 4.27(b)(1)(i); see also 17 CFR 4.27(b)(2)(i)
(establishing that CPOs operating only pools for which they claim
relief under 17 CFR 4.5 or 4.13 are not considered ``reporting
persons'' for purposes of the Form CPO-PQR filing requirement).
    \20\ See generally 17 CFR part 4 app. A, ``Reporting
Instructions.''
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    The form, as adopted in 2012, identifies three classes of filers:
Large CPOs, Mid-Sized CPOs, and Small CPOs. The thresholds for
determining Large and Mid-Sized CPO status, and thus their reporting
obligations, generally align with those in Joint Form PF.\21\ A Large
CPO is a CPO that had at least $1.5 billion in aggregated pool assets
under management (AUM) \22\ as of the close of business on any day
during the reporting period; a Mid-Sized CPO is a CPO that had at least
$150 million, but less than $1.5 billion, in aggregated pool AUM as of
the close of business on any day during the reporting period.\23\
Although not defined in the form, ``Small CPO,'' as used herein, refers
to a CPO that had less than $150 million in aggregated pool AUM during
the reporting period. The reporting period for Large CPOs is any of the
individual calendar quarters (ending March 31, June 30, September 30,
and December 31), whereas, for Small and Mid-Sized CPOs, the reporting
period is the calendar year.\24\
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    \21\ See generally Instructions to Form PF, available at http://www.sec.gov/about/forms/formpf.pdf. Private fund investment advisers
with ``regulatory AUM,'' as that term is defined in Joint Form PF,
of at least $150 million are required to file Section 1 of Joint
Form PF; private fund investment advisers with regulatory AUM equal
to or exceeding $1.5 billion are required to file Sections 1 and 2
of Joint Form PF. Id.
    \22\ As used in the form, AUM refers to the amount of all assets
that are under the control of the CPO. 17 CFR part 4, app. A,
``Definitions of Terms'' (providing specific definitions for
terminology used in the form, including AUM). The ``Definitions of
Terms'' section of the form is renamed by this Final Rule ``Defined
Terms'' in the Revised Form.
    \23\ Id.
    \24\ Id. (defining ``Reporting Period''). The form additionally
defines, ``Reporting Date,'' as the last calendar day of the
Reporting Period for which this Form CPO-PQR is required to be
completed and filed,'' e.g., ``the Reporting Date for the first
calendar quarter of a year is March 31. Id. For Mid-Sized and Small
CPOs, their Reporting Date would therefore be December 31. Id.
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    Prior to the Final Rule amendments adopted herein, Form CPO-PQR
consisted of three schedules: Schedules A, B, and C.\25\ Schedule A
requires reporting CPOs to disclose basic identifying information about
the CPO (Part 1) and about each of the CPO's pools and the service
providers they use (Part 2).\26\ Consistent with the ``Reporting
Period'' definitions described above, Large CPOs submit Schedule A on a
quarterly basis, whereas all other reporting CPOs submit it
annually.\27\ Schedule B requires additional detailed information for
each pool operated by Mid-Sized and Large CPOs, in particular regarding
each operated pool's investment strategy, borrowings and types of
creditors, counterparty credit exposure, trading and clearing
mechanisms, value of aggregated derivative positions, and

[[Page 71774]]

schedule of investments.\28\ Large CPOs also submit Schedule B on a
quarterly basis; Mid-Sized CPOs are required to complete and submit
Schedule B annually.\29\
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    \25\ 17 CFR part 4, app. A, ``Reporting Instructions.''
    \26\ Id. at ``Reporting Instructions,'' no. 2.
    \27\ Id.
    \28\ 17 CFR part 4, app. A, Sched. B, ``Detailed Information
About the Pools Operated by Mid-Sized CPOs and Large CPOs.''
    \29\ 17 CFR part 4, app. A, ``Reporting Instructions,'' no. 2.
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    Schedule C requires further detailed information about the pools
operated by Large CPOs on an aggregate and pool-by-pool basis. Part 1
of Schedule C requires aggregate information for all pools operated by
a Large CPO, including (1) a geographical breakdown of the pools'
investment on an aggregated basis, and (2) the turnover rate of the
aggregate portfolio of pools.\30\ Part 2 of Schedule C requires certain
detailed information for each ``Large Pool'' the Large CPO
operates,\31\ where a ``Large Pool'' is a commodity pool that has a net
asset value (NAV) \32\ individually, or in combination with any
parallel pool structure,\33\ of at least $500 million as of the close
of business on any day during the reporting period.\34\ Specifically,
Part 2 requires information with respect to each Large Pool the Large
CPO operates during the given reporting period; this section of the
form elicits information regarding the Large Pool's: (1) Identity; (2)
liquidity; (3) counterparty credit exposure; (4) risk metrics; (5)
borrowing; (6) derivative positions and posted collateral; (7)
financing liquidity; (8) participant information; and (9) the duration
of its fixed income assets.\35\ Large CPOs complete and file Schedule C
on a quarterly basis: This filing includes Part 1 of Schedule C, as
well as a separate Part 2 for each Large Pool that a Large CPO operates
during the reporting period.\36\ If a CPO is also registered with the
SEC as an investment adviser, and is therefore required to file Joint
Form PF regarding its advisory services to private funds,\37\ the CPO
is deemed to have satisfied its Schedule B and C filing requirements,
provided that the CPO completes and files the referenced sections of
Joint Form PF with respect to the pool(s) operated during the reporting
period.\38\
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    \30\ 17 CFR part 4, app. A, Sched. C, pt. 1.
    \31\ 17 CFR part 4, app. A, Sched. C, pt. 2, ``Information About
the Large Pools of Large CPOs.''
    \32\ As used in Form CPO-PQR, the term ``net asset value'' has
the same meaning as in Sec.  4.10(b). See 17 CFR 4.10(b) (defining
``net asset value'' as total assets minus total liabilities,
determined in accord with generally accepted accounting principles,
with each position in a commodity interest transaction accounted for
at a fair market value).
    \33\ As used in the form, the term ``parallel pool structure''
means any structure in which one or more Pools pursues substantially
the same investment objective and strategy and invests side by side
in substantially the same assets as another Pool. 17 CFR part 4,
app. A, ``Definitions of Terms.''
    \34\ 17 CFR part 4, app. A, Sched. C, pt. 2, ``Information About
the Large Pools of Large CPOs.''
    \35\ Id.
    \36\ 17 CFR part 4, app. A, ``Reporting Instructions,'' no. 2.
    \37\ As used in the form, the term ``private fund'' has the same
meaning as the definition of ``private fund'' in Joint Form PF. 17
CFR part 4, app. A, ``Definitions of Terms.''
    \38\ 17 CFR part 4, app. A, ``Reporting Instructions,'' no. 2.
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    In addition to Joint Form PF and Form CPO-PQR, in 2010, NFA adopted
and implemented its own NFA Form PQR to elicit data in support of NFA's
risk-based examination program for its CPO membership.\39\ Pursuant to
NFA Compliance Rule 2-46, all CPO NFA members, which includes all CPOs
registered with the Commission, must file NFA Form PQR on a quarterly
basis with respect to all of their operated pools.\40\ NFA accepts the
filing of Form CPO-PQR (but not Joint Form PF) in lieu of filing NFA
Form PQR for any quarter in which a Form CPO-PQR filing is required
under Sec.  4.27.\41\ Consequently, dually registered CPO-investment
advisers that file Joint Form PF in lieu of a Form CPO-PQR filing,
consistent with Sec.  4.27(d), as it reads prior to these Final Rule
amendments, are also required to file NFA Form PQR with NFA quarterly.
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    \39\ NFA Compliance Rule 2-46 (2017), available at https://www.nfa.futures.org/rulebook/rules.aspx?RuleID=RULE%202-46&Section=4
(noting this rule was initially adopted effective March 31, 2010,
and subsequently amended in 2013, 2016, and most recently, 2017).
Commission regulations require each person registered as a CPO to
become and remain a member of at least one registered futures
association, of which there is currently one, i.e., NFA. 17 CFR
170.17.
    \40\ NFA Compliance Rule 2-46(a). CFTC staff has previously
advised that reporting CPOs should exclude all pools operated
subject to relief provided in either 17 CFR 4.5 or 4.13 from their
Form CPO-PQR filings, including with respect to any applicable
reporting threshold calculations. CFTC Division of Swap Dealer and
Intermediary Oversight Responds to Frequently Asked Questions
Regarding Commission Form CPO-PQR (Nov. 5, 2015), available at
http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/faq_cpocta.pdf (2015 CPO-PQR FAQs). NFA Form PQR similarly focuses
its data collection efforts on the listed pools of registered CPO
Members. NFA may, however, use NFA Form PQR to collect information
beyond that collected by the Commission's Revised Form. See, e.g.,
NFA Compliance Rule 2-46(b). Nothing in the Commission's Proposal or
the Final Rule restricts NFA's ability to require reporting beyond
that required by the Commission, provided that such NFA requirements
are consistent with the CEA and Commission regulations promulgated
thereunder. See 7 U.S.C. 17(j).
    \41\ NFA Compliance Rule 2-46(b).
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B. The Proposal

    As noted above, the Commission published the NPRM on May 4, 2020,
proposing substantial revisions to Form CPO-PQR, as well as several
amendments to Sec.  4.27.\42\ Specifically, the Commission proposed to
eliminate the requirement to complete and submit Schedules B or C of
the form, with the exception of the Pool Schedule of Investments (PSOI)
(currently, question 6 of Schedule B). The Commission proposed to
retain the questions set forth in current Schedule A with certain
amendments, notably the addition of questions regarding LEIs, and the
deletion of questions regarding pool marketers and auditors.\43\ Thus,
the Commission proposed the Revised Form consisting of a revised
Schedule A, plus the PSOI and the instructions and definitions in the
current form that remain relevant.\44\ The Proposal required all
reporting CPOs to file the Revised Form on a quarterly basis,
regardless of AUM or size of operations, and such reporting CPOs would
be permitted to file NFA Form PQR in lieu of the Revised Form.\45\ The
Proposal included an amendment to Sec.  4.27(d) that would eliminate
the substituted compliance currently available for dually registered
CPO-investment advisers required to file Joint Form PF with respect to
their operated private funds, while retaining Joint Form PF as a
Commission form. The comment period for the Proposal expired on June
15, 2020, and the Commission received ten relevant \46\ comment
letters: Two from individuals; one from a registered futures
association; and seven from industry professional and trade
associations.\47\
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    \42\ 2020 CPO-PQR NPRM.
    \43\ 2020 CPO-PQR NPRM, 85 FR at 26381, 26383 (May 4, 2020).
    \44\ 2020 CPO-PQR NPRM, 85 FR at 26381 (May 4, 2020).
    \45\ 2020 CPO-PQR NPRM, 85 FR at 26381 and 26389 (May 4, 2020)
(proposing to amend Sec.  4.27(c)(1) by adding substituted
compliance for this filing requirement with respect to NFA Form
PQR).
    \46\ The Commission received a total of 14 comment letters, four
of which were either spam or otherwise not substantively relevant to
the Proposal in any respect.
    \47\ Comments were submitted by Mr. Chris Barnard (Barnard) (May
8, 2020); NFA (June 10, 2020); the Alternative Investment Management
Association (AIMA) (June 11, 2020); the Depository Trust and
Clearing Corporation (DTCC) (June 15, 2020); the Global Legal Entity
Identifier Foundation (GLEIF) (June 15, 2020); the Managed Funds
Association (MFA) (June 15, 2020); the Investment Adviser
Association (IAA) (June 15, 2020); the Securities Industry and
Financial Market Association Asset Management Group (SIFMA AMG)
(June 15, 2020); Ms. Talece Y. Hunter (Hunter) (June 15, 2020); and
the Investment Company Institute (ICI) (June 15, 2020). The complete
comment file for the 2020 CPO-PQR NPRM can be found on the
Commission's website. Comments for Proposed Rule 85 FR 26378 (May 4,
2020), available at https://comments.cftc.gov/PublicComments/CommentList.aspx?3098.

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[[Page 71775]]

II. Final Rule

A. General Comments and Adopting the Revised Form

    The comments that the Commission received were, in general,
strongly supportive of the Proposal.\48\ Commenters largely agreed with
the proposed amendments and viewed the proposal of the Revised Form as
a ``helpful improvement to the current system.'' \49\ Multiple
commenters stated that the Proposal, if adopted, would simplify CPO
reporting requirements, significantly reduce filers' reporting burdens,
increase the regulatory integrity and utility of the data collected by
the Revised Form, and serve as a critical step in the development of a
``holistic market surveillance program,'' with respect to registered
CPOs and the pools they operate.\50\ Similarly, NFA stated its support
of ``the Commission's efforts to streamline and simplify the reporting
requirements for CPOs,'' and its belief that ``the [P]roposal will
satisfy the Commission's goal of reducing reporting requirements in a
manner that continues to facilitate effective oversight of CPOs and the
pools they operate.'' \51\
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    \48\ See, e.g., DTCC, at 2.
    \49\ ICI, at 4 (noting that ``the Proposal would significantly
reduce the reporting burdens to which registered fund CPOs are
currently subject'').
    \50\ Hunter, at 1; AIMA, at 2; SIFMA AMG, at 2; Barnard, at 1.
    \51\ NFA, at 1.
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    Although MFA stated its preference for a consolidated form for both
SEC and CFTC filings with respect to pooled investment vehicles and
their operators or advisers, MFA nonetheless expressed its strong
support for the Proposal's Revised Form.\52\ Similarly, SIFMA AMG
stated that the Proposal is well-aligned with the Commission's intended
purpose for it, and subject to recommended revisions, strongly
recommended it be adopted.\53\ Encouraged by the Commission's proposed
amendments eliminating significant pool-specific sections of the form,
AIMA requested that the Commission consider further reducing the scope
of the Revised Form, if at all possible.\54\
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    \52\ MFA, at 1-2.
    \53\ SIFMA AMG, at 2.
    \54\ AIMA, at 2-3 (stating also that AIMA welcomed the Proposal,
instead of ``incremental and non-transformative change,'' and was
``in favour of making better use of data obtained through other
reporting obligations'').
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    After considering the public comments received, the Commission has
determined to adopt the Revised Form and the amendments to Sec.  4.27,
largely as proposed, in furtherance of its regulatory goals with
respect to registered CPOs and their operated pools,\55\ for the
reasons it explained in the Proposal.\56\ Today's Final Rule
constitutes the first of several steps in the Commission's ongoing
reassessment of Form CPO-PQR, the substantive information it seeks to
collect, and the form and manner in which the Commission collects and
uses that information.
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    \55\ Consistent with past Commission staff guidance, ``operated
pools,'' as used in this document, means those pools for which a CPO
is required to be registered with the Commission.
    \56\ 2020 CPO-PQR Proposal, 85 FR at 26381-84 (May 4, 2020).
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B. The Elimination of Schedules B and C From the Revised Form

    In proposing to eliminate a majority of the pool-specific reporting
requirements in Schedules B and C of Form CPO-PQR, the Commission
observed that, challenges with the data collected in Schedules B and C,
combined with the resource constraints of broader Commission
priorities, have frustrated the Commission's ability to fully realize
its vision for this data collection.\57\ As described above, the
eliminated data elements in Schedules B and C include detailed pool-
specific information, asset liquidity and concentration of positions,
clearing relationships, risk metrics, financing, and investor
composition.\58\ In explaining the proposed rescission of Schedules B
and C, the Commission stated that its ability to identify trends across
CPOs or pools using Form CPO-PQR data has been substantially
challenged, due to the post hoc nature of the previous filings and the
substantial amount of flexibility the Commission permitted for CPOs
completing the form.\59\ In the Proposal, the Commission noted that
certain of its alternate data streams provide a more timely,
standardized, and reliable view into relevant market activity than that
provided under Form CPO-PQR, which make them much easier to combine
into a holistic surveillance program.\60\
---------------------------------------------------------------------------

    \57\ 2020 CPO-PQR NPRM, 85 FR at 26381 (May 4, 2020).
    \58\ 2020 CPO-PQR NPRM, 85 FR at 26380 (May 4, 2020).
    \59\ 2020 CPO-PQR NPRM, 85 FR at 26381 (May 4, 2020).
    \60\ 2020 CPO-PQR NPRM, 85 FR at 26382 (May 4, 2020).
---------------------------------------------------------------------------

    The proposed removal of Schedules B and C was broadly supported by
commenters.\61\ For instance, IAA supported the Commission's efforts to
streamline the process, stating, ``We appreciate the CFTC tailoring the
regulatory reporting requirements for CPOs to limit data collection
that the Commission will make use of[,] and eliminating the more
detailed information in Form CPO-PQR that has not been helpful for the
CFTC's oversight purposes.'' \62\ Furthermore, ICI concurred with the
Commission that the agency's limited resources should not be spent on
trying to make use of the ``voluminous and very specific pool-level
data sought in Schedules B and C.'' \63\ Expressing support for the
elimination of Schedules B and C, as well as the retention of a revised
PSOI for each pool, SIFMA AMG praised the Commission for recognizing
``lessons learned'' from seven years of experience with the form and
the data it has elicited.\64\ SIFMA AMG described the Proposal as a
demonstration of the CFTC's consideration of the utility of the data
currently collected by the form, and balancing that against the
successful use of other Commission data streams, which were developed
after the form was initially adopted.\65\ In addition, SIFMA AMG
strongly supported the adoption of a streamlined Revised Form for all
CPOs and their pools, thereby eliminating the CPO and pool threshold
calculations that dictated the scope and burden of each CPO's Form CPO-
PQR filing.\66\
---------------------------------------------------------------------------

    \61\ E.g., IAA, at 3-4; NFA, at 1-2.
    \62\ IAA, at 4.
    \63\ ICI, at 6.
    \64\ SIFMA AMG, at 4.
    \65\ SIFMA AMG, at 4-5.
    \66\ SIFMA AMG, at 6 (noting that these threshold calculations
for CPO and pool size have proved difficult to practically apply and
calculate).
---------------------------------------------------------------------------

    Due to the logistical and timing difficulties the Commission
explained in detail in the NPRM,\67\ the Commission has determined to
forego the collection of the detailed information requested by
Schedules B and C of Form CPO-PQR, in part, because the Commission was
not able to fully incorporate the resulting data set into its oversight
program for registered CPOs and their operated pools. The Commission
acknowledges the strong support from commenters with respect to this
particular amendment, and believes that, in conjunction with other
amendments explained below, the Commission will receive more complete
and usable data regarding reporting CPOs' pool operations due to the
more targeted data collected in the Revised Form. Accordingly,
Schedules B and C, along with all references to the thresholds
associated therewith, have been removed in their entirety from the
Revised Form adopted by the Final Rule.
---------------------------------------------------------------------------

    \67\ 2020 CPO-PQR NPRM, 85 FR at 26381 (May 4, 2020).

