[Federal Register: June 4, 2002 (Volume 67, Number 107)]
[&thnsp;Rules and Regulations]
[Page 38379-38381]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



17 CFR Part 40

Fees for Product Review and Approval

AGENCY: Commodity Futures Trading Commission.

ACTION: Annual update of schedule of fees for product review and


SUMMARY: The Commission charges fees to designated contract markets and
registered derivatives transaction execution facilities to recover the
costs of its review of requests for product review and approval. The
calculation of the fee amounts to be charged for the upcoming year is
based on an average of actual program costs incurred in the most recent
three full fiscal years, as explained below. The new fee schedule is
set forth below.

EFFECTIVE DATE: June 4, 2002.

FOR FURTHER INFORMATION CONTACT: Richard A. Shilts, Acting Director,
Division of Economic Analysis, Commodity Futures Trading Commission,
Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581,
(202) 418��0.


I. Summary of Fees

Fees Charged for Processing Requests for Product Review and Approval

Single Applications
    &sbull; A single futures contract or an option on a
    &sbull; A single option on a previously-approved futures

[[Page 38380]]

    &sbull; A combined submission of a futures contract and an
option on the same futures contract��500.
Multiple Applications
    For multiple contract filings containing related contracts, the
product review and approval fees are:
    &sbull; A submission of multiple related futures
contracts��000 for the first contract, plus $500 for each
additional contract;
    &sbull; A submission of multiple related options on futures
contracts��000 for the first contract, plus $100 for each
additional contract;
    &sbull; A combined submission of multiple futures contracts
and options on those futures contracts��500 for the first
combined futures and option contract, plus $550 for each additional
futures and option contract.

II. Background Information

1. General

    The Commission recalculates each year the fees it charges with the
intention of recovering the costs of operating certain programs.\1\ All
costs are accounted for by the Commission's Management Accounting
Structure Codes (MASC) system operated according to a government-wide
standard established by the Office of Management and Budget. The fees
are set each year based on direct program costs, plus an overhead

    \1\&thnsp;See Section 237 of the Futures Trading Act of 1982, 7
U.S.C. 16a and 31 U.S.C. 9701. For a broader discussion of the
history of Commission fees, see 52 FR 46070 (Dec. 4, 1987).

2. Overhead Rate

    The fees charged by the Commission are designed to recover program
costs, including direct labor costs and overhead. The overhead rate is
calculated by dividing total Commission-wide direct program labor costs
into the total amount of the Commission-wide overhead pool. For this
purpose, direct program labor costs are the salary costs of personnel
working in all Commission programs. Overhead costs consist generally of
the following Commission-wide costs: indirect personnel costs (leave
and benefits), rent, communications, contract services, utilities,
equipment, and supplies. This formula has resulted in the following
overhead rates for the most recent three years (rounded to the nearest
whole percent): 105 percent for fiscal year 1999, 117 percent for
fiscal year 2000, and 105 percent for fiscal year 2001. These overhead
rates are applied to the direct labor costs to calculate the costs of
reviewing contract approval requests.

