Ownership and Control Reports, Forms 102/102S, 40/40S, and 71

Federal RegisterNov 18, 2013

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 15, 17, 18, and 20

RIN 3038-AD31

Ownership and Control Reports, Forms 102/102S, 40/40S, and 71

AGENCY:

Commodity Futures Trading Commission.

ACTION:

Final rule.

SUMMARY:

The Commodity Futures Trading Commission (“Commission” or “CFTC”) is adopting new rules and related forms to enhance its identification of futures and swap market participants. These final rules will leverage the Commission's current position and transaction reporting programs by requiring the electronic submission of trader identification and market participant data on amended Forms 102 and 40, and on new Form 71. The new and amended forms require the reporting of certain trading accounts active on reporting markets that are designated contract markets or swap execution facilities. Among other information, the forms collect ownership and control information with respect to both position-based special accounts and trading accounts that meet specified volume-based reporting levels.

DATES:

Effective date:

February 18, 2014.

Compliance date:

The compliance date will be delayed by an additional 180 days, with the result that the compliance date of these final rules will be August 15, 2014.

FOR FURTHER INFORMATION CONTACT:

Sebastian Pujol Schott, Associate Director, Division of Market Oversight (“DMO”), at 202-418-5641 or

sps@cftc.gov

; Mark Schlegel, Special Counsel, DMO, at 202-418-5055 or

mschlegel@cftc.gov

; Brian Robinson, Attorney Advisor, DMO, at 202-418-5385 or

brobinson@cftc.gov

; or James Outen, Industry Economist, DMO, at 202-418-5710 or

jouten@cftc.gov

; Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

A. Overview of Final Rules

B. Benefits Derived From Final Rule

II. Statutory Framework for Position Reporting and Trader and Account Identification

III. Current Trader and Account Identification Programs

A. Futures Large Trader Reporting—Current Forms 102 and 40

i. Identification of Special Accounts—Current Form 102

ii. Statement of Reporting Trader—Current Form 40

B. Large Trader Reporting for Physical Commodity Swaps—102S and 40S Filings

IV. Summary of 2010 and 2012 NPRMs

V. Summary of New and Amended Forms Adopted in These Final Rules

A. Position-Triggered Form 102A (Special Accounts)

i. Special Accounts and Reportable Positions

ii. 102A Form Requirements

iii. Timing of 102A Reporting

iv. Timing of 102A Change Updates and Refresh Updates

B. Volume-Triggered Form 102B (Volume Threshold Accounts)

i. Volume Threshold Accounts and Reportable Trading Volume Level

ii. 102B Form Requirements

iii. Timing of 102B Reporting

iv. Timing of 102B Change Updates and Refresh Updates

C. Position-Triggered Form 102S (Consolidated Accounts)

i. 102S Form Requirements

ii. Timing of 102S Reporting, Change Updates and Refresh Updates

D. Form 71 (Omnibus Accounts and Sub-Accounts)

E. New Form 40 (Reporting Traders)

VI. Data Submission Standards and Procedures

A. Overview

B. Schedule of Effective Date and Compliance Date

VII. Review of NPRM and Summary of Final Rules

A. Part 15

i. § 15.00(q)—Reporting Market

ii. § 15.00(t)—Control

iii. § 15.00(u)—Reportable Trading Volume

iv. § 15.00(v)—Direct Market Access

v. § 15.00(v)—Omnibus Account

vi. § 15.00(w)—Omnibus Account Originator

vii. § 15.00(x)—Volume Threshold Account

viii. § 15.00(y)—Omnibus Volume Threshold Account

ix. § 15.00(z)—Omnibus Reportable Sub-Account

x. § 15.00(aa)—Reportable Sub-Account

xi. § 15.00(bb)—Trading Account Controller; § 15.00(cc)—Volume Threshold Account Controller; § 15.00(dd)—Reportable Sub-Account Controller

xii. § 15.01(c)—Persons Required To Report

xiii. § 15.02—Reporting Forms

xiv. § 15.04—Reportable Trading Volume Level

B. Part 17

i. § 17.01(a)—Identification of Special Accounts (via 102A)

ii. § 17.01(b)—Identification of Volume Threshold Accounts (via 102B)

iii. § 17.01(c)—Identification of Omnibus Accounts and Sub-Accounts (via 71)

iv. § 17.01(d)—Exclusively Self-Cleared Contracts

v. § 17.01(e)—Identification of Omnibus Accounts and Sub-Accounts

vi. § 17.02(b)—Section 17.01(a) Reports (via 102A)

vii. § 17.02(c)—Section 17.01(b) Reports (via 102B)

viii. § 17.03(a)-(g)—Delegation of Authority to the Director of the Office of Data and Technology or the Director of the Division of Market Oversight

C. Part 18

i. § 18.04—Statement of Reporting Trader

ii. § 18.05—Maintenance of Books and Records

D. Part 20

i. § 20.5—Series S Filings

VIII. Related Matters

A. Paperwork Reduction Act

i. Overview

ii. Information To Be Provided

iii. Total Reporting and Recordkeeping Costs; Methodology Used To Estimate Costs

iv. Reporting Burdens—New and Revised Forms

v. Recordkeeping Burdens—Revised § 18.05

B. Consideration of Costs and Benefits

i. Background

ii. The Statutory Requirement for the Commission To Consider the Costs and Benefits of Its Actions

iii. Commission Request for Comments Regarding Cost and Benefit Estimates

iv. Methodology Used To Estimate Costs

v. Costs and Benefits of Individual Reporting Forms and Reporting and Recordkeeping Requirements

vi. Comments Regarding Costs and Benefits

vii. Consideration of Alternatives

viii. Reporting on Form 102S

ix. Consolidation Form Proposed by FIA

x. Section 15(a) Factors

C. Regulatory Flexibility Act

I. Background

A. Overview of Final Rules

The CFTC's large trader reporting rules (also referred to herein as the “reporting rules”) are contained in parts 15 through 21 of the Commission's regulations.

The reporting rules are currently structured to collect information with respect to positions in “open contracts,”

including: (1) Information necessary to identify persons who hold or control “reportable positions”

in open contracts (via current Form 40); and (2) information necessary to identify “special accounts”

(via current Form 102). These final rules modify the current

reporting rules and forms as they pertain to positions in open contracts. Specifically, the Commission is expanding the reporting rules and forms so that they may also be used to identify “volume threshold accounts,” defined as individual trading accounts that trigger volume-based reporting thresholds on a reporting market

that is a registered entity under sections 1a(40)(A) or 1a(40)(D) of the Commodity Exchange Act (“CEA” or “Act”) (

i.e.,

a designated contract market (“DCM”) or a swap execution facility (“SEF”)), regardless of whether such activity results in reportable positions.

Volume threshold accounts associated with DCMs and SEFs will be required to be reported by clearing members, as discussed in sections V(B) and VII below. The Commission notes that volume threshold accounts could reflect, without limitation, trading in futures, options on futures, swaps, and any other products traded on or subject to the rules of a DCM or SEF.

17 CFR parts 15 through 21. These final rules generally relate to parts 15, 17, 18 and 20 of the Commission's regulations.

“Open contract” means any commodity or commodity option position held by any person on or subject to the rules of a board of trade which have not expired, been exercised, or offset.

See

§§ 1.3(t) and 15.00(n).

A “reportable position” is defined in § 15.00(p) as any open contract position that at the close of the market on any business day equals or exceeds the Commission's reporting levels specified in § 15.03.

A “special account” is defined in § 15.00(r) as any commodity futures or option account in which there is a reportable position.

“Reporting market” is defined in current § 15.00(q) as a designated contract market, registered entity under section 1a(29) of the Act, and unless determined otherwise by the Commission, a derivatives transaction execution facility. By way of these final rules, the Commission is revising § 15.00(q) to define reporting market as a designated contract market or a registered entity under section 1a(40) of the Act. This revision is technical in nature, and serves to conform § 15.00(q) with recent amendments to the Act.

See infra

sections VII and IX.

See infra

section VII and IX for a discussion of the definition of volume threshold account.

The amendments to the reporting rules and forms will achieve three primary purposes. First, they will expand and subdivide current Form 102 into a new Form 102 (“New Form 102”), partitioned into three sections: Section 102A for the identification of position-based special accounts (“102A,” “Form 102A,” or “New Form 102A”); section 102B for the collection of ownership and control information from clearing members on volume threshold accounts associated with DCMs or SEFs (“102B,” “Form 102B,” or “New Form 102B”); and section 102S for the submission of 102S filings for swap counterparty and customer consolidated accounts with reportable positions (“102S,” “Form 102S,” or “102S filings”). Second, the amendments will enhance the Commission's surveillance and large trader reporting programs for futures, options on futures, and swaps through a variety of enhancements, including: Requiring the reporting on Form 102A of the trading accounts that comprise each special account; requiring the reporting of certain omnibus account information on Form 71 (“Form 71” or “New Form 71”) upon special call by the Commission;

updating Form 40 (“New Form 40”); and integrating the submission of 102S and 40S filings into the general Form 102 and Form 40 reporting program. Finally, these rules will provide for the electronic submission of Forms 102, 40, and 71 through either a web portal or secure FTP transmission.

As explained below, information regarding the owners and controllers of volume threshold accounts reported on Form 102B and that are identified as omnibus accounts (“omnibus volume threshold accounts”) will be collected by the Commission directly from originating firms, via Form 71.

B. Benefits Derived From Final Rules

The benefits of reporting through a dedicated ownership and control report (“OCR”) were discussed in proposed rulemakings that preceded these final rules—specifically, the Advanced Notice of Proposed Rulemaking published in July 2009

(the “2009 Advanced NPRM”), the Notice of Proposed Rulemaking published in July 2010

(the “2010 OCR NPRM”) and the subsequent Notice of Proposed Rulemaking published in July 2012

(the “NPRM”). Section IV below discusses the history of certain previous OCR rulemakings in more detail. As discussed in the NPRM, the final rules will enhance the Commission's current trade practice and market surveillance programs for futures and options on futures, and facilitate surveillance programs for swaps, by expanding the information presently collected on current Forms 102 and 40, and introducing a new information collection for omnibus volume threshold accounts in New Form 71.

The rules will also help implement the 102S and 40S filing requirements adopted in connection with the Commission's part 20 rules addressing large trader reporting for physical commodity swaps (discussed below).

Ultimately, the final rules will significantly enhance the Commission's ability to identify participants in the derivatives markets and to understand relationships between trading accounts, special accounts, reportable positions, and market activity. This will enable the Commission to better deter and prevent market manipulation; deter and detect abusive or disruptive practices (such as marking the close, “wash trading,” or money passing); and better perform risk-based monitoring and surveillance between related accounts.

See

Commission, Advanced Notice of Proposed Rulemaking: Ownership and Control Report, 74 FR 31642 (July 2, 2009).

See

Commission, Notice of Proposed Rulemaking: Ownership and Control Report, 75 FR 41775 (July 19, 2010).

See

Commission, Notice of Proposed Rulemaking: Ownership and Control Reports, Forms 102/102S, 40/40S, and 71, 77 FR 43968 (July 26, 2012).

See id.

at 43970.

See infra

section V for a discussion of New Form 71 and omnibus volume threshold accounts.

See infra

section V for a discussion of the 102S and 40S filing requirements.

See also

17 CFR 20.5(a) and (b). Final part 20 was published in the

Federal Register

on July 22, 2011.

See

Commission, Large Trader Reporting for Physical Commodity Swaps, 76 FR 43851 (July 22, 2011) (“Large Trader Reporting for Physical Commodity Swaps”).

As discussed in the NPRM, the final rules respond, in part, to the increased dispersion and complexity of trading in U.S. futures markets following their transition from localized, open-outcry venues to global electronic platforms.

Although electronic trading has conferred important informational benefits upon regulators, the resulting increases in trading volumes, products offered, and trader dispersion have created equally important regulatory challenges. Effective surveillance now requires automated analysis and pattern and anomaly detection involving millions of daily trade records

and hundreds of thousands of position records

present in the surveillance data sets received daily by the Commission.