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[[Page 71776]]

C. Adoption of the Proposed Schedule of Investments in the Revised Form

    One of the specific questions posed by the Commission in the
Proposal was: Should the Commission consider amending the Schedule of
Investments to align with the simpler schedule that appeared in NFA
Form PQR in 2010? \68\ The Commission received several comments on the
content of the proposed PSOI, including multiple recommendations that
the Commission adopt a schedule in the Revised Form that aligned with
the former Schedule of Investments originally adopted by NFA in 2010
for its NFA Form PQR (2010 Schedule of Investments).\69\ The 2010
Schedule of Investments is less detailed than the PSOI currently in use
by both Form CPO-PQR and NFA Form PQR.\70\
---------------------------------------------------------------------------

    \68\ 2020 CPO-PQR NPRM, 85 FR at 26384 (May 4, 2020).
    \69\ IAA, at 4; ICI, at 6; NFA, at 1-2; MFA, at 3.
    \70\ See infra pt. II.G.i for additional discussion on
permissible substituted compliance for Sec.  4.27 with respect to
NFA Form PQR.
---------------------------------------------------------------------------

    Several of the commenters argued that the detailed information
required by the proposed PSOI is no longer necessary in the broader
context of the Revised Form. For instance, NFA, in a comment that was
supported by both MFA and ICI, supported aligning with the 2010
Schedule of Investments because a ``more streamlined schedule will
significantly alleviate filing burdens on CPOs without negatively
impacting the usefulness of the information that is collected.'' \71\
NFA explained that it does not need the more granular information in
the PSOI, and that this granularity has not, in NFA's experience,
improved their analysis, in part, because ``very few CPOs include
balances on a significant number of line items set forth in the current
schedule.'' \72\ IAA also expressed its support, stating that the
specific data fields in the PSOI should be aligned with that of NFA
Form PQR.\73\
---------------------------------------------------------------------------

    \71\ NFA, at 2 (discussing how the 2010 Schedule of Investments
elicits the information necessary for NFA's risk assessment
purposes). See also ICI, at 4; MFA, at 4. ICI further emphasized
that the overall success of the Proposal's revisions to Form CPO-PQR
will depend on whether the resulting dataset is appropriately
calibrated to the Commission's regulatory interests and limited to
data the Commission will employ in regulating CPOs and their
commodity pools. ICI, at 4.
    \72\ NFA, at 2 (concluding that its 2010 Schedule of Investments
``elicits the information necessary for both the CFTC's and NFA's
needs'').
    \73\ IAA, at 5. MFA also supported this alignment and strongly
advocates for consistency between the Schedules of Investment in the
Revised Form and NFA Form PQR. MFA, at 3-4.
---------------------------------------------------------------------------

    The Commission acknowledges and understands commenters' arguments
supporting a more narrowly focused PSOI in the Revised Form.
Nevertheless, the Commission has determined not to make material
revisions at this time. Events in the bond and energy markets, both
recently and in its past experience, have reinforced the Commission's
understanding of the interconnectedness of financial markets, and
emphasized the importance of understanding how CPOs are positioned vis-
[agrave]-vis their counterparties and the economy as a whole.\74\
Moreover, incorporating a PSOI that is aligned with the 2010 Schedule
of Investments, particularly the 10% asset threshold discussed below,
in the Revised Form results in a material loss of information from
reporting CPOs on their operated pools' alternative investment or
derivatives positions, which are the primary focus of the Commission's
jurisdiction. For instance, the Commission notes that the 2010 Schedule
of Investments lacks specific line items for crude oil, natural gas,
and some precious metals like gold, all of which have been subject to
significant volatility.\75\
---------------------------------------------------------------------------

    \74\ ``Options trading firm blows up amid natural gas
volatility,'' Financial Times (Nov. 19, 2018), available at https://ft.com/content/b7c525f6-ec44/11e8/89c8/d36339d835c0; ``The Shine Is
Off,'' Slate (June 9, 2013), available at https://www.slate.com/business/2013/06/gold-bubble-paranoid-investors-pushed-gold-to-1900-an-ounce-in-2011-but-the-bubble-has-burst; ``Bond investors say some
energy companies `will not survive' oil rout slamming markets,''
Market Watch (Mar. 10, 2020), available at https://www.marketwatch.com/story/bond-investors-say-some-energy-companies-will-not-survive-oil-rout-slamming-markets-2020-03-09; ``Global
stocks, oil prices, and government bonds tumble,'' Financial Times
(Mar. 18, 2020), available at https://www.ft.com/content/1b1b47d4-68bd-11ea-a3c9/1fe6fedcca75; ``Oil plunges into negative territory
for the first time ever as demand evaporates,'' Business Insider
(Apr. 20, 2020), available at https://markets.businessinsider.com/commodities/news/us-crude-oil-wti-falls-to-21-year-low-1029106364#.
    \75\ Id.
---------------------------------------------------------------------------

    At this time, the Commission believes that reducing the amount of
information collected with respect to multiple asset classes,
particularly those that are under the Commission's primary
jurisdictional mandate,\76\ is premature. The resulting diminished
dataset would provide the Commission an insufficient view into the
actual holdings of operated commodity pools in markets subject to the
Commission's oversight, which, in turn, potentially undermines the
Commission's assessment of the risk posed by CPOs and their operated
pools within the commodity interest markets and their vulnerabilities
when faced with challenging market conditions. This information is
currently essential to the Commission's ability to identify CPOs and
pools with whom the Commission should engage more deeply depending on
market events, especially in times of unpredictable market volatility.
Therefore, the Commission has decided to collect the more detailed
PSOI, as it continues to reassess its data needs in this space.
---------------------------------------------------------------------------

    \76\ ``Gold prices settle at 1-week low as U.S. stock market
tumbles,'' MarketWatch (Sept. 3, 2020), available at https://www.marketwatch.com/story/gold-heads-for-back-to-back-loss-amid-vaccine-hope-us-dollar-strength-2020-09-03; ``Oil sinks with
equities on wavering hopes for demand pickup,'' Bloomberg (Sept. 3,
2020, updated Sept. 4, 2020), available at https://www.bloomberg.com/news/articles/2020-09-03/oil-extends-biggest-weekly-drop-since-june-as-demand-woes-return; ``U.S. oil prices
settle at lowest in nearly a month as supplies, output log sharp but
temporary hurricane-related drop,'' Market Watch (Sept. 2, 2020),
available at https://www.marketwatch.com/story/oil-prices-lifted-by-lackluster-bounce-in-opec-crude-output-inventory-fall-2020/09/02;
``Oil prices continue to slide as U.S. data feeds fuel demand
worry,'' Reuters (Sept. 2, 2020), available at https://www.reuters.com/article/us-global-oil/oil-prices-continue-to-slide-as-us-data-feeds-fuel-demand-worry-idUSKBN25U04D.
---------------------------------------------------------------------------

    In the Commission's experience, commodity interest markets change
over time, as do the Commission's own technological applications,
surveillance capabilities, and access to real-time data streams, and
thus, require the ongoing, careful review of the appropriateness of
existing regulatory approaches. Accordingly, the Commission hereby
instructs its staff to evaluate the ongoing utility of the PSOI
information in the Revised Form, including comparing it to the 2010
Schedule of Investments, within 18-24 months following the Final Rule's
Compliance Date. As part of its review, Commission staff should
consider whether or not it is appropriate to adopt the 2010 Schedule of
Investments, in light of such utility. After completing this review,
and taking into consideration the Commission's current regulatory
needs, the Commission expects its staff to develop recommendations or a
proposed rulemaking for the Commission's further review to effectuate
staff's findings.
    In addition, as part of this review, Commission staff should
continue to explore the use of data available from designated contract
markets, swap execution facilities, and swap data repositories--i.e.,
existing sources of transaction and position data--and its application
to effecting robust oversight of CPOs and commodity pools, as compared
to the information received from Revised Form CPO-PQR. In addition, the
Commission expects its staff to continue engaging with their
counterparts at the SEC during this 18-24 month period regarding
potential modifications to Joint Form PF, which should inform further
revisions to Revised Form CPO-PQR.
    Consistent with the views expressed by other commenters, NFA stated
its belief that the more limited dataset collected on the 2010 Schedule
of

[[Page 71777]]

Investments would be sufficient for both NFA's and the Commission's
purposes.\77\ The Commission notes, however, that direct oversight of
reporting CPOs and their operated pools is only one of the uses of the
data collected by the Revised Form's PSOI. This information is also
useful to the Commission in developing its understanding of the
commodity interest markets more broadly, including how various asset
classes are being utilized by reporting CPOs and their operated pools.
Although there may be certain subcategories of asset classes that have
not had many, if any, responses over the past six reporting periods,
that does not mean that such subcategories of asset classes may not
become more widely used in the future, or that a pool's exposure to
asset classes that are currently less widely utilized would not be
useful in overseeing the operations of reporting CPOs and their pools
going forward. Eliminating questions due solely to a lack of past
responses seems to presume that the operations and pool trading
activity of reporting CPOs will remain static going forward. The
Commission knows from its direct regulatory experience in overseeing
CPOs that such a presumption is false because these registrants and
their pools exhibit high levels of variability and dynamism in their
investment strategies.
---------------------------------------------------------------------------

    \77\ NFA, at 2.
---------------------------------------------------------------------------

D. Retaining the Five Percent Threshold for Reportable Assets

    Aligning the Revised Form's PSOI with the 2010 Schedule of
Investments would include increasing the threshold for reportable
assets of a pool from 5% of a pool's NAV to 10%, which multiple
commenters specifically addressed and supported.\78\ As discussed
above, MFA also requested the Commission align its PSOI with NFA's 2010
Schedule of Investments, and increase the reportable asset threshold
from 5% to 10%.\79\ SIFMA AMG stated that revising the PSOI in this
manner would greatly reduce or eliminate the burden on CPOs to provide
information on pool assets or investments that are, ``either nominal or
so minimal they do not affect the daily risk of a CPO.'' \80\ As an
alternative to adopting the 2010 Schedule of Investments, SIFMA AMG
also would support a more holistic analysis by the Commission of the
proposed PSOI: rather than simply doubling the percentage threshold for
reportable assets, SIFMA AMG argued that the Commission should
carefully review the proposed PSOI, weigh the utility of the asset sub-
categories, and eliminate those deemed to be unnecessary or not
implicating the Commission's regulatory interests.\81\
---------------------------------------------------------------------------

    \78\ IAA, at 5; MFA, at 4; SIFMA, at 14.
    \79\ MFA, at 4.
    \80\ SIFMA AMG, at 14.
    \81\ SIFMA AMG, at 14 (describing such an analysis as ``weighing
the difficulty of certain CPOs to provide data for the more granular
sub-categories compared with the usefulness of such data for the
Commission, with a focus on categories of assets where the
Commission does not have a specific regulatory interest or otherwise
would have limited use for such detail''). See also IAA, at 5
(questioning the relevance and necessity of certain line items in
the proposed PSOI); MFA, at 6-14 (providing line edits to the
proposed PSOI, and recommending the deletion of multiple asset
classes).
---------------------------------------------------------------------------

    Upon consideration of the comments, and consistent with the overall
PSOI analysis above, the Commission is declining to increase the
threshold for a pool's reportable assets from 5% to 10% at this time.
The Commission has reviewed data from past Form CPO-PQR filings, and
concludes that, if it were to raise the threshold from 5% to 10%, the
Commission would lose a material portion of the data that it has been
receiving regarding pool positions in derivatives and alternative
investments. Specifically, the Commission reviewed the first level of
subcategory data within the seven headings of asset classes from the
2019 year-end Form CPO-PQR filings. There was a total of 5,574 PSOIs
filed, with 1,240 of those filings reporting at least one balance that
was between 5% and 10% of NAV, which means that 22% of the total filed
PSOIs reported an asset balance that would be lost to the Commission,
if the Commission increased the reporting threshold to 10%.
    Looking at the data further, the Commission found that, of those
1,240 PSOIs reporting at least one asset between 5 and 10% of a pool's
NAV, 660 of them reported balances in either alternative investments or
derivatives--asset classes in which the Commission retains a
significant regulatory interest. Those 660 PSOIs constitute 53% of all
PSOIs reporting an asset as 5-10% of the pool's NAV, and amount to
approximately 12% of the total PSOI population. Losing data on 12% of
its total PSOI filings by reporting CPOs regarding alternative
investment or derivatives positions, which are the primary focus of the
Commission's jurisdiction, is a material loss, because it would provide
the Commission with an incomplete picture of the actual holdings of a
pool in markets subject to the Commission's oversight, which could
undermine the Commission's assessment of the market risk posed by CPOs
and their operated pools.\82\ This is of particular importance to the
Commission given the recent unprecedented market conditions discussed
above. Accordingly, the Revised Form adopted herein retains the 5%
asset reporting threshold, and the Commission reiterates its direction
to Commission staff to evaluate the ongoing utility of the PSOI
information in the Revised Form, within 18-24 months of the Compliance
Date for the Final Rule.
---------------------------------------------------------------------------

    \82\ In concluding that losing Form CPO-PQR data for 22% of its
total filing population was material, staff was guided by the SEC's
Staff Accounting Bulletin 99, which addresses accounting materiality
thresholds. Materiality, SEC Staff Accounting Bulletin No. 99, 64 FR
45150 (Aug. 19, 1999), available at https://www.sec.gov/interps/account/sab99.htm.
---------------------------------------------------------------------------

E. Adding LEI Fields to the Revised Form

    The Commission also proposed adding fields to the Revised Form
requesting LEIs for reporting CPOs and their operated pools that are
otherwise required to have them, due to their activity in the swaps
market.\83\ The Commission emphasized in the Proposal that the
inclusion of existing LEIs within the smaller dataset on Revised Form
CPO-PQR should enable the Commission to more efficiently and accurately
synthesize the various Commission data streams on an entity-by-entity
basis and may permit better use of other data to illuminate the risk
inherent in pools and pool families.\84\ Specifically, the NPRM
queried, Should the Commission include LEIs on Revised Form CPO-PQR?
Why or why not? \85\
---------------------------------------------------------------------------

    \83\ 2020 CPO-PQR NPRM, 85 FR at 26378 (May 4, 2020).
    \84\ 2020 CPO-PQR NPRM, 85 FR at 26383 (May 4, 2020)
(anticipating that the inclusion of LEIs would greatly facilitate
the aggregation of data from commodity pools under different levels
of common control).
    \85\ 2020 CPO-PQR NPRM, 85 FR at 26384 (May 4, 2020).
---------------------------------------------------------------------------

    Commenters supported the inclusion of LEIs because of their low
cost, ability to facilitate standardization across multiple data
streams and generally enhance reporting, and ``their risk management
capabilities.'' \86\ SIFMA AMG also supported the addition of questions
on LEIs, stating that it understood that ``[requiring LEIs in the
Revised Form CPO-PQR] is the key to integrating the information
collected in multiple data streams,'' and would make information
collected by the

[[Page 71778]]

Revised Form ``much easier to combine into a holistic surveillance
program'' for registered CPOs and their operated pools.\87\ Citing a
list of benefits associated with LEIs, GLEIF and DTCC advocated for
further expanding the LEI requirement to all reporting CPOs and pools,
instead of only requiring them from entities that currently have
them.\88\
---------------------------------------------------------------------------