3. Processing requests for contract approval

    Calculations of the fees for processing requests for product review
and approval have become more refined over the years as the types of
contracts being reviewed have changed.
    On August 23, 1983, the Commission established a fee for Contract
Market Designation (48 FR 38214). Prior to its recent amendment, the
Commodity Exchange Act (Act) provided for 󤥳�ignation��
each new contract as a 󣯮�tract market.��e Commodity
Futures Modernization Act (CFMA) amended the Act to limit the concept
of 󣯮�tract market designation�� the approval of certain
markets or trading facilities on which futures and options are traded,
as opposed to approval of a specific contract or product. Commission
rules that implemented the CFMA, therefore, charged a fee for the
contract review where approval has been requested by a designated
contract market or registered derivatives transaction execution
facility (DTF). No fee is charged a board of trade for its initial
designation as a contract market or registration as a DTF.
    The fee, as originally adopted in 1983, was based on a three-year
moving average of the actual costs expended and the number of contracts
reviewed by the Commission during that period. The formula for
determining the fee was revised in 1985. At that time, most designation
applications were for futures contracts and no separate fee was set for
option contracts.
    In 1992, the Commission reviewed its data on the actual costs for
reviewing applications for both futures and option contracts and
determined that the percentage-of applications pertaining to options
had increased and that the cost of reviewing a futures contract
designation application was much higher than the cost of reviewing an
application for an option contract. The Commission also determined that
when applications for a futures contract and an option on that futures
contract are submitted simultaneously, the cost is much lower than when
the contracts are separately reviewed. 'To recognize this cost
difference, three separate fees were established: one for futures; one
for options; and one for combined futures and option contract
applications (57 FR 1372, Jan. 14, 1992).
    The Commission refined its fee structure further in 1999 to
recognize the unique processing cost characteristics of a class of
contracts��h-settled based on an index of non-tangible
commodities (64 FR 30384, June 8, 1999). The Commission determined to
charge a reduced fee for related simultaneously submitted contracts for
which the terms and conditions of all contracts in the filing are
identical, except in regard to a specified temporal or spatial pricing
characteristic or the multiplier used to determine the size of each
contract. Contracts on major currencies, defined as the Australian
dollar, British pound, Euro (and its component currencies), Japanese
yen, Canadian dollars Swiss franc, New Zealand dollar, Swedish krona,
and the Norwegian krone (including contracts based on currency cross
rates), were determined to be eligible for the reduced multiple
contract fees.\2\ The Commission determined that a 10 percent marginal
fee for additional contracts in a filing would be appropriate for
simultaneously submitted contracts eligible for the multiple contract
filing fee.

    \2\&thnsp;Submissions containing a number of similar cash-
settled contracts based on the government debt of different foreign
countries would not be eligible for the reduced fee, since the
manipulation potential of each contract would be related to the
liquidity of the underlying instruments, and the individual trading
practices and governmental oversight in each specific country
require separate analysis.

    Commission staff compiled the actual costs of processing a request
for product review and contract approval for a futures contract for
fiscal years 1999, 2000, and 2001, and found that the average cost over
the three-year period was $5,000, including overhead. Review of actual
costs of processing contract-approval reviews for an option contract
for fiscal years 1999, 2000, and 2001 reveal that the average cost over
the period was $1,000 per contract, including overhead.
    In accordance with its regulations as codified at 17 CFR part 40
appendix B, the Commission has determined that the fee for approval of
a futures contract will be set at $5,000 and the fee for approval of an
option contract will be set at $1,000. The fee for simultaneously
submitted futures contracts and option contracts on those futures
contracts and the fees for filings containing multiple cash-settled
indices on non-tangible commodities have been set similarly and as
indicated in the schedule set forth in the Summary of Fee above.

III. Cost-Benefit Analysis

    Section 15 of the Act, as amended by section 119 of the CFMR,
requires the Commission to consider the costs and benefits of its
action before issuing a new regulation under the Act. Section

[[Page 38381]]

15 does not require the Commission to quantify the costs and benefits
of a new regulation or to determine whether the benefits of the
proposed regulation outweigh its costs. Rather, section 15 simply
requires the Commission to 󣯮�sider the costs and
benefits�� its action, in light of five broad areas of market
and public concern: protection of market participants and the public;
efficiency, competitiveness, and financial integrity of futures
markets; price discovery; sound risk management practices; and other
public interest considerations. Accordingly, the Commission could in
its discretion give greater weight to any one of the five enumerated
areas of concern and could in its discretion determine that,
notwithstanding its costs, a particular rule was necessary or
appropriate to protect the public interest or to effective any of the
provisions or to accomplish any of the purposes of the Act.
    The submission of new products for Commission review and approved
by designated contract markets or DTFs is voluntary. The Commission has
therefore concluded that those entities choosing to make such
submissions find that the benefits of doing so equal or exceed the
fees, which, as explained above, are derived from the Commission's
actual processing costs.

IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 USC 601, et seq., requires
agencies to consider the impact of rules on small business. The fees
implemented in this release affect contract markets and registered
DTFs. The Commission has previously determined that contract markets
and registered DTFs are not 󳭡�ll entities��r purposes
of the Regulatory Flexibility Act. Accordingly, the Chairman, on behalf
of the Commission, certifies pursuant to 5 USC 605(b), that the fees
implemented here will not have a significant economic impact on a
substantial number of small entities.

    Issued in Washington, DC, on May 29, 2002 by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 02��61 Filed 6��2; 8:45 am]