Although the final rules are partly driven by these developments in the U.S. futures markets, as discussed above, the rules will also facilitate the creation of a robust surveillance program for swaps that adequately captures information with respect to swap market participants.

See

NPRM

supra

note 10 at 43970.

For example, in November 2011, the Commission received an average of 7.4 million trade records per day from electronic trading on DCMs.

For example, in November 2011, the Commission received an average of 617,000 position records per day from reporting firms and exchanges.

Daily trade and position records are provided to the Commission pursuant to §§ 16.02 and 17.00, respectively. For further discussion of the Commission's large trader reporting program, see sections III(A) and (B), below.

In order to perform effective surveillance, the Commission must receive data sets that contain a sufficient number of reference points for the Commission to uncover relationships between related accounts, and analyze information based on surveillance criteria that are frequently evolving in response to market events. The collection of additional information regarding trading accounts and traders will enable the Commission to perform more efficient and effective surveillance. In particular, the OCR data collection will enable the Commission to link transaction-level data that it receives (which includes trading account numbers, but not traders'

names) to position-based data (which includes large traders' names, but not their trading account numbers), as explained below.

As noted in the NPRM, “Commission staff utilizes two distinct data platforms to conduct market surveillance: The Trade Surveillance System (`TSS') and the Integrated Surveillance System (`ISS'). Broadly speaking, TSS captures transaction-level details of trade data, while ISS facilitates the storage, analysis, and mining of large trader data from a position perspective. One important component of TSS is the Trade Capture Report (`TCR'). Trade Capture Reports contain trade and related order data for every matched trade facilitated by an exchange, whether executed via open-outcry, electronically, or non-competitively. Among the data included in the TCR are trade date, product, contract month, trade time, price, quantity, trade type (

e.g.,

open outcry outright future, electronic outright option, give-up, spread, block, etc.), executing broker, clearing member, opposite broker and clearing member, customer type indicator, trading account numbers, and numerous other data points.”

The OCR data collection will address a gap in the current system by providing common reference points between TSS and ISS data. New Form 102A, for example, is structured to collect special account numbers,

trading account numbers that comprise the special account, and the names of owners and controllers of both special accounts and such trading accounts, thereby linking TSS data to ISS data.

See

NPRM

supra

note 10 at 43970.

As discussed in section III(A) below, a special account is a commodity futures or option account that has a reportable position, based on reporting levels set by the Commission. A special account number is a unique account identifier assigned by an FCM, clearing member, or foreign broker to a special account.

See

17 CFR 17.00(g)(2)(iii) and 17 CFR 17.01(a). Special account numbers are included in ISS data. The special account number does not correspond to the trading account number reported on the Trade Capture Report. Accordingly, the special account number is not sufficient to link TSS data to ISS data.

The final rules do not amend the current reporting requirements with respect to ownership information, in connection with both position reporting pursuant to § 17.00 and Form 102 reporting pursuant to § 17.01. For a complete discussion of the reporting requirements with respect to ownership information, see section V(A)(i) below.

The data collection will also help the Commission to better identify and categorize individual trading accounts and market participants that trigger position or newly-created volume-based reporting thresholds. For example, New Form 102A will require reporting firms to identify the constituent trading accounts of each reported special account. In this manner, New Form 102A will ensure a new level of interoperability between the Commission's TSS trade data and ISS large trader data, and will permit Commission staff to quickly reconstruct trading for any special account. In addition to linking the two databases, New Form 102A will identify both the owners and controllers of such constituent trading accounts, thereby providing the Commission with a new lens through which to identify and surveil market activity that might otherwise appear unrelated to the Commission's surveillance programs.

New Form 102B will, for the first time, require identification of trading accounts based solely on their total trading volume during a single trading day. This new information collection will enhance the Commission's trade practice surveillance program by revealing connections of ownership or control between trading accounts that otherwise appear unrelated in the TCR. More generally, it will facilitate Commission efforts to detect and deter attempted market disruptions that may occur even in the absence of large open positions that are reportable on New Form 102A. Finally, the automated collection of OCR information via electronic forms, rather than through ad-hoc, manual processes, will permit both the Commission and market participants to administer the reporting programs more efficiently and effectively. Additional information on the forms addressed by these final rules is provided in section V below.

II. Statutory Framework for Position Reporting and Trader and Account Identification

The Commission's current reporting rules, and those adopted herein, are primarily implemented by the Commission pursuant to the authority of sections 4a, 4c(b), 4g, and 4i of the Act.

Section 4a of the Act, as amended by the Dodd-Frank Act, requires the Commission to set and enforce speculative position limits with respect to both futures and swaps.

Section 4c(b) gives the Commission plenary authority to regulate transactions that involve commodity options.

Section 4g(a) of the Act requires, among other things, each futures commission merchant (“FCM”), introducing broker, floor broker, and floor trader to file such reports as the Commission may require on proprietary and customer transactions and positions in commodities for future delivery on any board of trade in the United States or elsewhere.

In addition, section 4g(b) requires registered entities to maintain daily trading records as required by the Commission, and section 4g(c) requires floor brokers, introducing brokers, and FCMs to maintain their own daily trading records for each customer in such manner and form as to be identifiable with the daily trading records maintained by registered entities. Section 4g(d) permits the Commission to require that such daily trading records be made available to the Commission.

Lastly, section 4i of the Act requires the filing of such reports as the Commission may require when positions taken or obtained on designated contract markets equal or exceed Commission-set levels.

Collectively, these CEA provisions warrant the maintenance of an effective and rigorous system of market and financial surveillance.

7 U.S.C. 1

et seq.

In addition, CEA section 8a(5) authorizes the Commission to promulgate such regulations as, in its judgment, are reasonably necessary to effectuate any provision of the Act or to accomplish any of the purposes of the Act. 7 U.S.C. 12a(5). These final rules are also consistent with the purposes enumerated in CEA section 3(b), which states that the Act seeks to ensure the financial integrity of regulated transactions and to prevent price manipulation and other disruptions to market integrity. 7 U.S.C. 5(b).

7 U.S.C. 6a.

See

NPRM

supra

note 10 at 43970.

See infra

note 26 for a discussion of the Dodd-Frank Act.

7 U.S.C. 6c(b).

7 U.S.C. 6g(a).

See supra

section I(B) for a discussion of the trade data transmitted daily to the Commission by registered entities.

7 U.S.C. 6i.

As further discussed in the NPRM, in addition to the CEA sections described above, on July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).

Title VII of the Dodd-Frank Act

amended the CEA to establish a comprehensive new regulatory framework for swaps and security-based swaps. The legislation was enacted to reduce risk, increase transparency, and promote market integrity within the financial system by, among other things: (1) Providing for the registration and comprehensive regulation of swap dealers and major swap participants; (2) imposing clearing and trade execution requirements on standardized derivative products; (3) creating robust recordkeeping and real-

time reporting regimes; and (4) enhancing the Commission's rulemaking and enforcement authority with respect to, among other parties, all registered entities and intermediaries subject to the Commission's oversight.

See

Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the Dodd-Frank Act may be accessed at

http://www.cftc.gov./LawRegulation/OTCDERIVATIVES/index.htm. See

NPRM

supra

note 10 at 43971.

Pursuant to section 701 of the Dodd-Frank Act, Title VII may be cited as the “Wall Street Transparency and Accountability Act of 2010.”

As part of the Commission's rulemaking program implementing the Dodd-Frank Act,

the rule changes adopted herein also include swaps-related considerations in connection with the Commission's large trader reporting rules for swaps, enacted in 2011.

New CEA section 4t acknowledges the Commission's authority to establish a large trader reporting system for swaps that the Commission has determined perform a significant price discovery function; accordingly, the swaps-related considerations in the rules adopted herein also rely in part on the Commission's authority in CEA section 4t. Similarly, new CEA section 4s(f) requires swap dealers and major swap participants to make such reports as required by the Commission by rule or regulation regarding the transactions and positions of the registered swap dealer or major swap participant.

In addition, new CEA section 5h(f)(10) requires SEFs to report to the Commission, in a form and manner acceptable to the Commission, information that the Commission determines to be necessary or appropriate for the Commission to perform its duties under the CEA.

See generally, http://www.cftc.gov/LawRegulation/DoddFrankAct/index.htm

As noted

supra

in note 12, 17 CFR 20.5(a) and (b) contain the 102S and 40S filing requirements, discussed in greater detail below. Final part 20 was published in the

Federal Register

on July 22, 2011.

7 U.S.C. 6s(f).

7 U.S.C. 7b-3(f)(10).

III. Current Trader and Account Identification Programs

Section III below summarizes the current trader and account identification program under Forms 102 and 40, which is also discussed in detail in Section III of the NPRM.

See

NPRM

supra

note 10 at 43971.

A. Futures Large Trader Reporting—Current Forms 102 and 40

Current § 17.00, in part 17 of the Commission's regulations, forms the basis of the Commission's large trader reporting program.

It requires each FCM, clearing member, and foreign broker to submit a daily report to the Commission for each “special account” it carries—

i.e.,

a commodity futures or option account that has a reportable position. Such “§ 17.00 position reports” show the futures and option positions of traders with positions at or above specific reporting levels set by the Commission. Current reporting position trigger levels are located in § 15.03(b).

The daily report is sent to the Commission as a single data file from each reporting party pursuant to technical specifications identified in § 17.00(g).

The Commission's surveillance staff uses this report to, among other things: Assess individual traders' activities and potential market power; enforce speculative position limits; monitor for disruptions to market integrity; and calculate statistics that the Commission publishes to enhance market transparency (

e.g.,

in the Commitments of Traders reports).

17 CFR 17.00.

17 CFR 15.03(b).

17 CFR 17.00(g).

i. Identification of Special Accounts—Current Form 102

For each special account identified by an FCM, clearing member, or foreign broker and reported to the Commission in a § 17.00 position report, current § 17.01

requires the reporting party to separately identify the special account to the Commission on Form 102.

Pursuant to current § 17.02(b)(2),

Form 102 must be submitted by such parties within three days of an account becoming a special account. A Form 102 submission may also be required by the Commission or its designee via a special call. The text of current § 17.01

states the requirement to submit Form 102, and enumerates the specific data fields that are required to be completed on Form 102. Currently, Form 102 requires the filing of a separate “paper” form for each special account, which is generally transmitted to the Commission via email, facsimile, or regular mail. As explained below, these final rules will replace current Form 102, and require respondents to electronically submit New Form 102; the Commission will no longer accept submissions by email, facsimile, or regular mail.

17 CFR 17.01.

Current Form 102 is titled “Identification of Special Accounts.” 17 CFR 15.02.

17 CFR 17.02(b)(2).

17 CFR 17.01.

As noted above, Form 102 identifies and provides information with respect to special accounts carried by FCMs, clearing members, and foreign brokers. The current form, which will be updated and replaced by these final rules, provides the Commission with contact information for the trader(s) who owns and/or controls trading in each special account included in the daily § 17.00 position reports. The Form 102 questions, as currently detailed in § 17.01(a)-(f),

require the reporting firm to provide the following: A special account number; the name, address, and other identification information for the controller, owner (if also the controller), or originator (if an omnibus account) of the account; an indication whether trades and positions in the special account are usually associated with commercial activity of the account owner in a related cash commodity or activity; information regarding an FCM's relationship to the account; and name and address information for the party submitting the Form 102.

17 CFR 17.01(a)-(f).

Form 102 requires the reporting party to provide the legal entity identifier (“LEI”) (if any) of the reporting party and of various other parties reportable on the form, such as account owners, controllers, and originators. As noted in the footnotes to the reporting forms in the Appendix, if a reporting party provides an LEI on New Form 102 that was issued by the CICI Utility (or by any other CFTC-accepted LEI provider), then the reporting party is not required to report any of the fields marked as “Optional Fields” in the relevant question (

i.e.,

name and address), provided that such Optional Fields were reported to the CICI Utility (or other CFTC-accepted LEI provider) and are associated with the relevant LEI. The Commission is addressing such otherwise duplicative reporting in order to leverage information regarding reporting parties that is available from another source. Furthermore, in the event the CICI Utility (or any other CFTC-accepted LEI provider) is modified in the future to accept any of the fields marked on the forms as “Supplemental Fields,” then the reporting party will not be required to report any of the Supplemental Fields in the relevant question, provided that such Supplemental Fields were reported to the CICI Utility (or other CFTC-accepted LEI provider) and are associated with the relevant LEI. “Optional Fields” are currently captured by the CICI Utility, while “Supplemental Fields” are not currently captured by the CICI Utility. Reporting parties that take advantage of such relief from duplicative reporting on the forms should indicate in their submission that the omitted information has been reported to an LEI provider.