    \86\ DTCC, at 2; SIFMA AMG, at 6; GLEIF, at 1. See also Hunter,
at 1, and Barnard, at 1. GLEIF noted further that standardizing the
LEI requirement would also contribute to the harmonization of rules
and standards across regulatory regimes. GLEIF, at 2.
    \87\ SIFMA AMG, at 2.
    \88\ GLEIF, at 1 (stating that the Proposal's current LEI
requirement would not allow the Commission to aggregate all
derivatives transactions by pools under common control); DTCC, at 2.
---------------------------------------------------------------------------

    GLEIF also requested the Commission consider two specific
recommendations regarding LEIs: (1) Adopting a requirement that only
LEIs that are maintained and duly renewed would satisfy this reporting
obligation in the Revised Form; and (2) requiring LEIs for all
reporting entities submitting the Revised Form, as well as for a
reporting CPO's miscellaneous service providers, like a third-party
administrator, broker, trading manager, and/or custodian.\89\ DTCC
argued that expanding the LEI requirement to cover all reporting CPOs
and all of their operated pools would allow the Commission to obtain a
more complete picture of pool activity across all derivatives
transactions, rather than just with respect to swaps.\90\ DTCC also
provided specific cost estimates for LEI acquisition, renewal, and
maintenance, positing that these costs would not be a significant
burden on CPOs. Moreover, DTCC argued that expanding the requirement
could instead ease CPOs' reporting burden, ``through the
standardization of a common identifier,'' i.e., an LEI for each
reporting entity and each operated pool, and further facilitate the
synthesis of CPO and pool data.\91\
---------------------------------------------------------------------------

    \89\ GLEIF, at 1.
    \90\ DTCC, at 2.
    \91\ DTCC, at 2-3 (discussing the average costs associated with
obtaining and maintaining an LEI: average cost for an LEI is $111,
and the renewal fee is $91; the annual one-time cost for all CPOs
without an LEI would total $64,828; the annual renewal fee combined
for all 1326 registered CPOs would total $120,666). Neither DTCC nor
GLEIF provided any cost estimates with respect to expanding the LEI
requirement to all operated pools or to all of a reporting CPO's
service providers.
---------------------------------------------------------------------------

    MFA suggested that the Commission collect LEI data separately from
the Revised Form for purposes of protecting highly confidential
information in these filings from potential cyber breaches.\92\
Specifically, MFA recommended that the Commission incorporate
alphanumeric identifiers to conceal the identities of reporting CPOs in
the Revised Form, and that the Commission separate this data to
mitigate potential breaches and enhance protections for collected
registrant data.\93\ According to MFA, registered CPOs should be
permitted to file their LEIs for the Revised Form in a separate
submission, such that the LEIs and identifying information of the CPO
and its pools are separated from the confidential information the
Revised Form otherwise collects.\94\
---------------------------------------------------------------------------

    \92\ MFA, at 3.
    \93\ MFA, at 3.
    \94\ Id.
---------------------------------------------------------------------------

    The Commission is adopting this provision as proposed. The LEI
fields included in the Revised Form should provide significant
regulatory benefits, particularly with respect to the Commission's
stated goal of developing a holistic surveillance program for
registered CPOs and their operated pools.\95\ At this time, the
Commission will not require CPOs that do not currently have LEIs to
obtain them solely for the purposes of reporting on the Revised
Form.\96\ The Commission's regulations currently only require entities
to obtain LEIs if they are engaged in swaps transactions. Specifically,
the Commission's regulations regarding swap data reporting, which were
amended in September 2020, require CPOs or commodity pools that are
counterparties to swaps to use LEIs in all swap data recordkeeping and
reporting.\97\ The Commission would therefore expect that any CPO or
commodity pool entering into swap transactions would have an LEI.
Conversely, if a reporting CPO and its pools do not engage in swap
transactions, they would not be required to have LEIs. Moreover,
futures market participants are not required to have LEIs generally,
and as such, LEIs are not collected by the designated contract markets
or derivatives clearing organizations with respect to futures
transactions. Therefore, imposing such a requirement on reporting CPOs
and their pools that do not engage in swaps would not assist the
Commission in utilizing the other data streams available to it
regarding futures trading activity.
---------------------------------------------------------------------------

    \95\ 2020 CPO-PQR NPRM, at 85 FR 26382 (May 4, 2020).
    \96\ See infra Form CPO-PQR, ``Reporting Instructions,'' no. 9.
    \97\ Swap Data Recordkeeping and Reporting Requirements,
approved by the Commission on September 17, 2020. Publication in the
Federal Register is pending.
---------------------------------------------------------------------------

    Additionally, allowing only those LEIs that are maintained and duly
renewed to satisfy the reporting requirement in the Revised Form runs
counter to the Commission's stated purpose of the Revised Form.
Currently, swap dealers and other registered entities \98\ are the only
Commission registrants required to maintain and renew their LEIs.\99\
Notably, CPOs and their operated pools are not among those entities.
Additionally, because CPOs and their operated pools are not required to
obtain, maintain, or renew LEIs to participate in the futures market,
the Commission believes that imposing such a requirement solely for
Form CPO-PQR reporting purposes would not, at this time, advance the
Commission's goal of monitoring CPOs and their operated pools for
market and systemic risk.
---------------------------------------------------------------------------

    \98\ 17 CFR 1.3, ``registered entity'' (including, inter alia,
designated contract markets, swap execution facilities, derivatives
clearing organizations, and swap data repositories, in the
``registered entity'' definition).
    \99\ Swap Data Recordkeeping and Reporting Requirements,
approved by the Commission on September 17, 2020. Publication in the
Federal Register is pending.
---------------------------------------------------------------------------

    The Commission notes that this approach to LEIs in the Final Rule
does not preclude expanding the LEI requirement in the Revised Form in
the future. As noted herein, and in the Proposal, the Final Rule is
intended to leverage the other data developed by the Commission as they
currently exist. The Commission currently does not require LEIs to
participate in the commodity interest markets beyond the swaps market;
however, in the future, the LEI requirement could be expanded to other
commodity interest asset classes. If that should happen, reporting CPOs
and their pools would be required to report those LEIs on the Revised
Form as well. As LEIs become more ubiquitous in the market, and as more
CPOs obtain and use them in operating their pools, the Commission
anticipates that there will be a corresponding increase of reported
LEIs on the Revised Form.
    With respect to commenters' concerns about cybersecurity,
determining the feasibility of filing LEI information separately from
the Revised Form would hinder the Commission's ability to adopt the
Final Rule in a timely manner. The Commission believes that such delay
serves neither its own regulatory interests nor the interests of
Commission registrants required to file Form CPO-PQR. In arriving at
this conclusion, the Commission weighed the benefits of adopting
Revised Form CPO-PQR sooner, including the opportunity to begin fully
incorporating the Revised Form's dataset into the Commission's
oversight program for registered CPOs and their operated pools, as well
as operational efficiencies for the Revised Form's filers, against
whether the Commission should modify how data on the Revised Form is

[[Page 71779]]

collected. That analysis also included an assessment of the state of
the Commission's current data security protocols.
    With respect to the Commission's data security protocols, it is
currently in full compliance with all of the relevant statutes relating
to information security and protection.\100\ The Commission's Office of
Inspector General (OIG) audits the agency's security program annually,
and as of the 2019 audit, OIG identified no material weaknesses and
made no significant findings. Moreover, the OIG rated the Commission's
security program as ``effective.'' \101\ In addition to the OIG review,
the U.S. Department of Homeland Security (DHS) also assesses the
Commission on a semiannual basis, and DHS' most recent assessment of
the CFTC's security program for compliance with the Cybersecurity
Framework (CSF), as required by the Office of Management and Budget,
resulted in ratings of ``managed and measurable'' in all five functions
of the CSF.\102\
---------------------------------------------------------------------------

    \100\ See, e.g., the Federal Information Security Modernization
Act of 2014, 44 U.S.C 3551, et seq. (Dec. 18, 2014).
    \101\ ``Office of the Inspector General Semiannual Report to
Congress: October 1, 2019-March 31, 2020,'' CFTC Office of the
Inspector General, p. 8 (Mar. 31, 2020), available at https://www.cftc.gov/media/3946/oig_reporttocongress033120/download.
    \102\ ``Federal Information Security Modernization Act of 2014
Annual Report to Congress: Fiscal Year 2019,'' Office of Management
and Budget. Although DHS has not yet published the Fiscal Year 2019
report to its website, the Commission notes that it received similar
ratings in fiscal year 2018. See ``Federal Information Security
Modernization Act of 2014 Annual Report to Congress: Fiscal Year
2018,'' Office of Management and Budget, p. 49 (Aug. 23, 2019),
available at https://www.whitehouse.gov/wp-content/uploads/2019/08/FISMA/2018/Report-FINAL-to-post.pdf. The CSF, developed by the
National Institute of Standards and Technology, includes five
function areas: ``Identify, Protect, Detect, Respond, and Recover.''
Id. at 17. A finding of ``managed and measurable,'' is the fourth
highest of five levels and means, ``[q]uantitative and qualitative
measures on the effectiveness of policies, procedures, and
strategies are collected across the organization and used to assess
them and make necessary changes.'' Id. at 31. Per the IG Reporting
Metrics, a finding of ``managed and measurable'' ``is considered to
be effective at the domain, function, and overall level[s].'' Id. at
32.
---------------------------------------------------------------------------

    In the Commission's opinion, delaying the adoption of the Final
Rule and of Revised Form CPO-PQR, specifically in order to separately
collect a filing CPO's LEIs, would lead to an undesirable regulatory
outcome. This approach would delay the adoption of Revised Form CPO-PQR
significantly, if not indefinitely, thereby depriving filing CPOs of
much-anticipated compliance relief, for the purpose of addressing
arguably unwarranted (given the recent objective and favorable
evaluations of this agency's information security and data protection
protocols cited above) data security concerns only applicable to a
limited portion of the Form CPO-PQR filing population. The Commission
finds that the outcome of this approach would undermine and run counter
to the Commission's stated purposes in the Proposal, i.e., revising
Form CPO-PQR in a way that supports the Commission's ability to
exercise its oversight of CPOs and their operated pools, while reducing
reporting burdens for market participants.\103\ Taking all of this into
account, the Commission concludes that adopting Revised Form CPO-PQR at
this time, absent any significant modification as to how the
information, including LEIs, is submitted, is appropriate. In
conjunction with Commission staff's review of the Revised Form's PSOI
within 18-24 months of this Final Rule's Compliance Date, the
Commission further directs its staff to determine the feasibility,
necessity, and advisability of separating a CPO's LEIs from the rest of
Revised Form CPO-PQR in that same time frame. Lastly, the Commission
remains committed to devoting significant resources to ensure its
internal data security procedures are aligned with, or surpass,
industry best practices, as they develop over time.
---------------------------------------------------------------------------

    \103\ 2020 CPO-PQR NPRM, 85 FR at 26380 (May 4, 2020).
---------------------------------------------------------------------------

F. The Revised Form's Definitions, Instructions, and Questions

    As discussed above, the Commission also proposed several amendments
to the Instructions of the Revised Form.\104\ For instance, the
Commission proposed to require all reporting CPOs to file the Revised
Form quarterly by redefining ``Reporting Period,'' to mean a calendar
quarter.\105\ Additionally, the Commission proposed significant changes
to Instructions 2 and 3, in connection with deleting Form CPO-PQR's
Schedules B and C, as well as the elimination of terms related to the
various thresholds used for those schedules, i.e., Mid-Sized CPO, Large
CPO, and Large Pool.\106\ The Commission further queried in the
Proposal: Are there ways the Commission could further clarify and
refine the reporting instructions for completing Revised Form CPO-PQR
in order to provide CPOs with greater certainty that they are
completing the form correctly? \107\
---------------------------------------------------------------------------

    \104\ 2020 CPO-PQR NPRM, 85 FR at 26378 (May 4, 2020).
    \105\ 2020 CPO-PQR NPRM, 85 FR at 26396 (May 4, 2020).
    \106\ 2020 CPO-PQR NPRM, 85 FR at 26391 (May 4, 2020).
    \107\ 2020 CPO-PQR NPRM, 85 FR at 26384 (May 4, 2020).
---------------------------------------------------------------------------

i. Quarterly Filing Schedule for All CPOs Completing the Revised Form
    The simplified, uniform, quarterly filing schedule proposed for the
Revised Form with respect to all reporting CPOs and their operated
pools received broad support from commenters. NFA generally expressed
strong support for the Commission's efforts to streamline and simplify
the reporting regime for reporting CPOs, including the quarterly filing
schedule, and stated its belief that, ``the proposal will satisfy the
Commission's goal of reducing reporting requirements in a manner that
continues to facilitate effective oversight of CPOs and the pools that
they operate.'' \108\ SIFMA AMG also expressed its support to increase
the filing frequency of the Revised Form for all reporting CPOs because
of the simplified filing schedule across all CPOs, regardless of size,
and the consistency in filing schedules between the Revised Form and
NFA Form PQR.\109\
---------------------------------------------------------------------------

    \108\ NFA, at 1.
    \109\ SIFMA AMG, at 4.
---------------------------------------------------------------------------

    In adopting the changes as proposed, the Commission still favors
employing a simpler, more uniform filing requirement for all reporting
CPOs. This straightforward filing structure and schedule should
facilitate compliance and reporting under Sec.  4.27, thereby enhancing
the efficacy of the Commission's oversight of reporting CPOs and their
operated pools.
ii. Instructions 3 and 5
    Instruction 3 on Form CPO-PQR was carried over, in relevant part,
to the Proposal's Revised Form and states: The CPO May Be Required to
Aggregate Information Concerning Certain Types of Pools. For the parts
of Form CPO-PQR that request information about individual Pools, you
must report aggregate information for Parallel Managed Accounts and
Master Feeder Arrangements as if each were an individual Pool, but not
Parallel Pools. Assets held in Parallel Managed Accounts should be
treated as assets of the Pools with which they are aggregated.\110\
Paragraphs in Instruction 3 of the existing form describing how to
determine if a CPO is a Mid-Sized or Large CPO required to complete
Schedules B or C, or if a pool is a Large Pool for purposes of
completing Schedule C, were proposed to be deleted from the Revised
Form.\111\ In the Proposal, the Commission also retained

[[Page 71780]]

Instruction 5, which read as follows: I am required to aggregate funds
or accounts to determine whether I meet a reporting threshold, or I am
electing to aggregate funds for reporting purposes. How do I
``aggregate'' funds or accounts for these purposes? \112\ Instruction 5
then provided substantive examples on how to aggregate funds as if they
were one pool with respect to parallel managed accounts (PMAs) and/or
Master-Feeder Arrangements.\113\
---------------------------------------------------------------------------

    \110\ 2020 CPO-PQR NPRM, 85 FR at 26391 (May 4, 2020) (proposing
Instruction 3 of the Revised Form).
    \111\ 2020 CPO-PQR NPRM, 85 FR at 26391 (May 4, 2020).
    \112\ 2020 CPO-PQR NPRM, 85 FR at 26392 (May 4, 2020) (proposing
Instruction 5 of the Revised Form).
    \113\ Id.
---------------------------------------------------------------------------

    NFA responded to the Commission's question on additional
clarifications to the Revised Form's instructions, stating that, if the
Revised Form is adopted as proposed, the reporting requirements for
CPOs will no longer be dependent on reporting thresholds, and
therefore, a detailed instruction on PMAs is not necessary.\114\ NFA
recommended accordingly that the Commission ``consider whether these
instructions and the related definitional terms should be eliminated.''
\115\ SIFMA AMG also stated that the purpose of aggregating pool assets
would no longer be relevant under the Revised Form, and it would be
unclear what these instructions mean under the Revised Form, absent
those reporting thresholds.\116\ Therefore, SIFMA AMG also requested
the Commission remove Instructions 3 and 5 related to PMAs, given the
proposed deletion of Schedules B and C and the associated thresholds
for CPOs and pools. SIFMA AMG, like NFA, believed that the concept of
PMAs and pool asset aggregation, as a whole, is no longer relevant to
completing the Revised Form.\117\ SIFMA AMG also recommended the
Commission revise the Revised Form further to permit the filing of
Master-Feeder Arrangements as one pool, rather than requiring each fund
to report separately.\118\ Finally, SIFMA AMG suggested the Commission
adopt the approach taken in Joint Form PF with respect to Master-Feeder
Arrangements, specifically in Joint Form PF Instruction 5.\119\
---------------------------------------------------------------------------

    \114\ NFA, at 3.
    \115\ Id.
    \116\ SIFMA AMG, at 8-9 (stating its belief that these
instructions were borrowed from Joint Form PF and the main function
of this instruction is to aggregate pool assets of a CPO, for the
purpose of determining whether a firm is a Large, Mid-Sized, or
Small CPO, and whether a pool is a Large Pool).
    \117\ Id.
    \118\ Id. at 9.
    \119\ SIFMA AMG, at 11-13 (explaining further that, ``[t]o align
with the Commission's proposal to require pool LEIs on the CPO-PQR,
we are suggesting that should a single filing be permitted for
Master-Feeder Arrangements, a CPO should provide the LEI of a Master
Fund'').
---------------------------------------------------------------------------

