[Federal Register: November 18, 2004 (Volume 69, Number 222)]
[Page 67543-67544]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



Fees for Reviews of the Rule Enforcement Programs of Contract
Markets and Registered Futures Association

AGENCY: Commodity Futures Trading Commission.

ACTION: Establish the FY 2004 schedule of fees.


SUMMARY: The Commission charges fees to designated contract markets and
the National Futures Association (NFA) to recover the costs incurred by
the Commission in the operation of a program which provides a service
to these entities. The fees are charged for the Commission's conduct of
its program of oversight of self-regulatory rule enforcement programs
(17 CFR part 1 Appendix B) (NFA and the contract markets are referred
to as SROs).

    The calculation of the fee amounts to be charged for FY 2004 is
based on an average of actual program costs incurred in during FY 2001,
2002, and 2003, as explained below. The FY 2004 fee schedule is set
forth in the SUPPLEMENTARY INFORMATION. Beginning with the FY 2004 fee,
electronic payment of fees is required.

EFFECTIVE DATES: The FY 2004 fees for Commission oversight of each SRO
rule enforcement program must be paid by each of the named SROs in the
amount specified by no later than January 18, 2005.

FOR FURTHER INFORMATION CONTACT: Stacy Dean Yochum, Counsel to the
Executive Director, Commodity Futures Trading Commission, (202) 418-
5160, Three Lafayette Centre, 1155 21st Street NW., Washington, DC
20581. For information on electronic payment, contact Stella Lewis,
Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581,
(202) 418-5186.


I. General

    This notice relates to fees for the Commission's review of the rule
enforcement programs at the registered futures associations and
contract markets regulated by the Commission.

II. Schedule of Fees

    Fees for the Commission's review of the rule enforcement programs
at the registered futures associations and contract markets regulated
by the Commission:

                           Entity                             Fee amount
Chicago Board of Trade.....................................      $81,264
Chicago Mercantile Exchange................................      318,729
Kansas City Board of Trade.................................       11,866
New York Mercantile Exchange...............................      136,622
Minneapolis Grain Exchange.................................        6,605
National Futures Association...............................      110,946
New York Board of Trade....................................       51,075
BrokerTec Futures Exchange \1\.............................       12,126
    Total..................................................     $729,233
\1\ BrokerTec Futures Exchange, now known as Exchange Place Futures
  Exchange, LLC, ceased operations in November 2003. As of January 30,
  2004, Exchange Place Futures is wholly owned by U.S. Futures Exchange

III. Background Information

A. General

    The Commission recalculates the fees charged each year with the
intention of recovering the costs of operating this Commission
program.\2\ All costs are accounted for by the Commission's Management
Accounting Structure Codes (MASC) system, which records each employee's
time for each pay period. The fees are set each year based on direct
program costs, plus an overhead factor.

    \2\ 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).

B. Overhead Rate

    The fees charged by the Commission to the SROs are designed to
recover program costs, including direct labor costs and overhead. The
overhead rate is calculated by dividing total Commission-wide overhead
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): 117 percent for fiscal
year 2001, 129 percent for fiscal year 2002, and 113 percent for fiscal
year 2003. These overhead rates are applied to the direct labor costs
to calculate the costs of oversight of SRO rule enforcement programs.

C. Conduct of SRO Rule Enforcement Reviews

    Under the formula adopted in 1993 (58 FR 42643, Aug. 11, 1993),

[[Page 67544]]

appears at 17 CFR Part 1 Appendix B, the Commission calculates the fee
to recover the costs of its review of rule enforcement programs, based
on the three-year average of the actual costs of performing reviews at
each SRO. The cost of operation of the Commission's program of SRO
oversight varies from SRO to SRO, according to the size and complexity
of each SRO's program. The three-year averaging is intended to smooth
out year-to-year variations in cost. Timing of reviews may affect
costs--a review may span two fiscal years and reviews are not conducted
at each SRO each year. Adjustments to actual costs may be made to
relieve the burden on an SRO with a disproportionately large share of
program costs.
    The Commission's formula provides for a reduction in the assessed
fee if an SRO has a smaller percentage of United States industry
contract volume than its percentage of overall Commission oversight
program costs. This adjustment reduces the costs so that as a
percentage of total Commission SRO oversight program costs, they are in
line with the pro rata percentage for that SRO of United States
industry-wide contract volume.
    The calculation made is as follows: The fee required to be paid to
the Commission by each contract market is equal to the lesser of actual
costs based on the three-year historical average of costs for that
contract market or one-half of average costs incurred by the Commission
for each contract market for the most recent three years, plus a pro
rata share (based on average trading volume for the most recent three
years) of the aggregate of average annual costs of all contract markets
for the most recent three years. The formula for calculating the second
factor is: 0.5a + 0.5 vt = current fee. In this formula, ``a'' equals
the average annual costs, ``v'' equals the percentage of total volume
across exchanges over the last three years, and ``t'' equals the
average annual costs for all exchanges. NFA, the only registered
futures association regulated by the Commission, has no contracts
traded; hence its fee is based simply on costs for the most recent
three fiscal years.
    This table summarizes the data used in the calculations and the
resulting fee for each entity:

                                     average     Three-year    Average
                                      actual     percentage   year 2003
                                      costs      of volume       fee
Chicago Board of Trade...........      $81,264      34.0371      $81,264
Chicago Mercantile Exchange......      318,729      50.8784      318,729
New York Mercantile Exchange.....      182,492      12.4781      136,622
New York Board of Trade..........       87,485       2.0163       51,075
Kansas City Board of Trade.......       21,534       0.3022       11,866
Minneapolis Grain Exchange.......       12,394       0.1121        6,605
BrokerTec Futures Exchange.......       23,387       0.1188       12,126
    Subtotal.....................      727,285      99.8429      618,287
National Futures Association.....      110,946          N/A      110,946
    Total........................      838,231      99.8429      729,233

    An example of how the fee is calculated for one exchange, the
Minneapolis Grain Exchange, is set forth here:
    a. Actual three-year average costs equal $12,394.
    b. The alternative computation is:

(.5) ($12,394) + (.5) (.001121) ($727,285) = $6,605.

    c. The fee is the lesser of a or b; in this case $6,605.
    As noted above, the alternative calculation based on contracts
traded is not applicable to the NFA because it is not a contract market
and has no contracts traded. The Commission's average annual cost for
conducting oversight review of the NFA rule enforcement program during
fiscal years 2001 through 2003 was $110,946 (one-third of $332,837).
The fee to be paid by the NFA for the current fiscal year is $110,946.

Payment Method

    The Debt Collection Improvement Act (DCIA) requires deposits of
fees owed to the government by electronic transfer to funds (See 31
U.S.C. 3720). For information about electronic payments, please contact
Stella Lewis at (202) 418-5186 or [email protected], or see the CFTC Web
site at  href="http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.cftc.gov" shape="rect">http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.cftc.gov, specifically,  href="http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.cftc.gov/cftc/cftcelectronicpayments.htm.Regulatory" shape="rect">http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.cftc.gov/cftc/cftcelectronicpayments.htm.Regulatory
 Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., requires
agencies to consider the impact of rules on small business. The fees
implemented in this release affect contract markets (also referred to
as exchanges) and registered futures associations. The Commission has
previously determined that contract markets and registered futures
associations are not ``small entities'' for purposes of the Regulatory
Flexibility Act. Accordingly, the Chairman, on behalf of the
Commission, certifies pursuant to 5 U.S.C. 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 November 12, 2004, by the
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 04-25615 Filed 11-17-04; 8:45 am]