Based on the Commission's experience in receiving and reviewing Form 102 submissions, and as discussed below in the context of the final rules, the Commission has determined to update Form 102 in order to accommodate more detailed ownership and control information regarding identified special accounts, and to identify underlying trading accounts. In addition, the Commission is implementing an automated transmission process for Form 102 reporting, through either a web portal or secure FTP transmission, so that both the Commission and market participants may benefit from the efficiencies of automation.

See infra

section VIII(B)(iv) for a discussion of the Commission's contact reference database, which is intended to streamline the automated submission process and reduce the burden on reporting parties.

ii. Statement of Reporting Trader—Current Form 40

Current § 18.04, in part 18 of the Commission's regulations, requires that, after a special call of the Commission, each trader holding or controlling a reportable position file with the Commission a “Statement of Reporting Trader” on current Form 40, at such time and place as directed in the call.

Current Form 40 is most commonly submitted to the Commission via email, facsimile, or regular mail, but this submission scheme will be changed by these final rules. Specifically, as discussed below, current Form 40 will be replaced by New Form 40, which must be electronically submitted in response to a special call through either a web-based portal or a secure FTP transmission. When submitted in a timely and accurate manner, Form 40 submissions provide the Commission with basic identifying information regarding reportable traders active in its markets.

17 CFR 18.04.

Similar to current § 17.01, current § 18.04 specifically enumerates the data fields required in a Form 40 filing. Section 18.04 and Form 40 require a reporting trader receiving a special call to provide the following principal data points: Name and address; principal business and occupation; type of trader; registration status with the Commission; name and address of other persons whose trading the trader controls; name, address, and phone number for each controller of the reporting trader's trading; name and location of other reporting firms through which the reporting trader has accounts; name and locations of persons guaranteeing the trading accounts of the reporting trader or persons having a 10 percent or greater financial interest in the reporting trader or its accounts; other identification information regarding accounts which the reporting trader guarantees or in which the reporting trader has a financial interest of 10 percent or more; and whether the reporting trader has certain relationships with owners that are foreign governments.

Natural persons completing current Form 40 must also provide the following information, as applicable: A business telephone number; employer and job title; description of trading activity related to physical activity in or commercial use of a commodity; name and address of any organization of which the reporting trader participates in the management, if such organization holds a trading account; the name and address of a partner and/or joint tenant on the account; and the name and address of the partner and/or joint tenant that places orders.

Corporations and other non-natural persons completing current Form 40 must also provide the following information, as applicable: The jurisdiction where the reporting party is organized; names and locations of parent firms and their respective U.S. entity indication; names and locations of all subsidiary firms that trade in commodity futures and options on futures and their respective U.S. entity indication; name and address of person(s) controlling trading, by commodity and transaction type; contact information for a contact person regarding trading; and description of trading activity related to physical activity in, or the commercial use of, a commodity.

As with Form 102, and based on the Commission's experience in calling for and reviewing Form 40 submissions, the Commission has determined to update Form 40 in order to request more detailed information regarding the ownership, control and business activities of reporting traders. In addition, the Commission is implementing an automated transmission process for Form 40 reporting, through either a web portal or secure FTP transmission, so that both the Commission and market participants may benefit from the efficiencies of automation.

B. Large Trader Reporting for Physical Commodity Swaps—102S and 40S Filings

As noted above, and discussed in detail in Section III of the NPRM,

the Commission adopted rules in 2011 pertaining to swaps large trader reporting as new part 20 of the Commission's regulations.

In addition to establishing a position-based reporting scheme for swaps,

the rules also require the reporting of counterparty consolidated accounts with reportable positions (via Form 102S) and the filing of a Form 40S in response to a special call by the Commission. In general, the 102S and 40S filings serve an analogous function for swap counterparties with reportable positions to that served by the current Form 102 and Form 40 filings for futures and options on futures traders with reportable positions. These final rules will update Forms 102S and 40S, in part by requiring more detailed ownership and control information, and integrate the forms into the automated submission process.

See

NPRM

supra

note 10 at 43972.

See supra

note 12.

See generally:

Large Trader Reporting for Physical Commodity Swaps: Division of Market Oversight Guidebook for part 20 Reports, available at:

http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/ltrguidebook053112.pdf

(hereafter, “Swaps Large Trader Guidebook”).

Pursuant to § 20.5(a), in part 20 of the Commission's regulations, current 102S filings must be filed by a part 20 reporting party (a swap dealer or clearing firm) for each reportable counterparty consolidated account and “shall consist of the name, address, and contact information of the counterparty and a brief description of the nature of such person's paired swaps and swaptions market activity.”

In addition, pursuant to § 20.5(b), and in conjunction with § 20.6, all clearing organizations, swap dealers, clearing members, and counterparties with reportable positions must, after a special call of the Commission, complete a Form 40 “as if any references to futures or options contracts were references to paired swaps or swaptions as defined in § 20.1” and submit the same to the Commission as a 40S filing.

17 CFR 20.5(a).

17 CFR 20.5(b) and 20.6.

These final rules update and replace the reporting framework established by part 20. The information requested in new Form 102S also reflects considerations developed in the Swaps Large Trader Guidebook for compliance with part 20.

For example, new Form 102S requires information on both swap counterparty and customer consolidated accounts with a reportable position.

New Form 102S also requests ownership and control information regarding each non-omnibus consolidated account identified on the form. Building on the approach of modernizing Form 102 and Form 40 submissions, these final rules also provide for the electronic submission of both Form 102S and Form 40S.

See supra

note 46.

As explained in the Swaps Large Trader Guidebook, acceptable part 20 data records include “customer,” “principal,” “counterparty” and “agent” records. Customer consolidated accounts, principal consolidated accounts, and counterparty consolidated accounts must be reported on new Form 102S, but agent data records do not need to be reported on Form 102S. Customer consolidated accounts are treated as customer accounts for purposes of Form 102S reporting, while principal consolidated accounts and counterparty consolidated accounts are treated as counterparty accounts for purposes of Form 102S reporting.

IV. Summary of 2010 and 2012 NPRMs

On July 19, 2010, the Commission published for public comment a Notice of Proposed Rulemaking that proposed to collect certain account ownership and control information for all trading accounts active on U.S. futures

exchanges and other reporting parties (the “2010 OCR NPRM”).

The 2010 OCR NPRM proposed to collect this information through a dedicated ownership and control report (“OCR”). In an effort to accommodate comments received in response to the 2010 OCR NPRM, the Commission withdrew the 2010 OCR NPRM, and instead pursued the collection of account ownership and control information through a separate Notice of Proposed Rulemaking, published on July 26, 2012 (the “NPRM”).

See supra

note 9.

See supra

note 10.

The NPRM proposed new rules and related forms to enhance the Commission's identification of futures and swap market participants, by collecting ownership and control information for certain trading accounts active on reporting markets that are DCMs or SEFs. The rules proposed to leverage the Commission's current position and transaction reporting programs by requiring the electronic submission of trader identification and market participant data on revised Forms 102 and 40, and on New Form 71. The NPRM contained a detailed discussion of the current futures large trader program under Forms 102 and 40,

and the anticipated benefits of the revised and newly introduced forms,

topics which are also summarized in these final rules.

See

NPRM

supra

note 10 at 43971.

See

NPRM

supra

note 10 at 43970.

The Commission invited all interested parties to submit comments on the NPRM, including comments with respect to costs and benefits, within a designated comment window. The Commission received a total of eight comment letters from thirteen interested parties, which are listed below.

All NPRM comment letters (“CL”) are available through the Commission's Web site at:

http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1247

The following parties submitted written comments:

1. CME Group Inc. (“CME”)

CME Group submitted a single comment letter on behalf of four DCMs, each of which is being counted for purposes of this summary as a separate interested party: The Chicago Mercantile Exchange, Inc.; the Board of Trade of the City of Chicago, Inc.; the New York Mercantile Exchange, Inc.; and the Commodity Exchange, Inc. Its comments are noted here as those of “CME”.

2. Futures Industry Association (“FIA”)

3. ICE Futures U.S., Inc. (“ICE”)

4. North American Derivatives Exchange, Inc. (“Nadex”)

5. The National Rural Electric Cooperative Association, the Large Public Power Council, and the Electric Power Supply Association (collectively, “Joint Electric Association”)

6. John Hazelwood Estate (“Hazelwood”)

Hazelwood's comment letter responds to the 2010 OCR NPRM, rather than the NPRM; however, it remains part of the record for this rulemaking.

7. Sheila Bailey-Waddell (“Waddell”)

8. Ron Troncatty (“Troncatty”)

Mr. Troncatty's comment letter was unresponsive; however, it remains part of the record for this rulemaking.

The written comments received are summarized in section VII below. In response to the comments received, the Commission has revised and/or eliminated several regulations that were proposed in the NPRM. The Commission also received a number of comments pertaining to the costs and/or benefits of certain proposed regulations. Pursuant to section 15(a) of the CEA, the Commission has considered the costs and benefits of the regulations being adopted in this release, as discussed in more detail in section VIII(B) below. For purposes of these final rules, the Commission has updated the cost estimates that appeared in the NPRM based on the most recent data and statistics available to the Commission.

V. Summary of New and Amended Forms Adopted in These Final Rules

As noted above, this rulemaking addresses three forms—New Form 102, New Form 71, and New Form 40. New Form 102 is designed as a multi-function form, since the requirement to submit New Form 102 can arise from one of three separate triggers: A special account, volume threshold account, or consolidated account becomes reportable. The data required to be submitted on a New Form 102 is determined by the underlying triggering mechanism. A discussion follows of the three New Form 102 triggering mechanisms, the related sections of the form, and the information required to be provided in each section. The Commission will send New Form 71 via a special call to collect additional information about certain volume threshold accounts identified as omnibus accounts on New Form 102B. New Form 40 will continue to serve its traditional purpose as a tool to be used, at the Commission's discretion, to collect additional information about traders and market participants identified on New Form 102, as well as on New Form 71. New Form 71 and New Form 40 are also described in detail below. In addition, section VII below discusses in detail the version of the forms proposed in the NPRM, the comments received on the forms, and the changes that are being made to the forms in these final rules in response to comments.

As part of its implementation plan related to this rulemaking, and described in more detail below, the Commission has developed both a web-based portal and a secure FTP transmission through which market participates will submit and update their reporting forms. Market participants may provide required information through either submission method. This automated process is intended to cure much of the inefficiency and potential error associated with the current submission process via email, facsimile, or regular mail.

A. Position-Triggered Form 102A (Special Accounts)

i. Special Accounts and Reportable Positions

New Form 102A is the section of New Form 102 that will serve a function most analogous to current Form 102. New Form 102A requires an FCM, clearing member, or foreign broker to identify and report its special accounts. As discussed above, a special account is defined in current § 15.00(r), and means any commodity futures or option account in which there is a reportable position.

For the purposes of part 17, reportable position is defined in current § 15.00(p)(1), and generally includes any open contract position that at the close of the market on any given business day equals or exceeds the levels in current § 15.03.

These final rules do not amend the definition of either special account or reportable position.

17 CFR 15.00(r).

17 CFR 15.00(p)(1) and 15.03.

The Commission notes that under current regulations (§ 17.00(b), citing § 150.4),

reporting firms are required to separately aggregate the positions of common owners and those of common controllers for purposes of reporting special accounts to the Commission, except as otherwise instructed by the Commission or its designee. Special accounts that are so aggregated and reported to the Commission pursuant to § 17.00 must also be identified to the Commission on Form 102 pursuant to current § 17.01. The requirement to separately aggregate the positions of common owners and those of common controllers for purposes of reporting special accounts to the Commission on Form 102 is reflected in the instructions to New Form 102A. As noted in question 2 on New Form 102A, special accounts become reportable on the form based on (i) ownership of a reportable

position, (ii) control of a reportable position, (iii) both ownership and control of a reportable position, or (iv) because the relevant account is an omnibus account with a reportable position.