    The Commission generally agrees with commenters with respect to
PMAs and the remaining references to reporting thresholds in the
proposed Revised Form. Consequently, the Commission believes that much
of the language in these instructions should be deleted for internal
consistency in the Revised Form. Therefore, the Commission is revising
Instruction 3 to remove all references to PMAs and Parallel Pools,
focusing solely on reporting information concerning pools in a Master-
Feeder Arrangement. Thus, Instruction 3 in the Revised Form only
addresses how Master-Feeder Arrangements should be reported.\120\
---------------------------------------------------------------------------

    \120\ See infra Revised Form CPO-PQR, ``Reporting
Instructions,'' no. 3.
---------------------------------------------------------------------------

    With respect to the treatment of Master-Feeder Arrangements under
the Revised Form, commenters raise an interesting question as to the
proper requirements to impose on structures meeting the form's
definition of a Master-Feeder Arrangement. Specifically, the form
provides that a Master-Feeder Arrangement is ``an arrangement in which
one or more funds (``Feeder Funds'') invest all or substantially all of
their assets in a single fund (``Master Fund'').'' \121\ This
definition encompasses many variations of fund complexes from funds
with wholly-owned subsidiaries, to funds with multiple levels of
intermediary funds between the feeder and master funds, to the more
traditional structures where two or more feeder funds invest
substantially all of their assets into a commonly owned master fund.
The Commission believes that, to adequately consider the propriety of
permitting all such fund structures to consolidate their filings on the
Revised Form, additional analysis is required to determine the
appropriate parameters to impose on such relief. Therefore, the
Commission declines to change the reporting approach for Master-Feeder
Arrangements at this time and instead, instructs staff to engage in
such an analysis to determine what modifications may be needed to
provide for consolidated reporting where appropriate.
---------------------------------------------------------------------------

    \121\ 17 CFR part 4, app. A, ``Definitions of Terms,'' ``Master-
Feeder Arrangement.''
---------------------------------------------------------------------------

    Upon consideration of the comments, the Commission is deleting
Instruction 5 in its entirety because this instruction was originally
included to explain how a reporting CPO should determine if it is a
Large, Mid-Sized, or Small CPO, and what the resulting scope of its
filing should be, i.e., whether Schedules B or C (or both) were
required. Accordingly, because Instruction 5 is no longer applicable,
the Commission has removed it from the Revised Form.
iii. Instruction 4
    The Proposal also retained Instruction 4, which provided the
following: I advise a Pool that invests in other Pools or funds (e.g.,
a ``fund of funds''). How should I treat these investments for purposes
of Form CPO-PQR? \122\ The Instruction states, in pertinent part, that
for purposes of this Form CPO-PQR, you may disregard any Pool's equity
investments in other Pools.\123\ NFA requested that the Commission
``consider eliminating the guidance in Instruction 4 regarding the
`investments in other Pools generally' heading'' because that guidance
allows a CPO to disregard a pool's equity investments in other pools,
and NFA would like these assets included.\124\ This reporting helps NFA
``identify pool assets that may also be reported by another pool or
fund.'' \125\ However, IAA disagreed ``with any recommendation to
eliminate Instruction 4,'' because IAA would consider that ``a
significant change in how CPOs currently report on the form.'' \126\
Consequently, IAA stated that this particular change should be
considered, if at all, ``as part of a formal rulemaking, with notice
and comment.'' \127\
---------------------------------------------------------------------------

    \122\ 2020 CPO-PQR NPRM, 85 FR at 26391-92 (May 4, 2020)
(proposing to retain Instruction 4 in the Revised Form).
    \123\ Id.
    \124\ NFA, at 3.
    \125\ Id. (emphasizing that NFA would like to see these ``other
pool investments'' reflected in multiple answers in the Revised
Form, in particular to Questions 2 and 8 on assets under management,
Question 9 for the calculation of monthly rates of return, and the
PSOI in Question 11 on investments in other funds).
    \126\ IAA, at 6, n.28.
    \127\ IAA, at 6.
---------------------------------------------------------------------------

    Instruction 4, in the original form, was generally intended to
provide clear instruction that investments in other pools should not be
included in a specific reporting CPO's or operated pool's applicable
reporting threshold. For example, a pool's fund-of-funds investments,
in which the reporting CPO may have little to no control over the
management or performance of those assets, should not cause a pool to
be considered a ``Large Pool,'' which would require additional, highly
detailed reporting with respect to that pool. Similarly, a reporting
CPO should not also have been categorized as a Large or Mid-Sized CPO,
with consequences to the scope and breadth of their filings, solely due
to the fact that its aggregated pool AUM included

[[Page 71781]]

investments in other pools that it does not operate.
    Although NFA presents a compelling argument regarding its
anticipated use of information regarding pools' investments in other
pools, the Commission has determined to continue to provide CPOs with
the discretion to include or exclude such investments, provided that
their treatment is consistent throughout the Revised Form. The
Commission understands from IAA that this would be a significant change
in how CPOs of pools that invest in other pools engage with the form
and could be quite burdensome for CPOs that may be reporting such
information for the first time. Moreover, the Commission believes that
retaining the obligation to include such investments in the reported
pool's AUM and NAV (Question 8 of the Revised Form), as well as
requiring the investments to be enumerated in the PSOI, as discussed
below, provides adequate information about a pool's investments in
other pools for the Commission to oversee their activities, while the
Commission continues to develop its abilities to integrate its data
regarding reporting CPOs and their operated pools. Therefore,
consistent with Instruction 4 as originally adopted, the Commission
will continue to require that such investments be included in a
reporting CPO's response to Question 10 in the current form, which
solicits information regarding the pool's statement of changes
concerning AUM, and which has been redesignated as Question 8 in the
Revised Form, as well as in the PSOI in the Revised Form, but will not
otherwise require such CPO to include a pool's investments in other
pools in its responses to the Revised Form.
    The Final Rule's revisions to Instruction 4 also require the
reporting CPO to include such investments in other pools in the PSOI.
In the Proposal, the Commission amended the form by removing detailed
pool information set out in Schedules B and C, but retained the PSOI,
which has now become the only section on Revised Form CPO-PQR that
provides detailed pool investment information. In the original form,
the PSOI supplemented the rest of the information provided; going
forward, with the amendments removing Schedules B and C, the PSOI's
value and status has changed, as it is now the key collection of
information through which the Commission can analyze the market
activities and risks of CPOs and their operated pools. Therefore, due
to the change of importance and status of the PSOI, along with its
plain language, which includes line items for various classes of funds,
such as mutual funds, private funds, and money market funds, reporting
CPOs must disclose their pools' investments in other funds as part of
the PSOI. The Commission further believes that requiring these
investments to be listed in the PSOI is necessary for it to make full
use of the information provided on Question 8 in the Revised Form, for
which such investments must also be included. Without this detail in
the PSOI, it would be very difficult to determine the asset classes
influencing the movement in a pool's AUM and NAV from one reporting
period to the next. Therefore, the Revised Form retains the current
general treatment of investments in other pools currently set forth in
Instruction 4, with the additional clarification that they are included
in the PSOI.
    With respect to pools that invest substantially all of their assets
in other pools, their investments in other pools were required to be
included in the reporting CPO's responses to Schedule A of Form CPO-
PQR. Because under the Revised Form, Schedule A comprises the entirety
of the Revised Form, with the exception of the addition of the PSOI,
the Commission is revising Instruction 4 to provide that such other
pool investments must be reported on in the Revised Form.
iv. Definition of ``Broker''
    Like the original iteration of the form, the Proposal defined
``broker'' as any entity that provides clearing, prime brokerage, or
similar services to the Pool.\128\ IAA recommended that the Commission
clarify whether a ``broker'' in the Revised Form refers to only
commodity-related brokers, or includes non-commodity brokers.\129\ IAA
further explained that CPOs may have many relationships with executing
brokers for non-commodity interest transactions, and absent a
clarification of this definition, this prompt would constitute a
substantial burden for CPOs to include all brokers in the Revised
Form.\130\ Finally, IAA queried what regulatory interest or benefit the
Commission would gain from a broad definition of ``broker,'' and
concluded that, ``we do not believe this information is necessary to
implement [Revised] Form CPO-PQR or to assist the CFTC in its oversight
of the commodities markets.'' \131\ ICI also supported clarifying the
``broker'' definition in this manner, and limiting the responses to the
Revised Form ``to brokers that a CPO uses with respect to commodity
interest transactions,'' because, ICI explained, such an approach would
be consistent with the Proposal's stated purpose of refining reporting,
``in order to better monitor the commodity interest markets.'' \132\
---------------------------------------------------------------------------

    \128\ 2020 CPO-PQR NPRM, 85 FR at 26394 (May 4, 2020).
    \129\ IAA, at 5.
    \130\ Id. (stating that large numbers of non-commodity interest
transactions and differences in brokerage firm names could make
answering this question completely particularly difficult for CPOs
that have hundreds of relationships with approved brokers for their
non-commodity interest trading).
    \131\ IAA, at 6. IAA further stated its expectation that, should
the Commission clarify the ``broker'' definition to refer only to
brokers involved in commodity interest transactions, then NFA would
likewise adopt an identical interpretation for NFA Form PQR. Id.
    \132\ ICI, at 5.
---------------------------------------------------------------------------

    The Commission has consistently understood the term ``broker,'' in
the context of Form CPO-PQR, to include more than just those service
providers engaging in the commodity interest markets,\133\ and has not
limited the definition of the term ``broker,'' as used either in the
current form or the Revised Form, in any manner. Moreover, Form CPO-
PQR, as a general matter, has consistently requested information on all
enumerated service providers used by a reporting CPO for its operated
pool(s), regardless of the asset class or markets involved.\134\
Consistent with this position, which is supported by the plain meaning
of the Form CPO-PQR's definition of ``broker,'' reporting CPOs
currently filing the form should identify any broker used in any
transactions for any pool not operated pursuant to an exemption or
exclusion during the reporting period. This is also consistent with
other aspects of the form and the Revised Form, e.g., the PSOI, which
are not limited to collecting data solely on the commodity interest
transactions of a reporting CPO and its operated pools.
---------------------------------------------------------------------------

    \133\ See 17 CFR part 4, app. A, ``Definitions of Terms,''
``broker'' (defining ``broker'' as ``an entity that provides
clearing, prime brokerage or similar services to the Pool'').
    \134\ See, e.g., 2015 CPO-PQR FAQs, in which Commission staff
further echoed this broad understanding of ``broker'' in its
discussion of pool custodians, marketers, and underwriters.
---------------------------------------------------------------------------

    The Commission notes elsewhere in this release that the trading
activity or investments of pools in asset classes other than commodity
interests may impact the viability of that pool and/or the overall
operations of its CPO.\135\ This fact has been highlighted by the
recent unprecedented market movements and difficulties resulting from
the Covid-19 pandemic and its broad negative effects on the U.S. and
global economies. Therefore, the Commission finds that collecting data
on CPO and pool activity outside of commodity interests is also of
general

[[Page 71782]]

regulatory interest and concern to the Commission with respect to its
effective oversight of reporting CPOs and their operated pools. The
Commission has concluded that limiting the brokers reported solely to
those used in connection with commodity interest transactions would not
be conducive to its effective oversight, would be a significant
departure from its clear past positions and interpretations of the
form, and further, would result in internal inconsistency in the
Revised Form, where some aspects of the data collection would be
limited to commodity interests, whereas others would not. Therefore,
after considering the comments, the Commission is not changing the
scope of the definition of the term ``brokers,'' and confirms, in the
context of the Revised Form as adopted, that the term is not limited to
those brokers used in connection with commodity interest transactions.
---------------------------------------------------------------------------

    \135\ See supra II.C.
---------------------------------------------------------------------------

v. Elimination of Questions Regarding Auditors and Marketers
    The Proposal also would remove questions regarding a CPO's auditors
and marketers employed for its operated pools because the Commission
and NFA have access to this information through other regulatory
sources, ``which the Commission preliminarily believes obviates the
need for obtaining this information through Revised Form CPO-PQR.''
\136\ SIFMA AMG specifically supported the removal of these questions,
stating this proposed deletion is especially appropriate where the
information is already required elsewhere by other regulations or
filings, and is therefore, easily accessible to the CFTC and NFA.\137\
With respect to questions regarding a CPO's auditors or marketers, the
Commission is adopting the Revised Form as proposed, omitting those
questions, for the reasons articulated in the Proposal.
---------------------------------------------------------------------------

    \136\ 2020 CPO-PQR NPRM, 85 FR at 26383 (May 4, 2020).
    \137\ SIFMA AMG, at 7.
---------------------------------------------------------------------------

vi. FAQs and Glossary
    The Revised Form includes a list of ``Defined Terms,'' which was
entitled ``Definitions of Terms'' in its prior iteration. In 2015,
Commission staff published responses to frequently asked questions (the
2015 CPO-PQR FAQs, or FAQs) providing detailed answers to questions
from CPOs attempting to complete Form CPO-PQR.\138\ SIFMA AMG requested
that the Commission align the 2015 CPO-PQR FAQs with the Revised Form,
such that these items can be clarified and updated for completeness and
accuracy.\139\ IAA recommended that the Commission improve the clarity
of the FAQs by removing language that would not apply to the Revised
Form, specifically referencing PMAs, parallel pool structures, and
aggregating funds for reporting threshold purposes.\140\ MFA suggested
the Commission amend the instructions in the Revised Form to
``incorporate relevant, substantive FAQs into the instructions of Form
CPO-PQR.'' \141\ Furthermore, SIFMA AMG requested an additional change
to the FAQs to create a complete Glossary of Terms for use by filers of
the Revised Form.\142\
---------------------------------------------------------------------------

    \138\ 2015 CPO-PQR FAQs.
    \139\ SIFMA AMG, at 17 (recommending further the creation of a
centralized ``Glossary of Terms'' for use by filers of the Revised
Form and/or NFA Form PQR). Currently, SIFMA AMG states that some
definitions may be found in NFA Form PQR, while others are solely in
the Revised Form, and still other definitions or information solely
published in the FAQs. SIFMA AMG would like to see this information
centralized and easily accessible for CPOs filing the Revised Form.
Id.
    \140\ IAA, at 6.
    \141\ MFA, at 3. MFA stated that otherwise, Commission staff
would need to separately issue FAQs with respect to the adopted
Revised Form to replace the existing 2015 CPO-PQR FAQs, which MFA
views as less effective than centralizing and incorporating FAQs and
instruction examples in the Revised Form. Id. at 4.
    \142\ SIFMA AMG, at 17.
---------------------------------------------------------------------------

    The Commission understands commenters' concerns that the form will
be significantly revised by the Final Rule, resulting in large portions
of the 2015 CPO-PQR FAQs becoming obsolete or inaccurate, absent
commensurate revisions. Therefore, while reviewing comments and
developing the Revised Form for the Commission's consideration,
Commission staff has also reviewed the 2015 CPO-PQR FAQs in light of
the revisions adopted herein. The Commission expects staff to complete
this review and to publish updated FAQs regarding the Revised Form, as
soon as practicable, following the adoption of the Final Rule.
    The Commission is also making some technical changes to regulatory
citations and cross-references in the Revised Form, and further
clarifying its definitions and instructions to facilitate completion of
the Revised Form. The technical clarifications include revising the
definition of ``GAAP'' in the Revised Form to reflect the ability of
reporting CPOs to use certain ``alternative accounting principles,
standards, or practices'' currently permitted under Sec.  4.27(c)(2),
which is redesignated by the Final Rule as Sec.  4.27(c)(4). The
Commission is also reorganizing the Revised Form, so that the Defined
Terms precede its Instructions, which the Commission hopes will
facilitate understanding of the Revised Form.