17 CFR 17.00(b) and 150.4.

Following the implementation of these final rules, reporting parties should continue to report special accounts pursuant to § 17.00 on a disaggregated basis if the parties have been so instructed by the Commission or its designee. All reporting parties should continue to provide position reporting based on control of a special account. As an example, if a special account is controlled by one reporting party but owned by another, such account should be reported only by the reporting party that controls the special account.

Consistent with this guidance, and notwithstanding the requirement on New Form 102A to also report based solely on ownership of a reportable position, the Commission will not require reporting based on this trigger via New Form 102A following the implementation of these final rules. The Commission is retaining the reporting trigger based on ownership of a reportable position in New Form 102A as a placeholder, in the event that the Commission requires 102A reporting based solely on this trigger on a future date.

ii. 102A Form Requirements

As compared to current Form 102, the data fields in 102A will include new ownership and control information fields (or, in the case of special accounts that are omnibus accounts, omnibus account originator information fields) for position-based special accounts. Form 102A will also require reporting firms that are clearing members to identify the trading accounts that comprise a position-based special account, and to provide TCR trading account numbers for those trading accounts.

To clarify, trading accounts that comprise a position-based special account include all of those trading accounts that: (1) Are used to execute trades cleared by the clearing member submitting the 102A; (2) are owned or controlled by the entity identified as owning or controlling the special account reported on a 102A; and (3) execute transactions in the same commodity or commodities in which the special account has a reportable position. Notwithstanding the fact that the Commission will not require reporting of special accounts based solely on ownership (as discussed above), when completing New Form 102A, reporting parties must identify both the owners and controllers of trading accounts that comprise a position-based special account identified on the form. The Commission's objective, in requiring 102A reporting parties to identify the trading accounts that comprise a special account, is to facilitate trade-level monitoring of the means by which special account owners or controllers establish and unwind their reportable positions.

See supra

section I(B) for a discussion of the TCR.

Based on comments received in response to the 2010 OCR NPRM, it is the Commission's understanding that non-clearing FCMs, foreign brokers, and omnibus account originators (collectively, “non-clearing entities”) will generally not have the ability to match/identify a trading account number for their customers or sub-accounts (hereafter, “sub-accounts”) on the TCR.

As a result, the Commission notes that the requirement in 102A to identify a trading account number for trading accounts that comprise a special account will only be a relevant/applicable data field for clearing members identifying trading accounts that comprise a special account.

See supra

section I(B) for a discussion of the TCR.

Notwithstanding these limitations regarding the reporting of trading accounts that comprise a special account, non-clearing entities must continue to report special accounts on Form 102 with respect to their customers/sub-accounts, in the event that such accounts, if carried directly with a clearing member, would be required to be reported as a position-based special account. Current Form 102 requires non-clearing entities to report such special accounts, and New Form 102A does not change that requirement.

New Form 102A will also require reporting firms to indicate whether a special account reported based on ownership or control of a reportable position is a house or customer account of the reporting firm. This indicator will allow the Commission to perform certain financial risk surveillance functions in a more automated and efficient manner, by quickly identifying house positions that potentially create risk for the reporting firm. Finally, 102A requires any reporting firm that indicates on 102A that it is a foreign broker to identify its U.S. FCM.

New Form 102A also includes a question regarding the controllers of trading accounts.

Respondents should report all individuals meeting the definition of “trading account controller” set forth in § 15.00(bb) when responding to this question.

The Commission notes however that regardless of whether the trading is carried out in whole or in part through an automated trading system or direct human initiation, the underlying analysis remains the same. When completing Form 102A, reporting parties should identify each person that satisfies the definition of “trading account controller,” as defined in § 15.00(bb). Once respondents have identified all individuals meeting the definition of trading account controller in a Form 102A submission, they will not be required to submit change updates to the 102A if one previously identified controller takes the place of another previously identified controller. These instructions regarding the reporting of trading account controllers on New Form 102A are also applicable to the reporting of volume threshold account controllers on New Form 102B.

See

question 10(iii) on Form 102A.

Pursuant to § 15.00(bb), trading account controllers are natural persons “who by power of attorney or otherwise actually direc[t] the trading of a trading account”. In the event that a respondent's trading in a reportable trading account is conducted in whole or in part through an automated trading system (“ATS”), when submitting New Form 102A the respondent should consider whether any operator, supervisor, or other individual involved in the administration of such ATS meets the definition of trading account controller with respect to the trading account. The Commission recognizes that, for some respondents, the individuals involved in the administration of an ATS may not qualify as trading account controllers. The Commission further recognizes that the administration of ATSs may vary from one respondent to another, and that such variance may impact which natural persons a respondent identifies as trading account controllers for accounts whose trading is conducted in whole or in part through an ATS.

See

question 6 on Form 102B.

iii. Timing of 102A Reporting

See infra

the discussion of § 17.02(b) in section VII, which provides additional information regarding changes to the timing of New Form 102A reporting made in response to comments on the NPRM.

This rulemaking imposes a bifurcated deadline for submitting certain information on New Form 102A. Reporting parties are required to submit a completed Form 102A to the Commission no later than 9 a.m.

on the business day following the date on which the special account becomes

reportable. This form must include all required information, including the names of the owner(s) and controller(s) of each trading account that is not an omnibus account, and that comprises a special account reported on the form. However, the reporting party may provide certain supplemental information regarding such owner(s) and controller(s) on a later date. No later than 9 a.m. on the third business day following the date on which the special account becomes reportable, the reporting party may update its Form 102 submission to provide information with respect to such owner(s) and controller(s) other than their names (

e.g.,

their address and other contact information).

The final rules also include an “on-call” provision, which requires a 102A to be submitted on such other date as directed by special call of the Commission.

Unless otherwise specified by the Commission or its designee, the stated time in the final rules is eastern time for information concerning markets located in that time zone, and central time for information concerning all other markets, in accordance with § 17.02(a).

iv. Timing of 102A Change Updates and Refresh Updates

The final rules also require reporting parties to submit an updated Form 102A in the event that a change occurs that causes the information submitted on the form to no longer be accurate (“change updates”). Change updates must be submitted according to the bifurcated schedule described in the preceding paragraph. The final rules also include an “on-call” provision, which requires 102A change updates to be submitted on such other date as directed by special call of the Commission.

In addition to change updates, § 17.02(b) requires that, starting on a date specified by the Commission or its designee and at the end of each annual increment thereafter (or such other date specified by the Commission or its designee that is equal to or greater than six months), each FCM, clearing member, or foreign broker resubmit every 102A that it has submitted to the Commission or its designee for each of its special accounts (“refresh updates”). The goal of the refresh update provision for 102A is to establish discrete points in time where all 102A data is considered accurate and reliable, thereby avoiding the data drift that is often associated with long-term data collection efforts.

Both the change update and refresh update provisions of § 17.02(b) include a sunset provision. An FCM, clearing member, or foreign broker may stop providing change updates or refresh updates for a Form 102A that it has submitted to the Commission for any special account upon notifying the Commission or its designee that the account in question is no longer reportable as a special account and has not been reportable as a special account for the past six months. If a reporting party so notifies the Commission, and the special account becomes reportable again at a subsequent date, then the reporting party would be required to file a new Form 102A.

B. Volume-Triggered Form 102B (Volume Threshold Accounts)

i. Volume Threshold Accounts and Reportable Trading Volume Level

New Form 102B of New Form 102 introduces a new volume-based reporting structure not found in current Form 102. While current Form 102 reporting requirements arise when an account (or collection of related accounts) has a reportable position, 102B reporting is triggered when an individual trading account meets a specified trading volume level in an individual product and, as a result, becomes a “volume threshold account.” Volume threshold account, as defined below in final § 15.00(x), means any trading account that carries reportable trading volume on or subject to the rules of a reporting market that is a DCM or SEF.

The reportable trading volume level (“RTVL”) is defined in final § 15.04 as trading volume of 50 or more contracts, during a single trading day, on a single reporting market that is a DCM or SEF, in all instruments that such reporting market designates with the same product identifier (including purchases and sales, and inclusive of all expiration months).

As noted above, volume threshold accounts could reflect, without limitation, trading in futures, options on futures, swaps, and any other product traded on or subject to the rules of a DCM or SEF.

See supra

section I(A) for an explanation of the reporting markets relevant to 102B filings, and

infra

sections VII and IX for amendments to the definition of “reporting market.”

See also supra

note 12.

ii. Timing of 102S Reporting, Change Updates and Refresh Updates

The timing for submitting new 102S filings will continue to be subject to current § 20.5(a)(3).

17 CFR 20.5(a)(3) provides: “Reporting entities shall submit a 102S filing within three days following the first day a consolidated account first becomes reportable or at such time as instructed by the Commission upon special call.”

Section 20.5(a)(4) of the final rules requires that if any change causes the information filed on a 102S for a consolidated account to no longer be accurate, an updated 102S must be filed with the Commission no later than 9:00 a.m. on the business day after such change occurs, or on such other date as directed by special call of the Commission (“change updates”).

In addition to change updates, final § 20.5(a)(5) requires that, starting on a date specified by the Commission or its designee and at the end of each annual increment thereafter (or such other date specified by the Commission or its designee that is equal to or greater than six months), each clearing member or swap dealer must resubmit every 102S that it has submitted to the Commission for each of its consolidated accounts (“refresh updates”). As with the 102A and 102B, discussed above, the goal of the refresh update provision is to establish discrete points in time where all 102S data is considered accurate and reliable. The Commission is proposing the refresh update provision in an effort to maintain accurate 102S data, and to avoid the data drift which is often associated with long-term data collection efforts.

Both the change update and refresh update provisions of § 20.5(a) include a sunset provision. A clearing member or swap dealer may stop providing change updates or refresh updates for a Form 102S that it has submitted to the Commission for any consolidated account upon notifying the Commission or its designee that the account in question is no longer reportable as a consolidated account and has not been reportable as a consolidated account for the past six months. If a reporting party so notifies the Commission, and the consolidated account becomes reportable again at a subsequent date, then the reporting party would be required to file a new Form 102S.

D. Form 71 (Omnibus Accounts and Sub-Accounts)

New Form 71 (“Identification of Omnibus Accounts and Sub-Accounts”) will be sent, in the Commission's discretion, in the event that a volume threshold account is identified as a customer omnibus account on Form 102B. The Commission will send New Form 71 via a special call to the originating firm of such an account. The Commission will provide the relevant account number and reporting market reported on the 102B when sending the Form 71. Recipients of a Form 71 will be required to provide information regarding any account to which the customer omnibus account allocated trades that resulted in reportable trading volume for the account receiving such allocations (a “reportable sub-account”) on a specified trading date.

Form 71 is designed to permit originating firms to report the required information directly to the Commission without requiring such firms to disclose information regarding customers to potential competitors. If a reportable sub-account is itself an omnibus account (an “omnibus reportable sub-account”), then the originating firm will be required to (a) indicate whether the omnibus reportable sub-account is a house or customer omnibus account and (b) identify the originator of the omnibus reportable sub-account. Another Form 71 will be sent, at the discretion of Commission staff, to the originator of a customer omnibus reportable sub-account identified on Form 71. At its discretion, the Commission will continue to reach through layered customer omnibus reportable sub-accounts via successive Form 71s until reaching all reportable sub-accounts, if any, that are not omnibus sub-accounts.

The relevant trading date will be specified by Commission staff on Form 71 at the time the special call is made.

If a reportable sub-account identified on Form 71 is not an omnibus sub-account, then the originating firm will be required to identify the owner(s) and controller(s) of the non-omnibus reportable sub-account. A New Form 40 will be sent, via a special call at the discretion of the Commission, to such owner(s) and controller(s). Form 71 will therefore enable the Commission to collect the same level of information regarding owners and controllers (via a subsequent New Form 40) that the Commission will collect with respect to a non-omnibus volume threshold account identified on 102B. The key data points to be collected in Form 71 are summarized below.