G. Substituted Compliance

    The Proposal also included amendments to Sec.  4.27 that would
allow CPOs to file NFA Form PQR in lieu of filing the Revised Form with
the Commission,\143\ and eliminate the ability of dually registered
CPO-investment advisers filing Joint Form PF to file such form in lieu
of the Revised Form.\144\
---------------------------------------------------------------------------

    \143\ 2020 CPO-PQR NPRM, 85 FR at 26378 (May 4, 2020).
    \144\ 2020 CPO-PQR NPRM, 85 FR at 26378 (May 4, 2020) (citing
the lack of similarities between Joint Form PF and the Proposal's
Revised Form).
---------------------------------------------------------------------------

i. NFA Form PQR
    In general, commenters supported the proposed amendment permitting
CPOs to file NFA Form PQR in lieu of the Revised Form for the purpose
of improving filing efficiencies.\145\ IAA commended the Commission
``for offering CPOs additional filing efficiencies without compromising
the Commission's ability to obtain affected data.'' \146\ IAA further
recommended that the Commission add a specific instruction to the
Revised Form to reflect this allowing the filing of NFA Form PQR as
substituted compliance.\147\ IAA stated that by explaining this
substituted compliance for NFA Form PQR within the Revised Form's
instructions, the Commission would ``assist CPOs that frequently review
the instructions for the form in addition to or instead of the text of
the rule to ensure the filing is accurate and complete.'' \148\
Additionally, as noted with respect to the proposed uniform, quarterly
filing schedule above, SIFMA AMG expressed its strong support for a
single filing schedule across the Revised Form and NFA Form PQR, as
well as for the adoption of substituted compliance with respect to NFA
Form PQR.\149\
---------------------------------------------------------------------------

    \145\ Barnard, at 1-2; Hunter, at 1; IAA, at 4.
    \146\ IAA, at 4.
    \147\ IAA, at 6 (requesting that ``the instruction state that a
CPO `required to file NFA Form PQR with the NFA for the reporting
period may make the NFA filing in lieu of the Form CPO-PQR report
required under Rule 4.27(c)''').
    \148\ IAA, at 6.
    \149\ SIFMA AMG, at 15-16.
---------------------------------------------------------------------------

    The Commission has determined that, upon NFA's inclusion of
questions eliciting LEIs, NFA Form PQR will be substantively consistent
with Revised Form CPO-PQR. The Commission recognizes, however, that
absent a condition requiring NFA Form PQR to be substantively
consistent with Form CPO-PQR on an ongoing basis, it is possible for
the two forms to diverge

[[Page 71783]]

over time while still being eligible for substituted compliance, and
that this could undermine the Commission's collection of vital
information regarding reporting CPOs and their operated pools.
Therefore, the Commission will review any proposed changes to NFA Form
PQR consistent with the procedure set forth in CEA section 17(j).\150\
This will ensure the continued alignment of the forms. Because any
alterations to NFA Form PQR would be accomplished through amendments to
NFA membership rules, which are subject to review by Commission staff
and either notice to, or review by, the Commission, ongoing monitoring
of the continued substantive consistency of the forms should be easily
implemented through this existing process.
---------------------------------------------------------------------------

    \150\ 7 U.S.C. 21(j).
---------------------------------------------------------------------------

    Therefore, the Commission is adopting, as proposed, the amendments
to Sec.  4.27(c)(2) clearly establishing substituted compliance for the
Revised Form with respect to NFA Form PQR. Finally, upon consideration
of the comments, the Commission is adding a new Instruction 2 in the
Revised Form that explicitly states that to the extent a CPO has timely
filed the National Futures Association's Form PQR, such filing shall be
deemed to satisfy this Form CPO-PQR.\151\
---------------------------------------------------------------------------

    \151\ See infra Revised Form CPO-PQR, ``Reporting
Instructions,'' no. 2.
---------------------------------------------------------------------------

ii. Joint Form PF
    The decision to rescind substituted compliance with respect to
Joint Form PF elicited differing opinions from commenters. For
instance, NFA did not support the alternative of filing all or part of
Joint Form PF, in lieu of the Revised Form, because Joint Form PF is at
least as burdensome as the Commission's form, and further, it includes
``significantly more information than NFA needs.'' \152\ ICI also
disagreed with replacing the form with all or part of Joint Form PF
because that would impose additional burdens on dually registered CPOs,
who are not currently required to file Joint Form PF for their
registered funds, and therefore, would be required to adapt their
current systems and processes to Joint Form PF.\153\
---------------------------------------------------------------------------

    \152\ NFA, at 2 (stating there is no need to ensure similar
reporting obligations between the SEC and CFTC, where ``the
Commission believes it will have sufficient tools with [the Revised
Form] and other data streams to effectively oversee registered CPOs
and the commodity interest markets''). NFA noted further that, even
if the CFTC were to rescind Form CPO-PQR in favor of Joint Form PF,
NFA would still require its CPO Members to file NFA Form PQR,
``which is tailored to NFA's needs and is not a significant burden
on Members to complete.'' Id.
    \153\ ICI, at 5 (agreeing that ``the proposed changes to Form
CPO-PQR, relative to the alternatives, would permit the Commission
to discharge its regulatory duties with respect to CPOs and their
operated pools that might have the greatest impact on market and
systemic risk, while easing reporting obligations on a significant
number of CPOs'').
---------------------------------------------------------------------------

    Conversely, AIMA requested that the Commission and NFA allow dually
registered CPOs to file Joint Form PF in satisfaction of the reporting
obligations in Sec.  4.27 and NFA Compliance Rule 2-46, because this
approach would reduce the reporting burden, ``while still assuring NFA
has the necessary information from a supervisory perspective.'' \154\
Rather than eliminate Sec.  4.27(d) entirely, SIFMA AMG requested that
the Commission preserve substituted compliance with respect to Joint
Form PF on a voluntary basis because some of its members believe there
would be efficiencies in allowing Joint Form PF to be filed for both
private fund and non-private fund pools.\155\
---------------------------------------------------------------------------

    \154\ AIMA, at 2.
    \155\ SIFMA AMG, at 16.
---------------------------------------------------------------------------

    The Commission specifically asked in the Proposal, For CPOs dually-
registered with the CFTC and the SEC, if Form CPO-PQR is amended as
proposed, would you cease reporting data for these pools on Joint Form
PF?'' \156\ AIMA responded that these CPOs are likely to continue
including them rather than incurring the costs of a separate filing
obligation, if ``the inclusion of such non-private fund pools on Form
PF can be treated as satisfaction of separate Form CPO-PQR and NFA Form
PQR filing obligations, and those pools have been included in the Form
PF previously.'' \157\ ICI argued that, although adopting the Proposal
may mean less data with respect to commodity pools would be reported on
Joint Form PF, that prospect, in general, should not be the driving
factor in this policy decision--rather, the Commission should focus on
whether the Revised Form elicits the information it needs and will use
in pursuit of its regulatory mission with respect to CPOs and their
pools.\158\ SIFMA AMG noted, however, that it generally supports the
elimination of detailed reporting requirements for CPOs, and it does
not believe there would be regulatory harm, if information is no longer
being provided on Joint Form PF with respect to non-private fund
pools.\159\
---------------------------------------------------------------------------

    \156\ 2020 CPO-PQR NPRM, 85 FR at 26384 (May 4, 2020).
    \157\ AIMA, at 2 (noting that if the Commission decides against
allowing Joint Form PF as substituted compliance for Sec.  4.27,
``it is likely that non-private fund commodity pools will no longer
be included in Form PF to reduce the filing burden as far as
possible'').
    \158\ ICI, at 5-6.
    \159\ SIFMA AMG, at 16.
---------------------------------------------------------------------------

    After considering the comments received, the Commission is adopting
the amendments to Sec.  4.27, eliminating the substituted compliance
for a dually registered CPO-investment adviser completing Joint Form PF
in lieu of the Revised Form, as proposed for the reasons stated in the
Proposal.\160\ The original Sec.  4.27(d), which provided that
substituted compliance mechanism with respect to Joint Form PF, is no
longer appropriate because: (1) The Revised Form will differ from Joint
Form PF, both in substance and filing schedule; and (2) continuing to
accept Joint Form PF in lieu of the Revised Form would frustrate an
intended and clearly stated purpose of the Proposal, i.e., is to
enhance and better coordinate the Commission's own internal data
streams to more efficiently and effectively oversee its registered,
reporting CPOs and their operated pools.
---------------------------------------------------------------------------

    \160\ 2020 CPO-PQR NPRM, 85 FR at 26383 (May 4, 2020).
---------------------------------------------------------------------------

iii. Substituted Compliance for CPOs of Registered Investment Companies
    ICI also commented particularly on the burdens imposed by the
proposed amendments on CPOs of registered investment companies (RICs).
Specifically, ICI requested that, to eliminate duplicative reporting
between the SEC and CFTC regimes applicable to the operations of RICs,
the Commission consider adopting a substituted compliance approach with
respect to periodic reporting by CPOs of RICs, similar to its 2013
rulemaking to harmonize RIC and CPO/pool regulatory requirements.\161\
Although the Commission noted in the Proposal that RICs are subject to
comprehensive regulation by the SEC, it did not discuss the possibility
of deferring to the SEC with respect to collecting information from
CPOs of RICs. Under these circumstances, the Commission would be unable
to address the issue of providing additional substituted compliance to
CPOs of RICs without re-proposing and reopening the comment period for
the NPRM.\162\
---------------------------------------------------------------------------

    \161\ ICI, at 2-3, n.6. ICI suggested that the CFTC use the SEC
filings and reports already filed by CPO/IAs of RICs, which require
disclosure of LEIs, to glean data on the commodity interest
activities of these operators and pools. Id. See also Harmonization
of Compliance Obligations for Registered Investment Companies
Required to Register as Commodity Pool Operators, 78 FR 52308 (Aug.
22, 2013).
    \162\ 5 U.S.C. 553(c).
---------------------------------------------------------------------------

    Moreover, the Commission believes that the suggested approach by
ICI would simply not be practical. As explained by ICI, RICs file
numerous

[[Page 71784]]

regulatory filings, \163\ each of which are designed for a particular
purpose by the SEC. Incorporating those filings into the Commission's
filing regime via substituted compliance would be difficult to
accomplish and would require the devotion of significant time and
resources by both the Commission and NFA. None of these filings,
however, is a direct analog to the Revised Form, which adds to the
complexity of any undertaking to create a substituted compliance regime
with respect to those filings. Finally, the Commission has identified
limited benefit in providing such relief, if it were possible, because
such CPOs would remain subject to NFA's independent reporting
requirement in NFA Form PQR. Therefore, the Commission declines to
provide additional substituted compliance for CPOs of RICs in the
amendments to Sec.  4.27 adopted by the Final Rule.
---------------------------------------------------------------------------

    \163\ ICI, at 2, n.7. These reports include N-PORT and N-CEN and
address information about the RIC's portfolio, investment policies
and practices, and other information. Id.
---------------------------------------------------------------------------

H. Compliance Date

    MFA requested that the Commission consider providing registered
CPOs with six months from the adoption of a Final Rule with respect to
Form CPO-PQR to permit reporting CPOs to make ``coding and software
changes'' to accommodate Revised Form CPO-PQR's requirements.\164\ The
Commission has determined not to require filing of reports on the
Revised Form for the reporting period ending December 31, 2020.
However, to the extent reporting CPOs are required to file NFA Form PQR
for the reporting period ending December 31, 2020, that filing must
still be submitted in accordance with applicable NFA membership rules.
Therefore, reporting CPOs will be required to submit the Revised Form
sixty days after the first 2021 reporting period ends on March 31,
2021, making initial compliance with the Revised Form due on May 30,
2021. The Commission has determined that this schedule allows for
adequate time for CPOs and NFA to prepare their systems and procedures
with respect to the Revised Form.
---------------------------------------------------------------------------

    \164\ MFA, at 4.
---------------------------------------------------------------------------

III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires Federal agencies, in
promulgating regulations, to consider whether the rules they propose
will have a significant economic impact on a substantial number of
small entities and, if so, to provide a regulatory flexibility analysis
regarding the economic impact on those entities. Each Federal agency is
required to conduct an initial and final regulatory flexibility
analysis for each rule of general applicability for which the agency
issues a general notice of proposed rulemaking.\165\
---------------------------------------------------------------------------

    \165\ 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    The Final Rule adopted by the Commission will affect only persons
registered or required to be registered as CPOs. The Commission has
previously established certain definitions of ``small entities'' to be
used by the Commission in evaluating the impact of its rules on such
entities in accordance with the requirements of the RFA.\166\ With
respect to CPOs, the Commission previously has determined that a CPO is
a small entity for purposes of the RFA, if it meets the criteria for an
exemption from registration under Sec.  4.13(a)(2).\167\ Because the
Final Rule generally applies to persons registered or required to be
registered as CPOs with the Commission, the RFA is not applicable to
the Final Rule.\168\
---------------------------------------------------------------------------

    \166\ See, e.g., Policy Statement and Establishment of
Definitions of ``Small Entities'' for Purposes of the Regulatory
Flexibility Act, 47 FR 18618, 18620 (Apr. 30, 1982).
    \167\ Id. at 47 FR 18619-20 (Apr. 30, 1982). Commission
regulation at Sec.  4.13(a)(2) exempts a person from registration as
a CPO when: (1) None of the pools operated by that person has more
than 15 participants at any time, and (2) when excluding certain
sources of funding, the total gross capital contributions the person
receives for units of participation in all of the pools it operates
or intends to operate do not, in the aggregate, exceed $400,000. 17
CFR 4.13(a)(2).
    \168\ Moreover, Sec.  4.27(b)(2)(i) specifically excludes from
the obligation to file Form CPO-PQR any CPO that operates only pools
for which it maintains . . . an exemption from registration as a
commodity pool operator as provided in Sec.  4.13.
---------------------------------------------------------------------------

    Accordingly, the Chairman, on behalf of the Commission, hereby
certifies pursuant to 5 U.S.C. 605(b) that this Final Rule will not
have a significant economic impact on a substantial number of small
entities.

B. Paperwork Reduction Act

i. Overview
    The Paperwork Reduction Act (PRA) imposes certain requirements on
Federal agencies in connection with their conducting or sponsoring any
collection of information as defined by the PRA.\169\ Under the PRA, an
agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless it displays a currently
valid control number from the Office of Management and Budget (OMB).
The amendments set forth in the Proposal would result in a collection
of information within the meaning of the PRA, as discussed below. The
Commission therefore submitted the Proposal to OMB for review. The
Proposal also invited the public and other Federal agencies to comment
on any aspect of the proposed information collection requirements
discussed therein; \170\ however, no such comments were received.
---------------------------------------------------------------------------

    \169\ 44 U.S.C. 3501, et seq.
    \170\ 2020 CPO-PQR NPRM, 85 FR at 26386 (May 4, 2020).
---------------------------------------------------------------------------

    The Final Rule affects a single collection of information for which
the Commission has previously received a control number from OMB. This
collection of information is, ``Rules Relating to the Operations and
Activities of Commodity Pool Operators and Commodity Trading Advisors
and to Monthly Reporting by Futures Commission Merchants, OMB control
number 3038-0005'' (Collection 3038-0005). Collection 3038-0005
primarily accounts for the burden associated with part 4 of the
Commission's regulations that concern compliance obligations generally
applicable to CPOs and commodity trading advisors (CTAs), as well as
certain enumerated exemptions from registration as such, exclusions
from those definitions, and available relief from compliance with
certain regulatory requirements.
    As discussed above, the Final Rule includes substantive changes to
the current form, such as (1) amending Schedule A, (which, together
with the PSOI that is currently part of Schedule B, will constitute the
entirety of the Revised Form), to add a requirement to disclose the
LEIs (if any) for each reporting CPO and operated pool; (2) moving
Schedule B's ``Schedule of Investments'' section to Schedule A; and (3)
rescinding the remainder of the current form's current Schedules B and
C. Additionally, Sec.  4.27(c)(2) will now permit the filing of NFA
Form PQR with NFA in lieu of reporting CPOs filing the Revised Form
with the Commission. Therefore, the Commission is amending Collection
3038-0005 to be consistent with the finalized restructuring of the
Revised Form. Specifically, the Commission is amending the collection
to reflect the expected adjustment in burden hours for registered CPOs
filing the Revised Form for their operated pools, and also to include
in the collection, a reporting CPO's ability to file NFA Form PQR in
lieu of filing the Revised Form, provided that it is determined to be
substantively consistent with the Revised Form.
    This Final Rule is not expected to impose any significant new
burdens on CPOs, but rather will constitute a

[[Page 71785]]

substantial reduction in reporting burden for most impacted
registrants. Approximately half of all registered CPOs are currently
considered Mid-Sized CPOs or Large CPOs under the existing form and
filing regime. Due to the Final Rule and its significant revisions to
the form, these reporting CPOs will be required to answer far fewer
questions, when compared to the historical Form CPO-PQR's
requirements.\171\ CPOs classified as Small CPOs may experience a
slight increase in burden, due to an increase in the frequency of
reporting to a quarterly basis rather than annually, and the addition
of the PSOI to the Revised Form for all reporting CPOs. The Commission
believes, however, that for many of these CPOs, this burden increase
will practically be slight or very technical in nature, because all
reporting CPOs currently complete NFA Form PQR, which also includes a
schedule of investments identical to the Revised Form's PSOI, on a
quarterly basis pursuant to NFA membership rules. The Commission
anticipates that going forward, pursuant to amended Sec.  4.27(c)(2),
reporting CPOs, regardless of their size or classification under the
original form, will complete and file NFA Form PQR in lieu of the
Revised Form, which will further allow them to maximize efficiency by
fulfilling both NFA and CFTC reporting requirements with one
filing.\172\
---------------------------------------------------------------------------

    \171\ See, e.g., supra pt. II.B (discussing the elimination of
Schedules B and C from the Revised Form).
    \172\ See infra Sec.  4.27(c)(2), as amended by this Final Rule
(permitting the filing of NFA Form PQR in lieu of filing the Revised
Form with the Commission).
---------------------------------------------------------------------------