As a threshold question, section A of Form 71 requires the originator of an omnibus volume threshold account or a reportable sub-account to confirm certain identifying information regarding the originator. Such information would have been reported to the Commission by an omnibus account carrying firm on Form 102B or on a preceding Form 71 (

e.g.,

the originator's name, address and phone number), and used to auto-populate the present Form 71. The originator is prompted to update any incorrect information provided in Section A.

Second, section B of Form 71 requires the originator to provide certain information regarding the allocation of trades from a specified account number, and on a specified date and reporting market, to another account (called a “recipient account”). Specifically, the originator is required to indicate whether: (1) It allocated trades from the specified account number on the specified date and reporting market that resulted in reportable trading volume for a recipient account; (2) it allocated trades from the specified account number on the specified date and reporting market, but the allocations did not sum to reportable trading volume for a recipient account on such date; or (3) it did not allocate any trades from the specified account number on the specified date and reporting market.

If condition (1) is met, the originator is required to indicate in section B whether the reportable sub-account is an omnibus reportable sub-account. If so, the originator is required to indicate whether the omnibus reportable sub-account is a house or customer omnibus account, and to provide information sufficient to identify and contact the originator of the sub-account (

e.g.,

the originator's name, address and phone number, and a contact name, contact job title, and the relationship of the contact to the originator). As noted above, another Form 71 will be sent at the discretion of Commission staff to the originator of a customer omnibus reportable sub-account identified in response to section B of Form 71. Therefore, Form 71 may be sent to a chain of such originators if each originator allocated trades to another customer omnibus reportable sub-account.

If the reportable sub-account is not an omnibus sub-account, the originator is

required to provide information sufficient to identify and contact the owner(s) and controller(s) of such non-omnibus reportable sub-account (

e.g.,

the name, address and phone number of the owner(s) and controller(s)). This information will enable the Commission, in its discretion, to send a New Form 40 to such owner(s) and controller(s).

E. New Form 40 (Reporting Traders)

In these final rules, the Commission adopts a revised Form 40 that will be sent, on special call of the Commission, to individuals and other entities identified on any of 102A, 102B, and Form 71. As adopted herein, New Form 40, still referred to as the “Statement of Reporting Trader,” will continue to serve the function traditionally met by current Form 40. New Form 40 will provide the Commission with detailed information regarding both the business activities and the ownership and control structure of a reporting trader identified in the Commission's Form 102 program (as updated by these final rules). New Form 40 will also be the vehicle through which market participants subject to 17 CFR 20.5(b) submit their 40S filings, and will be used to collect additional information regarding the owners and controllers of non-omnibus volume threshold accounts identified by Form 71. Those entities required to complete a New Form 40 will be under a continuing obligation, per direction in the special call, to update and maintain the accuracy of the information submitted on New Form 40 by periodically updating the information on the New Form 40 web portal or by periodically resubmitting New Form 40 by secure FTP transmission.

Among other data, New Form 40 will request the following regarding the reporting trader: Contact information for the individual(s) responsible for the reporting trader's trading activities, risk management operations, and the information on the New Form 40; if applicable, omnibus account information, foreign government affiliation information, and an indication regarding the reporting trader's status as a domestic or non-domestic entity; information regarding the reporting party's ownership structure in connection with its parents and subsidiaries; information regarding the reporting trader's control relationships with other entities; information regarding other relationships with persons that influence or exercise authority over the trading of the reporting trader; an indication regarding swap dealer status and major swap participant status; an indication of all commodity groups and individual commodities that the reporting trader presently trades, or expects to trade in the near future, in derivatives markets; and other indications regarding the nature of the reporting trader's derivatives trading activity. The form includes definitions of certain terms, including parent, subsidiary, and control, to be used for the purpose of completing New Form 40.

New Form 40 will also require reporting traders who engage in commodity index trading (“CIT”), as defined in the new form, to identify themselves to the Commission.

New Form 40 defines CIT as: (a) An investment strategy that consists of investing in an instrument (

e.g.,

a commodity index fund, exchange-traded fund for commodities, or exchange-traded note for commodities) that enters into one or more derivative contracts to track the performance of a published index that is based on the price of one or more commodities, or commodities in combination with other securities; or (b) an investment strategy that consists of entering into one or more derivative contracts to track the performance of a published index that is based on the price of one or more commodities, or commodities in combination with other securities. Reporting traders engaged in CIT as defined in (b) are required to indicate whether they are, in the aggregate, pursuing long exposure or short exposure with respect to the relevant commodities or commodity groups listed on the Form.

See question 14 in New Form 40.

See question 14ii(a) in New Form 40.

VI. Data Submission Standards and Procedures

A. Overview

During the comment period of the NPRM, the Commission's data and technology staff worked with potential reporting parties and other market participants to address the information technology standards associated with the rules proposed by the NPRM.

Following these discussions, the Commission established two submission methods for the reporting forms required by these final rules: (a) A web-based portal and (b) an XML-based, secure FTP data feed. While the NPRM contemplated that certain forms (Forms 40/S and 71) could be submitted only via the web portal, these final rules provide that reporting parties may submit each of the new or revised forms through either the web-based portal or the FTP data feed, in order to provide additional flexibility to reporting parties. The Commission is offering two filing methods for each form because it anticipates a wide range of technological capabilities among reporting parties (varying based on the relative size and experience of a given reporting party). Reporting parties will be able to select the submission method that works best with their existing data and technology infrastructure and the number of filings they expect to make. Those reporting parties electing to submit information through the FTP data feed should contact the Commission, which will provide the necessary technical information to establish the data feed. Following the publication of these final rules, the Commission intends to publish a data compliance guidebook with detailed instructions for the two submission methods.

Summaries of these discussions are available through the Commission's Web site at:

http://comments.cftc.gov/PublicComments/CommentList.aspx?id=1247

For a recent example of a similar undertaking, see the Swaps Large Trader Guidebook, linked

supra

at note 46.

When a reporting party identifies a new account on New Form 102A, 102B or 102S, the Commission will evaluate the account to determine whether to request a New Form 40/40S or New Form 71 via a special call. If the Commission determines to send a New Form 40/40S or New Form 71 to the applicable reporting trader or account originator, the Commission will contact the reporting party (generally via email, using the email address provided on the New Form 102). The Commission will provide instructions for submitting the applicable form through either the web-based portal or secure FTP data feed. Depending on the information provided in New Form 71, the Commission may require a New Form 40 or New Form 71 from additional persons or entities identified in the New Form 71, using the same process described above.

B. Schedule of Effective Date and Compliance Date

As noted above, these final rules include separate “effective” and “compliance” dates:

• The effective date of these final rules will be February 18, 2014.

• The compliance date, however, will be delayed by an additional 180 days, with the result that the compliance date of these final rules will be August 15, 2014.

Between the publication of these final rules and the effective date, reporting parties should work with the Commission's data and technology staff

to test and implement any information technology standards or systems associated with the final rules. During this testing period, reporting parties should provide all test data or form filings requested by the Commission's data and technology staff, in the form and manner requested by staff.

In addition, the Commission will conduct beta testing of each submission method prior to the compliance date. All reporting parties subject to the final rules must be in full compliance by the compliance date, including having submitted complete and accurate filings using one of the two submission methods described above.

The Commission will protect proprietary information consistent with the Freedom of Information Act and 17 CFR part 145, “Commission Records and Information.” In addition, section 8(a)(1) of the Act strictly prohibits the Commission, unless specifically authorized by the Act, from making public “data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers.” The Commission is also required to protect certain information contained in a government system of records according to the Privacy Act of 1974, 5 U.S.C. 552a.

VII. Review of NPRM and Summary of Final Rules

A. Part 15

i. § 15.00(q)—Reporting Market

NPRM Proposal

Proposed § 15.00(q) revised the definition of “reporting market” in current § 15.00(q) to replace the provision's cross-reference to section 1a(29) of the Act with a cross-reference to § 1a(40). The proposed rule also revised current § 15.00(q) to remove the provision's reference to derivatives transaction execution facilities (“DTEFs”).

17 CFR 15.00(q) and 15.02. The Dodd-Frank Act modified section 1a of the CEA. As a result, the definition of “registered entity” previously found in section 1a(29) of the CEA is now in section 1a(40). In the NPRM, the Commission proposed to revise current § 15.00(q) so that it cites to section 1a(40) for the definition of registered entity. The Commission also proposed to revise current § 15.00(q) by removing the provision's reference to DTEFs, a category of regulated markets that was eliminated by section 734 of the Dodd-Frank Act.

Discussion of Final Rule

No comments were received pertaining to the proposed rule, and the Commission is adopting proposed § 15.00(q) without modification.

ii. § 15.00(t)—Control

NPRM Proposal

Proposed § 15.00(t) added “control” to the list of defined terms in § 15.00.

The Commission's proposed definition, which applied only to special accounts (New Form 102A) and consolidated accounts (Form 102S), defined control as “to actually direct, by power of attorney or otherwise, the trading of a special account or a consolidated account.” The proposed definition specified that special accounts and consolidated accounts may have more than one controller. The Commission notes that the proposed definition of “control” applied solely for the purpose of satisfying the reporting obligations under parts 15 through 19 and 21 of the Commission's regulations. The proposed definition did not limit or alter existing law with respect to the meaning of the term control for the purpose of enforcing other requirements under the Act and the Commission's regulations, including those relating to position limits or manipulation. Similarly, existing requirements regarding the aggregation of positions in separate accounts for reporting or other purposes under the Act and Commission regulations (

e.g.,

§§ 17.00(b) and 150.4) were not altered by the definition of “control” proposed in § 15.00(t).

The definition of “control” in § 15.00 is based upon the definition of “controlled account” in section 1.3(j) of the Commission's regulations.

Summary of Comments on NPRM Proposal

FIA commented that it would be difficult and/or meaningless to provide the requested control information, because the individuals responsible for trading an account within a special account or a volume threshold account can change often, even within the same trading day.

Furthermore, “in the case of algorithmic trading programs, there likely will not be an identifiable individual who `actually directs the trading' of the program. For this reason, FCMs do not currently collect this information.”

FIA recommended removing the requirement to identify account controllers on Forms 102A and 102B.

CL-2012-FIA

supra

note 55 at 5.

CL-2012-FIA

supra

note 55 at 6.

CL-2012-FIA

supra

note 55 at 5. The 2010 OCR NPRM proposed a broader definition of an account controller: “A natural person, or a group of natural persons, with the legal authority to exercise discretion over trading decisions by a trading account, with the authority to determine the trading strategy of an automated trading system, or responsible for the supervision of any automated system or strategy.” In a comment letter dated December 23, 2010, FIA commented that “this definition cuts too broad a swath and would require information on individuals that never actually exercise trading authority over an account but, because of their position with the customer, as an owner or officer, would be deemed to have this authority . . . FIA believes the definition of an account controller should be consistent with the Commission's definition of control as set out in Commission Rule 1.3(j) and generally applied at exchanges.” The definition of an account controller reflected in § 15.00(t) and (bb)-(dd) of these final rules is based on Commission Rule 1.3(j).

Discussion of Final Rule

The Commission is adopting proposed § 15.00(t) without modification. At the same time, the Commission is modifying the instructions on Form 102 in response to comments that discussed the difficulty of identifying individuals that exercise control on a transient basis, such as individuals operating an automated trading system (“ATS”) during a daily shift. The instructions for Form 102A and Form 102B have been revised to state that respondents should report all individuals who qualify as “trading account controllers” or “volume threshold account controllers,” as defined in § 15.00(bb) and (cc), respectively.

The Commission notes that regardless of whether the trading is carried out in whole or in part through an automated trading system or direct human initiation, the underlying analysis remains the same. When completing Form 102A and Form 102B, reporting parties should identify each person that satisfies the definition of “trading account controller” or “volume threshold account controller,” as defined in § 15.00(bb) and (cc), respectively. Once respondents have identified all individuals meeting the applicable controller definition in a Form 102A or Form 102B submission, they will not be required to submit change updates to the submission if one previously identified controller takes the place of another previously identified controller.