    Therefore, the Commission infers that the Final Rule and the
Revised Form will generally prove to be less burdensome for reporting
CPOs, or at least, will not create any new net burdens for them. As a
result, the Commission is amending Collection 3038-0005, as proposed,
to reflect the elimination of reporting thresholds and classifications
of CPO by size, as well as the multiple Schedules in the original form;
to account for the uniform quarterly filing schedule adopted for all
reporting CPOs for their operated pools; and to adopt an overall
estimated burden for all filings that includes the retained questions
from Schedule A, as well as the adopted PSOI (from original Schedule B)
discussed above. Although the Final Rule results in an increase in the
burden hours associated with completing the Revised Form, the
Commission anticipates that, in practice, reporting CPOs will either
experience no change in their burden, or some decrease in burden. As
discussed above, the Commission has determined to accept the filing of
NFA Form PQR in lieu of filing the Revised Form. Because any data on
NFA Form PQR submitted as substituted compliance for required Sec. 
4.27 reporting would thereby become data collected by the Commission,
the burden associated with NFA Form PQR must also be included in a
collection of information with an OMB control number. Therefore, the
Commission is amending the current burden associated with OMB Control
Number 3038-0005 to also reflect the burden resulting from NFA Form
PQR, which the Commission estimates to be substantively identical to
that derived from the Revised Form.\173\
---------------------------------------------------------------------------

    \173\ As stated in the Proposal, ``the PRA estimates . . .
assume that all registered CPOs will either file Revised Form CPO-
PQR on a quarterly basis, or NFA Form PQR, but in no event will a
CPO be required to file both.'' 2020 CPO-PQR NPRM, 85 FR at 26386
(May 4, 2020).
---------------------------------------------------------------------------

    Despite the fact that the Commission will accept the filing of NFA
Form PQR in lieu of a filing on the Revised Form, the Commission has
determined that it should retain its own form for data collection
purposes and to ensure that it retains the ability to perform its
regulatory duties and satisfy its data needs regarding CPOs in the
future on a unilateral basis, if necessary. Moreover, the Commission
anticipates that it will incorporate the information collected on the
Revised Form more consistently with its other data streams. To that
end, retaining its own form independent of NFA confirms and preserves
the Commission's independent and primary role in developing its
regulatory and compliance program with respect to registered CPOs and
their pools generally, notwithstanding its history of delegating
certain registration and compliance functions to NFA. Furthermore,
retaining the Revised Form should ensure that the public is able to
exercise its rights to receive notice and provide comment as to the
content and structure of the Revised Form, as required by the
Administrative Procedure Act, and consistent with prior practice for
the original form.\174\ Therefore, the Commission concludes that the
final Revised Form announced today in the Final Rule is not
unnecessarily duplicative to information otherwise reasonably
accessible to the Commission.
---------------------------------------------------------------------------

    \174\ APA, 5 U.S.C. 553(c).
---------------------------------------------------------------------------

ii. Revisions to the Collection of Information: OMB Control Number
3038-0005
    Collection 3038-0005 is currently in force with its control number
having been provided by OMB, and it was renewed recently on January 30,
2019.\175\ As stated above, Collection 3038-0005 governs responses made
pursuant to part 4 of the Commission's regulations, pertaining to the
operations of CPOs and CTAs, including the required responses of
registered CPOs on Form CPO-PQR pursuant to Sec.  4.27. Generally, the
Commission is adjusting, as discussed below, the information collection
to reflect an increase in the burden hours associated with the
collection of information in the Revised Form. The Commission
anticipates, however, that (1) CPOs currently categorized as either
Mid-Sized or Large CPOs are expected to experience a substantial
reduction in burden relative to the current filing requirements under
Sec.  4.27 and Form CPO-PQR; and (2) CPOs considered Small CPOs under
the current filing requirements will experience no practical or
substantial increase in burden because, like all other registered CPOs,
they are currently required to file NFA Form PQR, which already
includes a schedule of investments identical to the Revised Form's
PSOI, on a quarterly basis, and such Small CPOs, as well as all other
reporting CPOs, will be permitted to file NFA Form PQR in lieu of
filing the Revised Form.
---------------------------------------------------------------------------

    \175\ See Notice of Office of Management and Budget Action, OMB
Control No. 3038-0005, available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=201701-3038-005.
---------------------------------------------------------------------------

    The currently approved total burden associated with Collection
3038-0005, in the aggregate, is as follows:
    Estimated number of respondents: 45,097.
    Annual responses for all respondents: 118,824.
    Estimated average hours per response: 3.16.\176\
---------------------------------------------------------------------------

    \176\ The Commission rounded the average hours per response to
the second decimal place for ease of presentation.
---------------------------------------------------------------------------

    Annual reporting burden: 375,484.
    The portion of the aggregate burden that is derived from the
current Form CPO-PQR filing requirements is as follows:
    Schedule A (for non-Large CPOs and Large CPOs filing Joint Form
PF):
    Estimated number of respondents: 1,450.
    Annual responses for all respondents: 1,450.
    Estimated average hours per response: 6.
    Annual reporting burden: 8,700.

    Schedule A (for Large CPOs not filing Joint Form PF):
    Estimated number of respondents: 250.

[[Page 71786]]

    Annual responses for all respondents: 1,000.
    Estimated average hours per response: 6.
    Annual reporting burden: 6,000.

    Schedule B (for Mid-Sized CPOs):
    Estimated number of respondents: 400.
    Annual responses for all respondents: 400.
    Estimated average hours per response: 4.
    Annual reporting burden: 1,600.

    Schedule B (for Large CPOs not filing Joint Form PF):
    Estimated number of respondents: 250.
    Annual responses for all respondents: 1,000.
    Estimated average hours per response: 4.
    Annual reporting burden: 4,000.

    Schedule C (for Large CPOs not filing Joint Form PF):
    Estimated number of respondents: 250.
    Annual responses for all respondents: 1,000.
    Estimated average hours per response: 18.
    Annual reporting burden: 18,000.

    The burden associated with NFA Form PQR was proposed as follows:
    Estimated number of respondents: 1,700.
    Annual responses by each respondent: 6,800.
    Estimated average hours per response: 8.
    Annual reporting burden: 54,400.
    Total annual reporting burden for all CPOs for current Form CPO-PQR
and NFA
    Form PQR: 86,900.
    The Commission will no longer be estimating burden hours according
to each individual Schedule of the form, because, pursuant to the Final
Rule, the Revised Form will not have schedules. Therefore, the
Commission is amending the collection for Form CPO-PQR compliance to be
a single burden-hours estimate for each reporting CPO completing the
Revised Form in its entirety.\177\ As noted above, the Commission is
also requiring that the Revised Form be filed quarterly by each
reporting CPO, regardless of the size of their operations, which would
result in four (4) annual responses by each respondent. Further, in the
Commission's experience, the PSOI comprised a considerable portion of
the burden hours previously associated with completing Schedule B,
depending on the complexity of a reporting CPO's operations and the
number of pools it operated. Thus, the Commission is estimating average
hours per response in such a way as to ensure that burden continues to
be counted. As noted above, although the estimated hours per response
is expected to increase due to the retention of the PSOI and the filing
frequency increasing to quarterly for many reporting CPOs, CPOs should
not practically experience an increase in burden. The Commission comes
to this conclusion because all reporting CPOs are already required to
provide a schedule of investments identical to the PSOI, as part of
their existing NFA Form PQR filings, which NFA membership rules require
on a quarterly basis, and because the Commission expects that those
CPOs will continue to make such filings to take advantage of the
substituted compliance for NFA Form PQR with respect to the Revised
Form, as adopted by the Final Rule.
---------------------------------------------------------------------------

    \177\ Additionally, the Commission will be accepting the filing
of NFA Form PQR in lieu of the Revised Form, which the Commission
has designed purposefully to be very similar. See supra pt. II.G.i.
The Commission reiterates that these PRA estimates assume that all
registered CPOs will either file the Revised Form on a quarterly
basis, or NFA Form PQR, but in no event will a CPO be required to
file both.
---------------------------------------------------------------------------

    Therefore, the Commission estimates the burden to registered CPOs
for completing the Revised Form and NFA Form PQR, because of the option
to file this form in lieu of the Revised Form, to be as follows:
    For the Revised Form and NFA Form PQR for All Registered CPOs:
    Estimated number of respondents: 1,700.
    Annual responses by each respondent: 6,800.
    Estimated average hours per response: 8.
    Annual reporting burden: 54,400.
    The new total burden associated with Collection 3038-0005, in the
aggregate, reflecting the adjustment in burden associated with Sec. 
4.27 and the Revised Form, is as follows:
    Estimated number of respondents: 43,062.
    Annual responses for all respondents: 113,980.
    Estimated average hours per response: 3.25.
    Annual reporting burden: 370,467.

C. Cost-Benefit Considerations

    Section 15(a) of the CEA requires the Commission to consider the
costs and benefits of its discretionary actions before promulgating a
regulation under the CEA or issuing certain orders.\178\ 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 swaps 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 CEA
section 15(a) considerations.
---------------------------------------------------------------------------

    \178\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

    As discussed above, the Commission is finalizing amendments to Form
CPO-PQR that would significantly reduce the amount of reporting
required thereunder. Specifically, the Final Rule: (1) Eliminates the
pool-specific reporting requirements in existing Schedules B and C of
Form CPO-PQR, other than the PSOI (question 6 of Schedule B); (2)
amends the information in existing Schedule A of the form to request
LEIs for CPOs and their operated pools and to eliminate questions
regarding the pool's auditors and marketers; (3) requires all reporting
CPOs to submit all information retained in the Revised Form on a
quarterly basis; and (4) allows CPOs to file NFA Form PQR in lieu of
filing the Revised Form, provided that NFA amends NFA Form PQR to
include LEIs. In the sections that follow, the Commission considers the
various costs and benefits associated with each aspect of the Final
Rule. The baseline against which these costs and benefits are compared
is the regulatory status quo, represented by Form CPO-PQR as codified
in appendix A to part 4 prior to these amendments.
    The consideration of costs and benefits below is based on the
understanding that the markets function internationally, with many
transactions involving U.S. firms taking place across international
boundaries; with some Commission registrants being organized outside of
the United States; with some leading industry members typically
conducting operations both within and outside the United States; and
with industry members commonly following substantially similar business
practices wherever located. Where the Commission does not specifically
refer to matters of location, the discussion of costs and benefits
below refers to the effects of this proposal on all activity subject to
the proposed and amended regulations, whether by virtue of the
activity's physical location in the United States or by virtue of the
activity's connection with or effect on U.S. commerce under CEA section
2(i).\179\ Some CPOs are located outside of the United States.
---------------------------------------------------------------------------

    \179\ 7 U.S.C. 2(i).

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

[[Page 71787]]

i. The Elimination of Pool-Specific Reporting Requirements in Schedules
B and C
    The Commission is adopting as final amendments that eliminate the
pool-specific reporting requirements in existing Schedules B and C of
Form CPO-PQR, other than the PSOI (question 6 of Schedule B). The
Commission acknowledges that this change could result in less
information available to the Commission and, potentially, to FSOC. The
detailed and specific information requested in Schedules B and C of
Form CPO-PQR is not available to the Commission through any of its
other data streams and, if put to its full use, would allow for
monitoring of CPOs and their operated pools in a way that could help
identify trends and points of stress. The challenges associated with
the Form CPO-PQR dataset are a primary reason for the Commission's
decision to discontinue its collection of this information, including
challenges posed by the degree of flexibility afforded CPOs in
reporting this information, and the fact that this information is only
reported to the Commission on a quarterly basis, at its most frequent.
Given these limitations associated with the data collected, the
Commission has determined to prioritize its limited resources to pursue
other key regulatory initiatives.
    However, considering the alternate data streams currently available
to the Commission, the Commission should nevertheless be able to
effectively oversee registered CPOs and their operated pools, and
potentially do so in a more efficient and effective manner, by adopting
the Revised Form as proposed, with some additional clarifications to
the Instructions and Defined Terms. Furthermore, due in part to the
identified data quality issues, the Commission has not provided FSOC
with any Form CPO-PQR data to date. The Commission acknowledges,
though, that FSOC would now receive less data from the Commission, as a
result of changes made by the Final Rule, as some CPOs that are filing
CFTC-only pool information through Joint Form PF may stop. Nonetheless,
the Commission does not believe that FSOC's monitoring abilities would
be materially or negatively affected, compared to the status quo, by
the Commission's rescission of most of Schedules B and C in Form CPO-
PQR, as the Commission has not provided FSOC with any data.
    The Commission anticipates that eliminating these pool-specific
reporting requirements will also reduce the ongoing variable compliance
costs for those CPOs considered Mid-Sized CPOs or Large CPOs, and which
may move between those filing categories with some regularity, under
the status quo. Consequently, those reporting CPOs would no longer need
to devote their resources to compiling, analyzing, and reporting this
data, which may have had limited utility with respect to their day-to-
day operations, to the Commission. Additionally, reporting CPOs in
general will no longer be required to monitor their AUMs for the
specific purpose of determining their filing obligations because,
pursuant to the Final Rule, there is now a single filing requirement
for all reporting CPOs. It is possible that the resulting cost savings
may allow those CPOs to devote their resources to other compliance or
operational initiatives, or to potentially pass those cost savings on
to pool participants through reduced fees. These cost savings will
likely be reduced, however, for any CPO that is dually registered with
the SEC and required to file Joint Form PF because that form requires
reporting of information substantially similar to that required in the
eliminated Schedules B and C, and the Final Rule does not alter any
such CPO's Joint Form PF filing obligations. Finally, the Commission
recognizes that the Final Rule also does not alleviate any of the fixed
or long-term costs reporting CPOs may have already incurred in
developing systems and procedures designed to meet the reporting
requirements of the original form, including Schedules B and C.
ii. The Revised Form
    This Final Rule adopts the Revised Form, which retains questions
from existing Schedule A of Form CPO-PQR, and also adds questions to
request LEIs for CPOs and their operated pools. The Commission
anticipates that adding these LEI questions will allow it to integrate
the data collected by the Revised Form with the Commission's other more
current data streams. Leveraging these other data sources in
combination with filings of the Revised Form will enable the Commission
to continue its oversight and monitoring of counterparty and liquidity
risk for some of the largest pools within the Commission's
jurisdiction. The Commission thereby concludes that the Final Rule will
allow it to focus on areas relevant for assessing and monitoring market
and systemic risk, while eliminating the reporting burden associated
with Schedules B and C, particularly with respect to pools that would
be considered Large Pools.
    The addition of these LEI fields may minimally increase the cost
for reporting CPOs and their operated pools that engage in swaps with
respect to the initial filing of the Revised Form, as LEIs do not
change over time, potentially allowing fields for those questions to be
prepopulated in subsequent filings. The Commission observes further
that neither the Revised Form nor Sec.  4.27 independently creates an
affirmative requirement for CPOs to obtain LEIs for themselves and
their operated pools, and that CPOs engaging in swaps already have LEIs
for themselves and/or their pools. Additionally, the Commission has
declined in the Final Rule to require the renewal or maintenance of
LEIs for purposes of meeting this Revised Form requirement.\180\
Accordingly, the Commission finds that there is likely no additional
cost to consider for a reporting CPO related to LEIs beyond the minimal
one-time expenditure for the initial Revised Form filing that includes
LEIs.
---------------------------------------------------------------------------

    \180\ See supra pt. II.E.
---------------------------------------------------------------------------

    The Final Rule also eliminates from the Revised Form questions
regarding the pool's auditors and marketers. The Commission has
determined that these amendments will result in reduced costs for
reporting CPOs without affecting the scope of information available to
the Commission, as the Commission already receives information
regarding CPO's accountants and has alternate means of obtaining
information about a pool's marketers. For example, persons soliciting
for pool participation units are typically either associated persons of
the CPO or registered representatives of a broker-dealer. Such persons
are already subject to regulation by either the Commission and NFA, or
the SEC and FINRA, and therefore readily identifiable by the Commission
outside of Form CPO-PQR.
    Currently, all CPOs other than Large CPOs submit the information
required by the existing form's Schedule A annually. Increasing the
frequency with which this information is reported will assist the
Commission in its efforts to integrate the Revised Form with the
Commission's other timelier data sources, which the Commission believes
will improve the overall efficacy of its monitoring and oversight of
CPOs and their operated pools. Although this amendment will result in
an increased regulatory cost for CPOs considered to be Small and Mid-
Sized CPOs under the existing form, when compared to the regulatory
status quo, the Commission concludes that the costs actually realized
by these CPOs will not be as significant, as they are already reporting