The Commission recognizes that, for some respondents that conduct trading in a reportable trading account or volume threshold account in whole or in part through an ATS, the individuals involved in the administration of such ATS may not qualify as trading account controllers or volume threshold account controllers.

See supra

section V(A)(ii).

iii. § 15.00(u)—Reportable Trading Volume

NPRM Proposal

Volume threshold accounts, omnibus volume threshold accounts, omnibus reportable sub-accounts, and reportable sub-accounts all reflect accounts that execute (or receive via allocation or give-up) “reportable trading volume.” Proposed § 15.00(u) defined reportable trading volume as contract trading volume that meets or exceeds the level specified in proposed § 15.04. Section 15.04, in turn, provided that reportable trading volume for a trading account is trading volume of 50 or more contracts, during a single trading day, on a single

reporting market that is a board of trade designated as a contract market under section 5 of the Act or a swap execution facility registered under section 5h of the Act, in all instruments that such reporting market designates with the same product identifier (including purchases and sales, and inclusive of all expiration months).

Discussion of Final Rule

See below the discussion of comments received regarding the reportable trading volume level proposed by § 15.04. No comments were received pertaining specifically to proposed § 15.00(u), and the Commission is adopting § 15.00(u) without modification.

iv. § 15.00(v)—Direct Market Access

NPRM Proposal

Proposed § 15.00(v) defined direct market access (“DMA”) as “a connection method that enables a market participant to transmit orders to a DCM's electronic trade matching system without re-entry by another person or entity, or similar access to the trade execution platform of a SEF.” Pursuant to the proposed definition, such access could be provided directly by a DCM or SEF, or by a 3rd-party platform. Proposed Forms 102A and 102B required an FCM to indicate whether a trading account or volume threshold account has been granted DMA to the trade matching system or the respective reporting system of the applicable reporting market.

Summary of Comments on NPRM Proposal

FIA, CME and ICE commented that the definition of DMA was overbroad, and FIA predicted that “virtually all customers for which a Form 102 would be required to be filed will have been granted DMA.”

CME commented that DMA data is not related to account ownership and control, the focus of these final rules, but rather to connectivity.

CL-2012-FIA

supra

note 55 at 6. CL-2012-CME

supra

note 55 at 2-3. CL-2012-ICE

supra

note 55 at 2.

CL-2012-CME

supra

note 55 at 2-3.

Discussion of Final Rule

In response to CME's comment regarding the relevance of DMA information, the Commission has concluded that the OCR reporting forms are not the appropriate vehicle for reporting information regarding connectivity. The Commission is therefore not adopting proposed § 15.00(v), and will not include a question regarding DMA in Form 102.

v. § 15.00(v)—Omnibus Account

Note that the following definitions in section § 15.00 have been reordered due to the elimination of the definition of direct market access (proposed in the NPRM as § 15.00(v)).

NPRM Proposal

Proposed § 15.00(w) (re-ordered in the final rules as § 15.00(v)) defined omnibus account as any trading account that one FCM, clearing member or foreign broker carries for another and in which the transactions of multiple individual accounts are combined. The identities of the holders of the individual accounts are not generally known or disclosed to the carrying firm.

Discussion of Final Rule

No comments were received pertaining to the proposed rule, and the Commission is adopting proposed § 15.00(w) (re-ordered in the final rules as § 15.00(v)) without modification.

vi. § 15.00(w)—Omnibus Account Originator

NPRM Proposal

Proposed § 15.00(x) (re-ordered in the final rules as § 15.00(w)) defined omnibus account originator as any FCM, clearing member or foreign broker that executes trades for one or more customers via one or more accounts that are part of an omnibus account carried by another FCM, clearing member or foreign broker.

Discussion of Final Rule

No comments were received pertaining to the proposed rule, and the Commission is adopting proposed § 15.00(x) (re-ordered in the final rules as § 15.00(w)) without modification.

vii. § 15.00(x)—Volume Threshold Account

NPRM Proposal

Proposed § 15.00(y) (re-ordered in the final rules as § 15.00(x)) defined volume threshold account as any trading account that executes, or receives via allocation or give-up, reportable trading volume on or subject to the rules of a reporting market that is a board of trade designated as a contract market under section 5 of the Act or a swap execution facility registered under section 5h of the Act.

In the case of a give-up trade, this NPRM definition was intended to require reporting by: (i) The carrying firm of the original executing account; (ii) the carrying firm of any intervening account(s); and (iii) the carrying firm of the account to which the give-up trade was ultimately allocated. Question 10 in Section VII of the NPRM emphasized the broad scope of the definition: “The Commission intends that the definition of `volume threshold account' captures all possible categories of accounts with reportable trading volume. . . . The Commission requests public comment regarding whether the proposed definition of `volume threshold account' achieves this purpose.”

Summary of Comments on NPRM Proposal

In response to this question, CME commented that volume-based accounts should be reported at the carrying broker level, and noted that, “this is where the account ownership and control information resides, not at executing brokers.”

CL-2012-CME

supra

note 55 at 4.

Discussion of Final Rule

The Commission is adopting proposed § 15.00(y) (re-ordered in the final rules as § 15.00(x)) with one modification. The definition of volume threshold account is being scaled back in the final rules, to capture a smaller number of volume threshold accounts than under the NPRM proposal. The definition is being modified to: “any trading account that carries reportable trading volume on or subject to the rules of a reporting market that is a [DCM or SEF].”

This change will reduce the number of reportable volume threshold accounts in the case of a give-up trade:

Based on comment letters received in response to various proposed OCR rulemakings, the Commission understands that, in the case of a give-up trade, the industry regards the account to which a give-up trade is ultimately allocated as the only “carrying” account in the give-up process. On this basis, the Commission does not view the original executing account of a give-up trade, or any intervening account(s) prior to the account to which the give-up trade is ultimately allocated, as “carrying” accounts in the give-up process.

• In a give-up scenario, this definition will require reporting by the carrying firm of the account to which the trade is ultimately allocated. Reporting will not be required, however, by the carrying firm of the original executing account, or by the carrying firm of any intervening account(s) prior to the account to which the trade is ultimately allocated.

• In a non-give-up scenario, there will be no change to the number of reportable volume threshold accounts. Under both the original and revised definition, reporting will be required by the carrying firm of the account in which the trade is both executed and cleared.

The Commission believes that this approach will be more efficient and less

burdensome for reporting parties, while nonetheless capturing a sufficient number of volume threshold accounts to advance the Commission's surveillance objectives.

viii. § 15.00(y)—Omnibus Volume Threshold Account

NPRM Proposal

Proposed § 15.00(z) (re-ordered in the final rules as § 15.00(y)) defined omnibus volume threshold account as any trading account that, on an omnibus basis, executes, or receives via allocation or give-up, reportable trading volume on or subject to the rules of a reporting market that is a board of trade designated as a contract market under section 5 of the Act or a swap execution facility registered under section 5h of the Act.

Summary of Comments on NPRM Proposal

See the discussion above regarding CME's comment on the definition of “volume threshold account.”

Discussion of Final Rule

The Commission is adopting proposed § 15.00(z) (re-ordered in the final rules as § 15.00(y)) with one modification, consistent with the change to the definition of volume threshold account described above. Under the final rules, omnibus volume threshold account means “any trading account that, on an omnibus basis, carries reportable trading volume on or subject to the rules of a reporting market that is a [DCM or SEF].”

ix. § 15.00(z)—Omnibus Reportable Sub-Account

NPRM Proposal

Proposed § 15.00(aa) (re-ordered in the final rules as § 15.00(z)) defined omnibus reportable sub-account as any trading sub-account of an omnibus volume threshold account, which sub-account executes reportable trading volume on an omnibus basis. Omnibus reportable sub-account also means any trading account that is itself an omnibus account, executes reportable trading volume, and is a sub-account of another omnibus reportable sub-account.

Discussion of Final Rule

No comments were received pertaining to the proposed rule, and the Commission is adopting proposed § 15.00(aa) (re-ordered in the final rules as § 15.00(z)) without modification.

x. § 15.00(aa)—Reportable Sub-Account

NPRM Proposal

Proposed § 15.00(bb) (re-ordered in the final rules as § 15.00(aa)) defined reportable sub-account as any trading sub-account of an omnibus volume threshold account or omnibus reportable sub-account, which sub-account executes reportable trading volume.

Discussion of Final Rule

No comments were received pertaining to the proposed rule, and the Commission is adopting proposed § 15.00(bb) (re-ordered in the final rules as § 15.00(aa)) without modification.

xi. § 15.00(bb)—Trading Account Controller; § 15.00(cc)—Volume Threshold Account Controller; § 15.00(dd)—Reportable Sub-Account Controller

NPRM Proposal

The Commission proposed to separately define the concept of control in the context of trading accounts, volume threshold accounts, and reportable sub-accounts. For these accounts, “control” may only be exercised by natural persons. Accordingly, proposed § 15.00(cc), (dd), and (ee) (re-ordered in the final rules as § 15.00(bb), (cc), and (dd)) defined trading account controllers, volume threshold account controllers, and reportable sub-account controllers, respectively, as “a natural person who by power of attorney or otherwise actually directs the trading of a [trading account, volume threshold account, or reportable sub-account].” Each account type may have more than one controller. The proposed definitions in § 15.00(cc), (dd), and (ee) are relevant to the submission of New Forms 102A (trading accounts), 102B (volume threshold accounts), and 71 (reportable sub-accounts), respectively.

Summary of Comments on NPRM Proposal

See above the discussion of comments received regarding the definition of control proposed by § 15.00(t).

Discussion of Final Rule

The Commission is adopting proposed § 15.00(cc), (dd), and (ee) (re-ordered in the final rules as § 15.00(bb), (cc), and (dd)) without modification. See the discussion of § 15.00(t) above regarding the modifications to the Form 102 instructions that will be made in response to comments received regarding the definition of control.

xii. § 15.01(c)—Persons Required To Report

NPRM Proposal

The introduction of new account and controller types in New Forms 102A, 102B, and 71 will result in a corresponding expansion in the categories of persons required to provide New Form 40 reports. Accordingly, the Commission proposed to amend § 15.01(c), which currently requires Form 40 reports only from persons who hold or control reportable positions.

Proposed § 15.01(c) required New Form 40 reports from: Traders who own, hold, or control reportable positions (identified via New Form 102A); volume threshold account controllers (identified via New Form 102B); persons who own volume threshold accounts (identified via New Form 102B); reportable sub-account controllers (identified via New Form 71); and persons who own reportable sub-accounts (identified via New Form 71).

17 CFR 15.01(c).

Discussion of Final Rule

No comments were received pertaining to the proposed rule, and the Commission is adopting proposed § 15.01(c) without modification.

xiii. § 15.02—Reporting Forms

NPRM Proposal

Current § 15.02 contains a list of the forms contained in parts 15 through 19, and 21.

Proposed § 15.02 was revised to reflect the proposed introduction of new Form 71, the renaming of Form 102, and the new OMB control number created by this rulemaking.

Discussion of Final Rule

No comments were received pertaining to the proposed rule, and the Commission is adopting proposed § 15.02 without modification.

xiv. § 15.04—Reportable Trading Volume Level

NPRM Proposal

Proposed § 15.04 provided that reportable trading volume for a trading account is trading volume of 50 or more contracts, during a single trading day,

on a single reporting market that is a board of trade designated as a contract market under section 5 of the Act or a swap execution facility registered under section 5h of the Act, in all instruments that such reporting market designates with the same product identifier (including purchases and sales, and inclusive of all expiration months).

Notably, proposed § 15.04 addressed trading volume, not open positions, and required that purchases and sales by a trading account be summed to determine whether such account has reached the reportable trading volume. Section 15.04 also stipulates that reportable trading volume should encompass all instruments that the reporting market designates with the same product identifier.

Summary of Comments on NPRM Proposal

FIA, CME and ICE commented that the reportable trading volume level (“RTVL”), as proposed, would generate an excessive amount of data that may not be meaningful to the Commission's trade practice and market surveillance programs.