[[Page 71788]]

this information on a quarterly basis via NFA Form PQR, as required by
NFA.
    Under the current form, only Mid-Sized and Large CPOs are required
to submit a PSOI, and Mid-Sized CPOs submit that information annually.
The Revised Form, as adopted by the Final Rule, will require all CPOs
to submit that information quarterly. The Commission believes that
receiving this information from all reporting CPOs more frequently
will, when combined with the new questions regarding LEIs, further
enhance its ability to integrate the data collected by the Revised Form
with other data streams and to identify trends on a timelier basis. As
a result, the Commission concludes that adopting a quarterly filing
schedule for all CPOs reporting on the Revised Form will ultimately
support its goal of effectively monitoring CPOs and their operated
pools for market and systemic risk, while also simplifying the
reporting requirements applicable to registered CPOs.
    The Commission realizes that requiring all information on the
Revised Form, including a PSOI for each operated pool, from all
reporting CPOs on a quarterly basis will result in an increased
regulatory cost, when compared to the regulatory status quo,
particularly for CPOs that would be considered Small and Mid-Sized CPOs
under the existing filing regime. For instance, CPOs previously
considered Small CPOs may be required to develop the procedures and
systems necessary to meet the additional reporting obligations for the
Revised Form's PSOI, and CPOs previously considered either Small CPOs
or Mid-Sized CPOs will be required by the Final Rule to report that
information to the Commission on a quarterly basis. The Commission
emphasizes, however, that all registered CPOs, regardless of the size
of their operations or AUM, are currently required to report the PSOI
on a quarterly basis via NFA Form PQR, as required by NFA membership
rules, meaning the actual costs as realized by these CPOs as a result
of the Final Rule should not be as significant, given the Commission's
goal of aligning the Revised Form with NFA Form PQR.
    The Final Rule also amends Sec.  4.27(c) such that it allows
reporting CPOs to file NFA Form PQR in lieu of filing the Revised Form,
provided that NFA amends NFA Form PQR to include questions regarding
LEIs. Under NFA's membership rules, all CPOs regardless of size are
currently required to file NFA Form PQR on a quarterly basis. This
provision will help CPOs maintain their current filing costs without
affecting the scope of information available to the Commission under
the Revised Form.
    As mentioned above, the Commission acknowledges that, through
adopting this revision to Sec.  4.27(d), the Final Rule could result in
less data being collected on Joint Form PF, as compared to the current
status quo. Many dually registered CPOs currently include commodity
pools that are not private funds in data that they report on Joint Form
PF, in lieu of filing Form CPO-PQR for such pools, in reliance on Sec. 
4.27(d). As a result of the Final Rule's revisions to Sec.  4.27(d),
these CPO-investment advisers could decide to stop including these
pools in their Joint Form PF filings. The Commission concludes though
that this loss of data to the SEC and FSOC will not meaningfully impact
the efficacy and intent of Joint Form PF in furthering the oversight of
the private fund industry, given that it would only result in the loss
of data with respect to non-private fund pools; the Commission
acknowledges, however, that FSOC may lose data for a specific type of
private fund asset class, specifically, managed futures.\181\
---------------------------------------------------------------------------

    \181\ ICI commented that it did not believe that the Commission
should focus on any perceived data needs of the FSOC in determining
the scope and focus of Form CPO-PQR, but rather the Commission
should act in whatever manner best supports its own regulatory
interests in revising the form. ICI, at 5-6.
---------------------------------------------------------------------------

    Additionally, all CPOs will be required to make a certain amount of
alterations to their reporting systems to accommodate the changes
adopted herein, even if it is just to deactivate certain data elements
that are no longer required and to add the questions regarding LEIs.
The Commission anticipates that any such costs will generally be one-
time expenditures, and moreover, should not be extensive, given the
Commission's efforts in the Final Rule to align the Revised Form with
NFA Form PQR, to the greatest extent possible.
iii. Alternatives
    In lieu of amending Form CPO-PQR as proposed, the Commission also
considered two alternative approaches in the Proposal, and requested
comments and data on how those potential alternatives might impact the
estimated costs and benefits to market participants and the
public.\182\ The first alternative considered by the Commission was
requiring all CPOs, regardless of whether they are dually registered,
to file Joint Form PF. ICI commented that this alternative would likely
result in increased costs for registered fund CPOs, noting that,
although CPOs of RICs are regulated by both the Commission and the SEC,
such CPOs are not currently required to file Joint Form PF.\183\ The
Commission agrees that this alternative would likely increase the
reporting burdens and costs for CPOs not so dually registered, as well
as for CPOs that are dually registered, yet do not currently file Joint
Form PF; under this alternative, those CPOs would incur increased
reporting burdens and costs without providing information directly to
the Commission that will be integrated with its other data sources to
develop its internal oversight initiatives over CPOs and their operated
pools.
---------------------------------------------------------------------------

    \182\ 2020 CPO-PQR NPRM, 85 FR at 26388 (May 4, 2020).
    \183\ ICI, at 5 (noting additionally that CPOs of RICs would
thus incur costs related to adapting their current systems and
processes for the purpose of filing Joint Form PF instead).
---------------------------------------------------------------------------

    The second alternative described in the Proposal that the
Commission considered was to devote resources to rectifying the
challenges with the data reported under the current form, and amend it
to require greater consistency and frequency of reporting of the data
fields eliminated by the Final Rule. However, the Commission stated in
the Proposal its preliminarily belief that its limited resources could
be better directed in line with its regulatory priorities, and that its
objectives with respect to oversight of reporting CPOs and their
operated pools could be effectively and potentially, more efficiently,
achieved through integration with existing data streams.\184\ ICI
supported this preliminary conclusion by the Commission and argued that
a ``more targeted data set is most useful for initial monitoring
purposes.'' \185\ After considering the alternatives and the responsive
comments, the Commission concludes that the changes to the form and
Sec.  4.27 adopted by the Final Rule, relative to the alternatives,
will facilitate the Commission's effective discharging of its
regulatory duties in a manner that simultaneously has the greatest
impact on market and systemic risk and eases reporting obligations on a
significant number of reporting CPOs with respect to their operated
pools.
---------------------------------------------------------------------------

    \184\ 2020 CPO-PQR NPRM, 85 FR at 26388 (May 4, 2020).
    \185\ ICI, at 6.
---------------------------------------------------------------------------

iv. Section 15(a) Factors
a. Protection of Market Participants and the Public
    The Commission believes that the Final Rule will enhance the
ability of the Commission to protect derivatives

[[Page 71789]]

markets, its participants, and the public by allowing it to integrate
the data collected by the Revised Form with other existing, more up-to-
date data streams in a way that will allow the Commission to better
exercise its oversight of registered CPOs and their operated pools. As
discussed above, the Final Rule may result in a loss of data available
to FSOC, which could limit FSOC's visibility into the activities of
CPOs and their operated pools.
b. Efficiency, Competitiveness, and Financial Integrity of Markets
    The Commission believes that the Final Rule will assist the
Commission in its efforts to support market efficiency,
competitiveness, and financial integrity. Under the Final Rule,
reporting CPOs will continue to provide useful information about
themselves and their operated pools to the Commission in a way that
will permit the Commission to incorporate that data with its other data
streams. The Commission believes that consolidating the data collected
in this manner will improve its oversight of reporting CPOs, their
operated pools, and how they affect the derivatives markets.
Additionally, the Commission believes that the specific requirement
that a reporting CPO prepare a PSOI on a quarterly basis for each of
its operated pools may result in heightened diligence by such CPOs,
with respect to their pools' ongoing operations, and may encourage
particularly smaller CPOs to adopt more formalized controls for their
businesses. The Commission believes that both of those results will
generally enhance the confidence of other market participants in
transacting with registered CPOs and their operated pools, and
generally, support the efficiency, competitiveness, and financial
integrity of the markets.
c. Price Discovery
    The Commission has not identified any impact that the Final Rule
would have on price discovery.
d. Sound Risk Management Practices
    Although the Commission is no longer requiring reporting CPOs and
their operated pools to report certain risk information on the Revised
Form, the Commission recognizes that CPOs will likely, in general,
continue to benefit from establishing and possessing systems that
collect and review risk-related information, even if it is no longer
reported. The Commission has not identified any other impact that the
Final Rule would have on sound risk management practices.
e. Other Public Interest Considerations
    The Commission did not identify any other public interest
considerations that the Final Rule would have.

D. Antitrust Laws

    Section 15(b) of the CEA requires the Commission to ``take into
consideration the public interest to be protected by the antitrust laws
and endeavor to take the least anticompetitive means of achieving the
purposes of the CEA, in issuing any order or adopting any Commission
rule or regulation (including any exemption under CEA section 4(c) or
4c(b)), or in requiring or approving any bylaw, rule, or regulation of
a contract market or registered futures association established
pursuant to section 17 of this Act.'' \186\
---------------------------------------------------------------------------

    \186\ 7 U.S.C. 19(b).
---------------------------------------------------------------------------

    The Commission believes that the public interest to be protected by
the antitrust laws is generally to protect competition. The Commission
requested comment on whether the Proposal implicates any other specific
public interest to be protected by the antitrust laws, but did not
receive any comments on whether the Proposal was anticompetitive.
    The Commission has considered the Final Rule to determine whether
it is anticompetitive and has identified no anticompetitive effects.
Because the Commission has determined the Final Rule is not
anticompetitive and has no anticompetitive effects, the Commission has
not identified any less anticompetitive means of achieving the purposes
of the CEA.

List of Subjects in 17 CFR Part 4

    Advertising, Brokers, Commodity futures, Commodity pool operators,
Commodity trading advisors, Consumer protection, Reporting and
recordkeeping requirements.

    For the reasons stated in the preamble, the Commodity Futures
Trading Commission hereby amends 17 CFR part 4 as set forth below:

PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

0
1. The authority citation for part 4 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 6(c), 6b, 6c, 6l, 6m, 6n, 6o, 12a,
and 23.

0
2. In Sec.  4.27, revise paragraphs (c) and (d) to read as follows:


Sec.  4.27  Additional reporting by commodity pool operators and
commodity trading advisors.

* * * * *
    (c) Reporting. (1) Each reporting person shall file with the
National Futures Association, a report with respect to the directed
assets of each pool under the advisement of a commodity pool operator
consistent with appendix A to this part, or a commodity trading advisor
consistent with appendix C to this part.
    (2) A reporting person required to file NFA Form PQR with the
National Futures Association for the reporting period may make such
filing in lieu of the report required under paragraph (c)(1) of this
section; provided that, the Commission has determined that NFA Form PQR
is substantively consistent with appendix A to this part.
    (3) Nothing in this provision restricts the National Futures
Association's ability to require reporting beyond that required by the
Commission; provided that, such additional requirements are consistent
with the Commodity Exchange Act and 17 CFR chapter I.
    (4) All financial information shall be reported in accordance with
generally accepted accounting principles consistently applied. A
reporting person operating a pool that meets the conditions specified
in Sec.  4.22(d)(2)(i) to present and compute the commodity pool's
financial statements contained in the Annual Report other than in
accordance with United States generally accepted accounting principles
and has filed notice pursuant to Sec.  4.22(d)(2)(iii) may also use the
alternative accounting principles, standards, or practices identified
in that notice in reporting information required to be reported
pursuant to paragraph (c)(1) of this section.
    (d) Investment advisers to private funds. Commodity pool operators
and commodity trading advisors that are dually registered as investment
advisers with the Securities and Exchange Commission, and that are
required to file Form PF under the rules promulgated under the
Investment Advisers Act of 1940, shall file Form PF with the Securities
and Exchange Commission, in addition to filings made pursuant to
paragraph (c)(1) of this section. Dually registered commodity pool
operators and commodity trading advisors that file Form PF with the
Securities and Exchange Commission will be deemed to have filed Form PF
with the Commission, for purposes of any enforcement action regarding
any false or misleading statement of material fact in Form PF.
* * * * *

0
3. Revise appendix A to part 4 to read as follows:

[[Page 71790]]

Appendix A to Part 4--Form CPO-PQR

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BILLING CODE 6351-01-C

    Issued in Washington, DC, on October 9, 2020, by the Commission.
Robert Sidman,
Deputy Secretary of the Commission.

    Note: The following appendices will not appear in the Code of
Federal Regulations.

Appendices to Compliance Requirements for Commodity Pool Operators on
Form CPO-PQR--Commission Voting Summary, Chairman's Statement, and
Commissioners' Statements

Appendix 1--Commission Voting Summary

    On this matter, Chairman Tarbert and Commissioners Quintenz,
Behnam, Stump, and Berkovitz voted in the affirmative. No
Commissioner voted in the negative.

Appendix 2--Supporting Statement of Chairman Heath P. Tarbert

    When the Commission considered the proposed rule to amend the
compliance requirements for commodity pool operators (CPOs) on Form
CPO-PQR,\1\ I observed that the esteemed 19th century mathematician
Charles Babbage had asked ``if you put into the machine the wrong
figures, will the right answers come out?'' \2\ Baggage foresaw what
would evolve in the 20th century as the ``garbage-in, garbage-out''
predicament--that is, the concept that flawed, or nonsense, input
data produces nonsense output or ``garbage.''
---------------------------------------------------------------------------

    \1\ Amendments to Compliance Requirements for Commodity Pool
Operators on Form CPO-PQR, 86 FR 26378 (May 4, 2020).
    \2\ Statement of Chairman Heath P. Tarbert in Support of
Revising Form CPO-PQR (Apr. 14, 2020), available at: https://www.cftc.gov/PressRoom/SpeechesTestimony/tarbertstatement041420b.
See Charles Baggage, Passages from the Life of a Philosopher (London
1864).
---------------------------------------------------------------------------

    Since becoming Chairman, I have prioritized improving the CFTC's
approach to collecting data. As a federal agency, we must be
selective about the data we collect, and then make sure we are
actually making good use of the data for its intended purpose.\3\
For example, we recently adopted three final rules to revise CFTC
regulations for swap data reporting, dissemination, and public
reporting requirements for market participants.\4\ One purpose of
those amendments was to simplify the swap data reporting process to
ensure that market participants are not burdened with unclear or
duplicative reporting obligations that do little to reduce market
risk or facilitate price discovery.\5\
---------------------------------------------------------------------------

    \3\ See Statement of Chairman Heath P. Tarbert in Support of
Revising Form CPO-PQR, supra note 2.
    \4\ CFTC Finalizes Rules to Improve Swap Data Reporting,
Approves Other Measures at September 17 Open Meeting, available at:
https://www.cftc.gov/PressRoom/PressReleases/8247/20.
    \5\ See Statement of Chairman Heath P. Tarbert in Support of
Final Rules on Swap Data Reporting (Sep. 17, 2020), available at:
https://www.cftc.gov/PressRoom/SpeechesTestimony/tarbertstatement091720c.
---------------------------------------------------------------------------

    Today we are engaged in a similar exercise. The amendments to
the compliance requirements for CPOs on Form CPO-PQR that we are
considering reflect the CFTC's reassessment of the scope of the form
and how it aligns with our current regulatory priorities. By
refining our approach to data collection, the final rule--in
conjunction with our current market surveillance efforts--will
enhance the CFTC's ability to gain more timely insight into the
activities of CPOs and their operated pools. At the same time, the
final rule will reduce reporting burdens for market participants.

Background on Form CPO-PQR

    Form CPO-PQR requests information regarding the operations of a
CPO, and each pool that it operates, in varying degrees of frequency
and complexity, depending upon the assets under management of both
the CPO and the operated pool(s). When it adopted Form CPO-PQR in
2012, the Commission determined that form data would be used for
several broad purposes, including:
     Increasing the CFTC's understanding of our registrant
population;
     assessing the market risk associated with pooled
investment vehicles under our jurisdiction; and
     monitoring for systemic risk.\6\
---------------------------------------------------------------------------

    \6\ See Commodity Pool Operators and Commodity Trading Advisors:
Compliance Obligations, 77 FR 11252 (Feb. 24, 2012).
---------------------------------------------------------------------------

    For the majority of pool-specific questions on Form CPO-PQR, the
Commission believed the incoming data would assist the CFTC in
monitoring commodity pools to identify trends over time. For
example, the CFTC would get information regarding a pool's exposure
to asset classes, the composition and liquidity of a pool's
portfolio, and a pool's susceptibility to failure in times of
stress.\7\
---------------------------------------------------------------------------

    \7\ See Commodity Pool Operators and Commodity Trading Advisors:
Amendments to Compliance Obligations, 76 FR 7976, 7981 (Form CPO-PQR
Proposal) (Feb. 11, 2011).
---------------------------------------------------------------------------

Shortcomings of Form CPO-PQR

    Seven years of experience with Form CPO-PQR, however, have not
borne out that vision. To begin with, in an effort to take into
account the different ways CPOs maintain information, the Commission
has allowed CPOs flexibility in how they calculate and present
certain of the data elements. As a result, it has been challenging,
to say the least, for the CFTC to identify trends across CPOs or
pools using Form CPO-PQR data. In

[[Page 71811]]

addition, taking into account the volume and complexity of the data
it was requesting, the Commission decided not to require the data to
be provided in real-time, but instead mandated only post hoc
quarterly or annual filings.
    As the CFTC staff has reviewed the data over the years, it has
become apparent that the disparate, infrequent, and delayed nature
of CPO reporting has made it difficult to assess the impact of CPOs
and their operated pools on markets. This is largely because
conditions and relative CPO risk profiles may have changed,
potentially significantly, by the time Form CPO-PQR is filed with
the CFTC.