100

More specifically, Nadex commented that the proposed 50-contract reportable trading volume level would capture too many retail customers that are trading contracts with very small notional values.

101

100

CL-2012-FIA

supra

note 55 at 8. CL-2012-CME

supra

note 55 at 3. CL-2012-ICE

supra

note 55 at 6.

101

CL-2012-Nadex

supra

note 55 at 2-3.

FIA and ICE both recommended that the Commission phase in a descending RTVL until the optimum level is reached.

102

FIA, for example, recommended that “the Commission could require that only accounts meeting a volume threshold of 1,000 contracts per day be reported in the first three months; contracts meeting a volume threshold of 750 contracts per day be reported in the second three months after the compliance date; and so on until the optimum volume threshold is reached.”

103

CME also expressed concern that the RTVL will capture too many accounts, but recommended that the RTVL should be changed to 250 contracts bought or sold during a calendar week.

104

102

CL-2012-FIA

supra

note 55 at 8. CL-2012-ICE

supra

note 55 at 6.

103

CL-2012-FIA

supra

note 55 at 8.

104

CL-2012-CME

supra

note 55 at 3.

Nadex recommended that a different RTVL should be applied to contracts with small notional values, as compared to contracts with larger, traditional notional values. “For any contract with a notional value of $1,000 or less, the RTVL could be increased to 5,000 (

i.e.,

1,000 times the standard RTVL of 50). This would still result in the Commission capturing information with respect to a relatively insignificant amount of trading activity in terms of notional value, but would be significantly less burdensome for the DCMs that offer these contracts.”

105

If the Commission determined not to adopt a different RTVL for contracts with small notional values, then Nadex recommended that “DCMs should have the opportunity to obtain a waiver from the standard RTVL level with an appropriate alternative to be determined after consultation between the relevant market and CFTC staff.”

106

105

CL-2012-Nadex

supra

note 55 at 3.

106

Id.

Discussion of Final Rule

Although the Commission acknowledges comments received regarding the appropriate RTVL, the Commission is adopting proposed § 15.04 without modification.

As indicated in the NPRM, the RTVL is based on Commission staff's analysis of DCM trade data received through the trade capture report from a sample of DCMs during a recent six-month period. The 50-contract RTVL is calibrated to identify a critical mass of the trading accounts active in Commission- regulated markets, measured not only by the percentage of trading volume for which those accounts are responsible, but also by the absolute number of accounts identified. The 50-contract RTVL identifies approximately 85 percent of trading volume in approximately 90 percent of the products sampled by the Commission over the six-month sample period. The 50-contract RTVL also identifies approximately one-third of the trading accounts in the sample set. As a result, the 50-contract RTVL will capture both: (1) Those accounts responsible for the large majority of trading volume; and (2) a meaningful absolute number of the trading accounts active in Commission-regulated markets. The Commission believes that (1) and (2) are both equally important in improving the Commission's ability to perform robust and comprehensive market and trade practice surveillance. While the 50-contract RTVL achieves the Commission's regulatory objectives, it is nonetheless also calibrated to minimize the regulations' impact on low-volume accounts whose trading activity does not warrant inclusion in the reporting regime.

Furthermore, the Commission also reiterates that volume threshold account reporting, through Form 102B, is a transaction-based reporting regime rather than a position-based regime. A fundamental purpose of volume-based reporting on Form 102B is to identify trading accounts based solely on their trading volume, independently of such accounts' contribution to open interest. The Commission's intent in this rulemaking is to achieve a comprehensive identification of the participants in regulated derivatives markets regardless of the trading strategies they may pursue.

For these reasons, the Commission declines to accept proposals that could reduce the trading volume or absolute number of accounts identified, including FIA's proposal that the final rules switch to an RTVL that descends from 1,000 contracts to 750 contracts, or proposals that would change the basis of measurement, including CME's proposal to use an RTVL of 250 contracts bought or sold per week. In addition, the Commission also declines to accept recommendations that would result in an impracticable administrative burden, including Nadex's recommendation that a different RTVL should be applied to contracts with small notional values. The Commission believes it would be inefficient for both the Commission and various reporting parties to create a reporting regime for its regulated markets that is differently scaled across multiple products, in response to the fact that trading volume varies from one product to the next.

107

Accordingly, the final rules will use the same RTVL proposed in the NPRM.

107

See infra

section VIII(B)(vii) for a discussion of the administrative difficulties of implementing such a proposal.

The NPRM proposed to apply the same RTVL (50 contracts) to volume threshold accounts associated with both DCMs and SEFs. Because the RTVL is based on the Commission's experience with DCMs, the NPRM asked for comment whether the 50-contract RTVL was also appropriate for the reporting of accounts associated with SEFs—and if not, what changes would be appropriate for reporting with regard to SEFs. The Commission did not receive any comments in response to this question. As a result, the Commission will apply the same RTVL (50 contracts) to volume threshold accounts associated with both DCMs and SEFs in the final rules, as contemplated by the NPRM.

In the event that trading activity in the SEF marketplace is lower than in the futures marketplace, the Commission expects that the 50 contract RTVL will likely identify a smaller percentage of volume threshold accounts associated with SEFs. The 50 contract RTVL for

SEFs would, correspondingly, impose a lesser burden on parties reporting volume threshold accounts on SEFs as compared to parties reporting such accounts on DCMs. Once the final rules have been implemented, if the Commission determines that the 50 contract RTVL is identifying an insufficient number of volume threshold accounts, the Commission may adjust the RTVL for SEF reporting via a subsequent rulemaking, to ensure that an equivalent segment of both the DCM and SEF marketplace is identified.

B. Part 17

i. § 17.01(a)—Identification of Special Accounts (via 102A)

NPRM Proposal

Proposed § 17.01(a) required reporting parties to identify special accounts on New Form 102A, and referred reporting parties directly to the new form for the required data points.

Summary of Comments on NPRM Proposal

Efficiency of Forms. FIA and CME both commented that the use of multiple reporting forms (

i.e.,

the 102A, 102B and 102S) to capture similar information is inefficient and unnecessary.

108

FIA stated that “the proposed amendments appear to be designed to populate three separate data bases to accommodate the Commission's existing systems for conducting trade practice and market surveillance, thereby perpetuating an inefficient system.”

109

As an example of this inefficiency, FIA noted that “the proposed amendments would require reporting firms to provide contact information for each of Form 102A, Form 102B and Form 102S.”

110

FIA stated that “managing three separate forms for the same customer will create unnecessary work and be more challenging to keep current.”

111

CME regarded the 102 reporting as duplicative and inefficient because it “requires a different Form 102 depending on the type of trigger.”

112

108

CL-2012-FIA

supra

note 55 at 3-4. CL-2012-CME

supra

note 55 at 2.

109

CL-2012-FIA

supra

note 55 at 4.

110

Id.

111

Id.

112

CL-2012-CME

supra

note 55 at 2.

In order to eliminate redundant requests on the forms for contact information, FIA suggested creating a “Reporting Contact Reference Database,” where contact information would be stored once for each special account number.

113

“This would ensure that contact information is stored and maintained as a single record, eliminate redundancy and improve the quality of information in the ownership and control reporting process.”

114

More generally, CME recommended that “the Commission's systems can and should use a common set of reference data so that a previously identified account does not need to be re-reported based upon a different trigger.”

115

113

CL-2012-FIA

supra

note 55 at 4.

114

Id.

115

CL-2012-CME

supra

note 55 at 2.

Discussion of Final Rule

Efficiency of Forms. In response to comments regarding the efficiency of the electronic submission process, the Commission is creating a contact reference database so that respondents will not need to enter contact information each time they manually complete a 102A, 102B or 102S through the web portal. For example, the respondent would enter the account number for the applicable form, and the Web portal page would automatically populate the contact information for that account number which the respondent had most recently provided. The Commission expects that this solution may be particularly helpful to small entities, which are likely to manually complete forms through the web portal. Larger firms, by contrast, are more likely to completely automate the process.

116

See also supra

note 41. New Form 102 requires the reporting party to provide the LEI (if any) of the reporting party and of various other parties reportable on the form, such as account owners, controllers, and originators. As noted in the footnotes to the reporting forms in the Appendix, if a reporting party provides an LEI on New Form 102 that was issued by the CICI Utility (or by any other CFTC-accepted LEI provider), then the reporting party is not required to report any of the fields marked as “Optional Fields” in the relevant question (

i.e.,

name and address), provided that such optional fields were reported to the CICI Utility (or other CFTC-accepted LEI provider) and are associated with the relevant LEI. The Commission is addressing such otherwise duplicative reporting in order to leverage information previously submitted by reporting parties. Footnotes to the reporting forms in the Appendix contain instructions regarding other fields that are not required to be reported in certain circumstances.

Summary of Comments on NPRM Proposal

Burden of Collecting Information for Certain Fields. CME recommended that the data fields collected on any automated form should be limited to those records that an FCM obtains in its regular onboarding processes.

117

CME commented that if the Commission requires the inclusion of certain data points that are not currently collected, “FCMs will need to revise their onboarding procedures to obtain that data for every account so that it can be recorded in a system and eventually be extracted for the automated reports, which would be, among other things, incredibly costly.”

118

FIA recommended that data points that are not currently collected by FCMs be removed from the forms. Specifically, FIA recommended removing the requirement to provide a customer or account controller's NFA identification number, because FCMs generally do not request or record this information.

119

FIA also recommended that certain ownership and control fields be removed, because FCMs do not collect this information. On a related topic, FIA recommended that the requirement to list the customer or account controller's Web site be removed, because Web site addresses are subject to change and FCMs would have no ability to monitor for such changes and update their records.

120

117

Id.

118

Id.

119

CL-2012-FIA

supra

note 55 at 6.

120

CL-2012-FIA

supra

note 55 at 7.

FIA proposed that the three sections of the proposed 102 be consolidated into a single Form 102, a draft of which is attached to the FIA comment letter (the “FIA consolidated form”).

121

CME expressed support for the FIA consolidated form.

122

The FIA consolidated form does not include fields that FIA indicated are currently unavailable and would be burdensome to collect and/or maintain, such as the customer or account controller's NFA ID and Web site address.

121

CL-2012-FIA

supra

note 55 at 4 and Exhibit A.

122

CL-2012-CME

supra

note 55 at 2.

Discussion of Final Rule

Burden of Collecting Information for Certain Fields. The Commission declines to accept the proposal to create a single, consolidated Form 102 based on the FIA consolidated form. The FIA consolidated form is missing a number of key data fields, the absence of which would undermine the goals of the Commission's data collection effort.

123

For example, the FIA consolidated form does not require respondents to state the reporting trigger. Instead, the directions to the FIA consolidated form state that, “This form must be completed if an account exceeds the reportable levels on special accounts, volume threshold accounts or consolidated accounts.” The form does not clarify whether respondents are reporting a special account, volume threshold account, or consolidated account that has reached a

reportable level. Without knowing the reporting trigger for the form (

e.g.,

whether the reporting party had reached a reportable position or reportable volume level), the Commission would be unable to efficiently and accurately categorize the trading accounts reported on the form, and utilize this account information for surveillance or other related purposes.

123

See infra

section VIII(B)(vi) for a more detailed discussion of the FIA consolidated form.

However, the Commission is accommodating FIA's comments in a more limited fashion, by clarifying in the instructions to the new forms that the NFA ID and Web site (the two examples of problematic fields cited by FIA) are only required to be reported to the extent the respondent has this information available in its records. There is no affirmative obligation for respondents to poll customers or other parties for the NFA ID and Web site if this information has not been previously collected.

Summary of Comments on NPRM Proposal

Identification of Special Account Owners. FIA noted that the current Form 102 requires that a special account be identified only by account controller (who may also be the account owner).

124

The new Form 102A requires that both the owner and controller of a special account be identified, if the account is reportable due to both ownership and control of a reportable position. FIA commented that “if an account is identified by owner or controller, the FCM may be required to file two Form 102s for the same account.”

125

FIA also commented that ownership information may be difficult for FCMs to provide, because FCMs “currently collect only limited information on certain indirect owners of an account,

e.g.,

fund participants that have a 10 percent or greater ownership interest, when the account is opened. This information is not updated.”