Sound Regulation Means Collecting Only Information We Intend to Use

    What we need is not over-regulation or even de-regulation, but
rather sound regulation. In the midst of the coronavirus pandemic,
when we are facing the greatest economic challenge since the 2008
financial crisis, and possibly since the Great Depression, the fact
that we are asking market participants to put significant time and
effort into providing us data that is difficult to integrate with
the CFTC's other more timely and standardized data streams is not
sound regulation. Frankly, it is wasteful and an example of
ineffective government.
    My colleague Commissioner Dan Berkovitz made the following
observation in connection with a different rulemaking: ``In addition
to obtaining accurate data, the Commission must also develop the
tools and resources to analyze that data.'' \8\ He is spot on. But I
believe the converse is also true. We should not collect data we
cannot use effectively. In the case of Form CPO-PQR, this means not
requiring market participants to provide information that the CFTC
has neither the resources nor the ability to analyze with our other
data streams. Our credibility as a regulator is strengthened when we
honestly admit that our regulations ask for data that we both have
not used effectively and have no intention of using going forward.
That is what we are doing today.
---------------------------------------------------------------------------

    \8\ Dan M. Berkovitz, Commissioner, CFTC, Statement on Proposed
Amendments to Parts 45, 46, and 49: Swap Data Reporting Requirements
(Feb. 20, 2020), available at: https://www.cftc.gov/PressRoom/SpeechesTestimony/berkovitzstatement022020b.
---------------------------------------------------------------------------

Alternative, and Sometimes Better, Sources of Data Are Available to the
Commission

    Form CPO-PQR is not our only source of data regarding commodity
pools. The CFTC has devoted substantial resources to developing
other data streams and regulatory initiatives designed to enhance
our ability to surveil financial markets for risk posed by all
manner of market participants, including CPOs and their operated
pools.
    These alternative data streams, which include extensive
information related to trading, reporting, and clearing of swaps,
are in some cases more useful or robust than information from Form
CPO-PQR. Importantly, most of the transaction and position
information the CFTC uses for our surveillance activities is
available on a more timely and frequent basis than the data received
on the current iteration of Form CPO-PQR. Furthermore, CFTC programs
to conduct surveillance of exchanges, clearinghouses, and futures
commission merchants already include CPOs and do not rely on the
information contained in Schedules B and C of Form CPO-PQR.
    Taken together, the CFTC's other existing data efforts have
enhanced our ability to surveil financial markets, including with
respect to the activities of CPOs and the pools they operate. In
general, the CFTC's alternate data streams provide a more prompt,
standardized, and reliable view into relevant market activity than
that provided under Form CPO-PQR. As revised, data from Form CPO-PQR
will more easily be integrated with these existing and more
developed data streams. This will enable the CFTC to oversee and
assess the impact of CPOs and their operated pools in a way that is
both more effective for us and less burdensome for those we
regulate.
    In keeping with these principles--particularly the principle
that we should not collect data we cannot use effectively--I note
that as part of this rulemaking the Commission is instructing the
staff to evaluate the ongoing utility of the Pool Schedule of
Investments information in revised Form CPO-PQR. This will include
comparing it to the 2010 Schedule of Investments. The review will be
completed within 18-24 months following the date upon which persons
are required to comply with the final rule and may result in further
recommended actions. During the review period, the staff also may
identify and extend targeted relief for data fields that the CFTC
receives from other sources.

Legal Entity Identifiers Are Something We Need

    The final rule does more than simply eliminate certain data
collections. It also requires the collection of an additional piece
of key information: Legal entity identifiers (LEIs) for CPOs and
their operated pools. LEIs are critical to understanding the
activities and interconnectedness within financial markets. Although
LEIs have been around since 2012 and authorities in over 40
jurisdictions have mandated the use of LEI codes to identify legal
entities involved in a financial transaction,\9\ this is a new
requirement for Form CPO-PQR. The lack of LEI information for CPOs
and their operated pools has made it challenging to align the data
collected on Form CPO-PQR with the data received from exchanges,
clearinghouses, swap data repositories, and futures commission
merchants. As a result, we cannot always get a full picture of what
is happening in the markets we regulate. Adding an LEI requirement
for CPOs and their operated pools will help give us a complete
perspective.
---------------------------------------------------------------------------

    \9\ See Financial Stability Board, Thematic Review on
Implementation of the Legal Entity Identifier, Peer Review Report
(May 28, 2019), available at: https://www.fsb.org/2019/05/thematic-review-on-implementation-of-the-legal-entity-identifier/.
---------------------------------------------------------------------------

    In addition, the final rule better aligns Form CPO-PQR with Form
PQR of the NFA, which all CPOs must file quarterly and which the NFA
may revise to include questions regarding LEIs. Under these
circumstances, we could permit a CPO to file NFA Form PQR in lieu of
our Form CPO-PQR as revised. In doing so, we would offer CPOs
greater filing efficiencies without compromising our ability to
obtain relevant data.

Form CPO-PQR, as Revised, has Other Regulatory Benefits

    The Dodd-Frank Act established the Office of Financial Research
(OFR) nearly a decade ago to look across our financial system for
risks and potential vulnerabilities.\10\ It was contemplated that,
for the OFR to do its work, it would have access to data from other
U.S. financial regulators. Yet to date, the CFTC has shared none of
the Form CPO-PQR data with the OFR, largely because of the
shortcomings outlined above.
---------------------------------------------------------------------------

    \10\ See Sections 151-56 of the Dodd-Frank Wall Street Reform
and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376
(2010).
---------------------------------------------------------------------------

    Once Form CPO-PQR is revised, it has the potential to be useful
not only to the CFTC. To this end, we have negotiated a memorandum
of understanding (MOU) with the OFR, under which we will for the
first time provide to the OFR the information we collect regarding
CPOs. Under the MOU, the OFR will receive the Form CPO-PQR
Information consistent with the provisions of Section 8(e) of the
CEA, which establishes important protections for CFTC data
sharing.\11\
---------------------------------------------------------------------------

    \11\ In Section 8(e) of the CEA (7 U.S.C. 12(e)), Congress
authorized the CFTC to share nonpublic information it obtains under
the CEA with other federal agencies acting within the scope of their
jurisdiction. Although Congress prohibited the CFTC from publishing
data and information that would separately disclose the business
transactions or market positions of any person and trade secrets or
names of customers, Section 8(a) allows the CFTC to publish research
and analysis based on such data and information where it has been
appropriately aggregated, anonymized, or otherwise masked to avoid
such separate disclosure. In conjunction, these two provisions of
Section 8 give the CFTC the power to review the work product of
other federal agencies with which it shares data and information to
ensure that they do not separately disclose confidential information
obtained from the CFTC, and to authorize those agencies to publish
research and analysis based on such confidential information.
---------------------------------------------------------------------------

Conclusion

    For these reasons, I am pleased to support the Commission's
final rule to amend the compliance requirements for CPOs on Form
CPO-PQR. As revised, Form CPO-PQR will focus on the collection of
data elements that can be used with other CFTC data streams and
regulatory initiatives to facilitate oversight of CPOs and their
operated pools. This will primarily reduce current data collection
requirements, but also mandate disclosure of LEIs by CPOs and their
operated pools. Focusing on enhancing data collection by the agency
is no doubt tedious. Nonetheless, I am convinced it leads to smarter
regulation that helps promote the integrity, resilience, and
vibrancy of U.S. derivatives markets.

[[Page 71812]]

Appendix 3--Supporting Statement of Commissioner Brian Quintenz

    I support today's final rule that would simplify and streamline
the reporting obligations of commodity pool operators (CPOs) on Form
CPO-PQR. The Commission first adopted Form CPO-PQR in 2012 and
closely modeled the form on Form PF. The Commission adopted the Form
of its own volition; unlike Form PF, which is specifically mandated
by the Dodd-Frank Act, there is no similar statutory directive
requiring the adoption of Form CPO-PQR.\1\ In my opinion, since its
adoption, the detailed information requested on Form CPO-PQR has not
significantly enhanced the Commission's oversight over CPOs and has
never been fully utilized by staff. I have long questioned the
Commission's need to know the litany of data requested on the Form.
---------------------------------------------------------------------------

    \1\ See section 404 of the Dodd-Frank Act.
---------------------------------------------------------------------------

    In my view, many of the questions on the existing form are more
academic than pragmatic in nature--information that may be nice for
the Commission to have, but data that is certainly not necessary for
the Commission to effectively oversee commodity pools and the
derivatives markets. This is why I am very pleased that the final
rule eliminates the most burdensome sections on the current form--
Schedules B and C, which together contain roughly 72 distinct
questions, if one includes all the separately identifiable subparts.
Many of these questions are challenging for CPOs to calculate
precisely and require numerous underlying assumptions that vary from
firm to firm, making it difficult, if not impossible, for the
Commission to perform an apples-to-apples comparison across the
commodity pool industry.
    While today's final rule represents a marked improvement over
the current CPO reporting regime, more work remains to be done.
Importantly, the proposal requested comment about reverting back to
the former Schedule of Investments originally adopted by the
National Futures Association (NFA) in 2010 for its NFA Form PQR
(2010 Schedule of Investments). In 2012, the Schedule of Investments
adopted by the Commission went further than the 2010 Schedule of
Investments, by lowering the itemized reporting thresholds and
adding significantly more granular subcategories of investments. For
example, the Commission sought information regarding the tranches of
various types of securitizations and the types of bonds held by the
pool. Historically, the information on the Schedule of Investments
has mostly been used by the NFA for their CPO examination program.
However, in its comment letter to the Commission, the NFA noted that
it ``does not have a need for the more granular information
currently in the Schedule'' and that it ``fully supports [aligning
the current schedule with the 2010 Schedule of Investments] because
[NFA] believe[s] a more streamlined schedule will significantly
alleviate filing burdens on CPOs without negatively impacting the
usefulness of the information that is collected.'' \2\
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    \2\ NFA Comment Letter (June 20, 2020), https://comments.cftc.gov/Handlers/PdfHandler.ashx?id=29369.
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    I am disappointed that this final rule does not amend the form
to adopt the 2010 Schedule of Investments, but I am encouraged that
the preamble instructs DSIO staff to evaluate the ongoing utility of
the current Schedule of Investments, including comparing it to the
2010 Schedule of Investments, within 18-24 months following the
compliance date. As part of this review, staff is instructed to
consider whether or not, in light of its utility, the Commission
should revert back to the 2010 Schedule of Investments. After
completing this review, in whole or in stages, staff will develop
recommendations, provide relief, or propose a rulemaking for the
Commission's further consideration to effectuate staff's findings.
This review will allow staff to carefully consider which questions
on the Schedule of Investments are necessary to effectively oversee
CPOs and to propose eliminating any fields which are being received
through other data channels or have no regulatory use case to the
Commission's oversight function. I think this review is long overdue
and is especially timely given the developments in other data
streams, like part 45 swap data, that DSIO is actively working to
combine with clearinghouse data to provide a complete picture of a
CPO's derivatives activity. I believe that DSIO's ability to
monitor, in real time, a fund's derivatives positions will be
absolutely vital to the oversight and regulation of commodity pools
in the future.
    In closing, I deeply appreciate DSIO staff's efforts to address
my concerns on this point in the weeks leading up to today's vote.
Thank you all very much for your engagement and dedication.

Appendix 4--Concurring Statement of Commissioner Rostin Behnam

    I respectfully concur with the Commodity Futures Trading
Commission's (the ``Commission'' or ``CFTC'') issuance of today's
final rule (the ``Final Rule'') amending Regulation 4.27 and Form
CPO-PQR. As a whole, the Final Rule provides a thoughtfully balanced
and complete evaluation of the issues identified in the notice of
proposed rulemaking \1\ and the responsive comments. Perhaps, just
as importantly, the Final Rule clearly acknowledges that it is the
first of several steps in the Commission's ongoing assessment of
Form CPO-PQR not only for its utility as a regulatory tool, but as a
yardstick to measure improvements to the Commission's data
integration and analytical capabilities. The Final Rule makes smart,
targeted corrections without forgoing the possibility of future
adjustments should the Commission later determine that additional
data would support evolving regulatory initiatives or Financial
Stability Oversight Counsel (FSOC) requirements to fulfill
statutorily mandated duties and initiatives aimed at identifying and
monitoring risks to financial stability.\2\
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    \1\ Amendments to Compliance Requirements for Commodity Pool
Operators on Form CPO-PQR, 85 FR 26378 (proposed May 4, 2020) (the
``NPRM'').
    \2\ See NPRM, 85 FR at 26379. Not only is the Commission among
those agencies that could be asked to provide information necessary
for the FSOC to perform its statutorily mandated duties, but the
FSOC may issue recommendations to the Commission regarding more
stringent regulation of financial activities that FSOC determines
may create or increase systemic risk. See Dodd-Frank Act sections
112(d)(1), 120; See also Reporting by Investment Advisers to Private
Funds and Certain Commodity Pool Operators and Commodity Trading
Advisors on Form PF, 76 FR 71128, 71129 (Nov. 16, 2011); Commodity
Pool Operators and Commodity Trading Advisors: Compliance
Obligations, 77 FR 11252, 11253 (Feb. 24, 2012).
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    In determining to reduce the frequency and scope of commodity
pool operator (CPO) data reporting and collection, the Commission is
pivoting away from what was an ambitious vision for ongoing
oversight, monitoring, and trend analysis inspired by the events and
fallout of the 2008 financial crisis.\3\ To be sure, keeping pace
with regulatory change and shifting priorities while exercising
appropriate discipline in collecting, handling, and managing data is
an endless endeavor. Nevertheless, I am pleased with today's
outcome, and I am confident that as we continue moving forward, the
tremendous abilities of the dedicated staff whose direct insight and
experience informed our decisions will ensure we continue to act
decisively in furthering our goals and supporting our mission
critical duties.
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    \3\ See, e.g., NPRM, 85 FR at 26381.
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    The CFTC shares aspects of its regulatory initiatives, risk
surveillance, and monitoring duties with respect to CPO and
commodity pools with the Securities and Exchange Commission (SEC),
the National Futures Association (NFA), and the FSOC. The Final Rule
in its detailed preamble identifies areas of overlap in which
commenters suggested that the Commission ought to retreat from its
proposed baseline for data collection in Revised Form CPO-PQR. I am
pleased that the Commission reasonably considered such comments and
provides well-reasoned responses based on analysis of facts and data
incorporated directly into the record. While the Commission and its
staff must always be prudent and judicious in our allocation of
data, resources, authority, and deference in working amicably
towards common goals, we should exercise great care so as to avoid
sacrificing primacy and independence when acting directly in support
of Congressional mandates and statutory directives.
    I appreciate the Commission and its staff's ongoing engagement
with the SEC and FSOC, as well as with NFA, throughout the drafting
of the NPRM and the Final Rule, and I am encouraged that discussions
are ongoing. As we move forward, it is my intention to ensure that
the Commission provides staff the support and resources necessary to
effectuate its current plans for Form CPO-PQR data and make future
amendments and adjustments, as appropriate.

Appendix 5--Statement of Commissioner Dan M. Berkovitz

    I am voting for the final rule to amend Regulation 4.27 and Form
CPO-PQR (``Final Rule''). This Final Rule makes adjustments to the
reporting requirements for Commodity Pool Operators (``CPOs'') and
their pools based on lessons learned over several years since the
requirements were first adopted.

[[Page 71813]]

    Eight years ago, the Commission began collecting information
from CPOs on Form CPO-PQR. During that period, the Commission has
come to learn that certain information in Form CPO-PQR has not
materially improved the Commission's understanding of CPOs'
participation in commodity interest markets, or its ability to
assess the risks their pools may pose. The Final Rule eliminates
information that has not proven to be of value to the Commission.
    Several commenters suggested that the Commission collect less
information on the Pool Schedule of Investments (``PSOI'') about CPO
investments in various asset classes. I support the Commission's
decision in the Final Rule to continue to collect position data
about pool investments. To evaluate the risks posed by CPOs and the
pools they operate, it is necessary to understand the total
portfolio of each pool and its trading strategy. Recent market
volatility--including historic price movements in crude oil--
underscores the importance of the CFTC's ability to understand the
nature of the participants in our markets and the scope of their
activities in order to conduct timely oversight and spot emerging
trends or risks.
    Since joining the Commission I have supported and encouraged
efforts to improve our data and analytical capabilities, and believe
they should be expanded in the coming years. Commission staff
currently is taking steps to better synthesize swap data for large
account controllers and develop a more holistic surveillance
program. Once these analytical tools have been further developed,
staff will then be in a position to advise the Commission regarding
whether any changes to the PSOI are appropriate.
    To ensure that the Commission has a complete picture of pool
activity across all derivatives markets, it should continue working
to integrate swaps data with futures data. Some commenters have
suggested that one way to do this would be to require all reporting
CPOs and their pools--not just those that trade swaps--to obtain
LEIs and submit them on Form CPO-PQR. I encourage the Commission and
staff to continue to explore this approach, among others, so that
the CFTC is able to aggregate all derivatives transactions by pools
under common control.
    I would like to thank the Division of Swap Dealer and
Intermediary Oversight for their efforts in finalizing this rule in
a form that I can support.

[FR Doc. 2020-22874 Filed 11-9-20; 8:45 am]
BILLING CODE 6351-01-P