126

Finally, FIA commented that “owner” is not defined for purposes of Form 102.

127

FIA recommended “removing the proposed requirement that special accounts be identified only by account owner.”

128

124

CL-2012-FIA

supra

note 55 at 5.

125

Id.

126

Id.

127

Id.

128

Id.

Discussion of Final Rule

Identification of Special Account Owners. The Commission declines to modify the reporting forms in response to comments regarding the identification of account owners. The Commission notes that FIA's comment that FCMs may be required to file two Form 102s for the same account appears to be based upon a misunderstanding of the New Form 102 filing procedure. Regardless of whether a Form 102A is filed as a result of ownership of a reportable position, control of a reportable position, or both ownership and control of a reportable position,

129

the form would be filed only once in response to each reporting trigger, by means of an electronic submission through a secure FTP data feed or through the Commission's secure Web site portal.

129

See supra

section V(A)(i) regarding the requirement on New Form 102A to report special accounts solely on the basis of ownership.

As discussed above, FIA commented on the difficulty of collecting information regarding the direct owners of an account. However, the Commission notes that New Form 102 is identical to current Form 102 in that it requires respondents to determine which party directly owns a special account. The New Form 102 is not more burdensome in this regard. As a result, the Commission is not, pursuant to these final rules, requiring respondents to change their current practices with respect to the manner in which they identify owners for purposes of 102 reporting.

Finally, FIA discussed the difficulty of maintaining accurate information regarding the indirect owners of an account. The Commission notes that the New Form 102 requests information regarding only the direct owners of trading accounts, not the indirect owners.

Summary of Comments on NPRM Proposal

Sharing of Information With Regulatory and Self-Regulatory Authorities. FIA and CME recommended that the information collected via the revised forms should be made available to “appropriate regulatory and self-regulatory authorities” (FIA) and “relevant SROs” (CME).

130

Furthermore, ICE recommended that the Commission should “either provide a feed or separate file differentiated by exchange code(s) to each DCM containing information only for those accounts actively trading on the DCM, or permit DCMs to access and download the LTR [large trader reporting] and OCR data specific to the DCM.”

131

130

CL-2012-FIA

supra

note 55 at 8. CL-2012-CME

supra

note 55 at 3.

131

CL-2012-ICE

supra

note 55 at 6.

Discussion of Final Rule

Sharing of Information With Regulatory and Self-Regulatory Authorities. The Commission is not modifying the final rules to provide for the sharing of information collected via the forms with the parties proposed by commenters, such as regulatory and self-regulatory authorities. The Commission believes that it would be costly and overly burdensome for the Commission to distribute the collected information to external parties; furthermore, distribution to external parties would not be consistent with the scope of the Commission's responsibilities. The Commission notes that DCMs and SEFs may also implement rules requiring market participants to submit ownership and control information directly to them, if DCMs and SEFs determine that such reporting would be beneficial.

ii. § 17.01(b)—Identification of Volume Threshold Accounts (via 102B)

NPRM Proposal

Proposed § 17.01(b) subjects volume threshold accounts to an account identification regime comparable to the position-based regime already existing for special accounts. Proposed § 17.01(b) specifically requires clearing firms to identify volume threshold accounts on New Form 102B.

Summary of Comments on NPRM Proposal

See the discussion of § 17.01(a) above, which describes comments received regarding the identification of special accounts and volume threshold accounts on Forms 102A and 102B, respectively.

Discussion of Final Rule

The Commission is adopting proposed § 17.01(b) without modification.

iii. § 17.01(c)—Identification of Omnibus Accounts and Sub-Accounts (via 71)

NPRM Proposal

Proposed § 17.01(c) subjected omnibus accounts to their own volume-based account identification regime.

132

The proposed rule required the originator of an omnibus volume threshold account (or the originator of an omnibus reportable sub-account within such account) to file New Form 71 (“Identification of Omnibus Accounts and Sub-Accounts”) upon

special call by the Commission or its designee.

132

See supra

section V(D) and

infra

section IX.

Discussion of Final Rule

No comments were received pertaining to the proposed rule, and the Commission is adopting proposed § 17.01(c) without modification.

iv. § 17.01(d)—Exclusively Self-Cleared Contracts

NPRM Proposal

Proposed § 17.01(d) required reporting markets that list exclusively self-cleared contracts to file § 17.01(a) and § 17.01(b) reports as if they were clearing members. Proposed § 17.01(d) reflects the requirements of current § 17.01(h) with respect to special accounts, but also incorporates the new volume threshold accounts added by these final rules.

Discussion of Final Rule

No comments were received pertaining to the proposed rule, and the Commission is adopting proposed § 17.01(d) without modification.

v. § 17.01(e)—Identification of Omnibus Accounts and Sub-Accounts

NPRM Proposal

The Commission proposed to introduce a new § 17.01(e) that would extend the Commission's special call authority—currently applicable to special accounts—to also include volume threshold accounts, omnibus volume threshold accounts and reportable sub-accounts.

133

Responses to special calls would be due within 24 hours.

133

The Commission's special call authority with respect to special accounts is currently found in § 17.02(b)(1), which the Commission will now strike, as explained below.

Discussion of Final Rule

No comments were received pertaining to the proposed rule, and the Commission is adopting proposed § 17.01(e) without modification.

vi. § 17.02(b)—Section 17.01(a) Reports (via 102A)

NPRM Proposal

Section 17.02(b)

134

currently addresses the form, manner, and completion date requirements of current 102 filings. Specifically, § 17.02(b)(1) requires reporting parties to submit current Form 102 upon special call by the Commission; in the absence of a special call, § 17.02(b)(2) requires reporting parties to submit current Form 102 within three business days of the first day that a special account is reported to the Commission. The Commission proposed to replace both provisions as described below.

134

17 CFR 17.02(b).

First, as explained above, the Commission proposed to strike current § 17.02(b)(1) and to shift its special call requirements to proposed § 17.01(e). Second, the Commission proposed to strike current § 17.02(b)(2) and to replace its Form 102 submission requirements with a new § 17.02(b)(1)-(4) to address the form and manner of New Form 102A filings for special accounts. Proposed § 17.02(b)(1) directed reporting parties to the Commission's Web site (

www.cftc.gov

) for detailed instructions on the Form 102A filing process. Proposed § 17.02(b)(2)-(4) addressed the completion date requirements of initial Form 102A submissions, 102A change updates, and 102A refresh updates, respectively.

Summary of Comments on NPRM Proposal

§ 17.02(b)(2)-(3) (new 102A filings and change 102A filings). Proposed § 17.02(b)(2)-(3) required firms to file a new Form 102A by 9:00 a.m. ET the following business day after a special account becomes reportable; similarly, changes to a previously submitted Form 102A were required to be reported by 9:00 a.m. ET the following business day. FIA stated that obtaining all the information required by Form 102A (including, for example, the trading accounts that comprise a special account) can take several days.

135

As a result, FIA recommended that the deadline for filing a complete Form 102A or any change update be modified to five business days from the date the account or change becomes reportable.

136

135

CL-2012-FIA

supra

note 55 at 7.

136

Id.

§ 17.02(b)(4) (refresh 102A filings). Proposed § 17.02(b)(4) required firms to resubmit the Form 102A every six months for each special account, in order to ensure that the information reported is frequently updated. Refresh updates were also required under this proposed rule on such later date (

i.e.,

later than six months) specified by the Commission or its designee. FIA commented that this timeframe “will impose significant operational and financial burden on reporting firms,” and recommended that refresh updates instead be required every two years.

137

CME also recommended that refresh updates be required every two years.

138

137

Id.

138

CL-2012-CME

supra

note 55 at 3.

§ 17.02(b)(3)-(4) (when 102A accounts are no longer reportable). Proposed § 17.02(b)(3)-(4) provided that an FCM may stop reporting a change update or refresh update with respect to a special account upon notifying the Commission or its designee that the account in question is no longer reportable. FIA stated that “the Commission provides no guidance on when an FCM may reasonably conclude that an account is no longer reportable. A customer may fall below and rise above the reportable position level frequently during the course of its relationship with an FCM.”

139

FIA therefore recommended that the Commission revise the proposed rule to provide that an FCM may determine that an account is no longer reportable with respect to a particular product if the account remains below the reporting level for a fixed period of time, such as 180 days/six months.

140

FIA's six-month proposal tracks the sunset provision in the NPRM for the reporting of change and refresh updates on Form 102B.

141

139

CL-2012-FIA

supra

note 55 at 7.

140

CL-2012-FIA

supra

note 55 at 7-8.

141

Under the NPRM and these final rules, clearing members may stop providing change and refresh updates on Form 102B for any volume threshold account upon notifying the Commission or its designee that the volume threshold account executed no trades in any product in the past six months on the reporting market at which the volume threshold account reached the reportable trading volume level. See § 17.01(c)(3) and (4) in section IX,

infra.

Discussion of Final Rule

No comments were received pertaining to proposed § 17.02(b)(1), and the Commission is adopting this proposed rule without modification. In light of the comments received, the Commission is making the following modifications to § 17.02(b)(2)-(4) and to new Form 102A:

§ 17.02(b)(2)-(3) (new 102A filings and change 102A filings). New Form 102A requests information regarding both special accounts and the trading accounts that comprise a special account. The Commission is modifying the reporting deadline for new and changed Form 102A filings, specifically with respect to the reporting of non-omnibus trading accounts that comprise a special account. Respondents are required to provide the names of such trading account owners and controllers by 9:00 a.m. the following business day. However, respondents are required to provide the other contact details with respect to such trading account owners and controllers (address, telephone

number, etc.) within three business days.

142

Specifically, the information marked as `Follow-On Information' in questions 10(ii) and (iii) on New Form 102A may be provided within three business days. All other required fields on New Form 102A must be completed by 9:00 a.m. the following business day. See New Form 102A in the Appendix to these final rules for more information. The Commission is adopting a reporting requirement of three business days as an acceptable intermediate point between one business day (as proposed in the NPRM) and five business days (as requested by FIA, per the preceding summary of comments). The three business day requirement is therefore less burdensome than the one business day requirement proposed in the NPRM. Based on the experience of the Commission's surveillance group, the Commission believes that the three business day requirement, while longer than the one day proposal in the NPRM, will nonetheless enable the Commission to maintain current databases, including up-to-date contact information that will allow the Commission to contact market participants quickly in the event of significant market events that occur close to the time of reporting. By contrast, based on the experience of the Commission's surveillance group, the Commission believes that a five business day reporting deadline is too long to perform timely market surveillance, and maintain databases that are sufficiently accurate and current to be useful.

In addition, the final rules will reduce the burden on reporting parties by clarifying that all Form 102 reporting deadlines in the final rules are eastern time for information concerning markets located in that time zone, and central time for information concerning all other markets.

§ 17.02(b)(4) (refresh 102A filings). Refresh filings for special accounts will be required once per year, as opposed to once each six months (as proposed in the NPRM).

143

In light of this change, the final rules provide that refresh updates are required on such other date specified by the Commission or its designee that is equal to or greater than six months, which is consistent with the alternative deadline language in proposed §§ 17.02 and 20.5.

143

The Commission is adopting a refresh reporting requirement of once per year as an acceptable intermediate point between once each six months (as proposed in the NPRM) and once every two years (as requested by FIA and CME, per the preceding summary of comments). The annual refresh requirement is therefore less burdensome than the six month requirement proposed in the NPRM. Based on the experience of the Commission's surveillance group, the Commission believes that the annual refresh requirement, while longer than the six month requirement proposed in the NPRM, will nonetheless enable the Commission to maintain current databases, including up-to-date contact information that will allow the Commission to contact market participants quickly in the event of significant market events. By contrast, based on the experience of the Commission's surveillance group, the Commission believes that a two year refresh deadline is too long to perform timely market surveillance and maintain databases that are sufficiently accurate and current to be useful.

§ 17.02(b)(3)-(4) (when 102A special accounts are no longer reportable). In response to FIA's comment, pursuant to these final rules, reporting parties may stop providing Form 102A change updates and refresh updates for a special account if the account is no longer reportable as a special account and has not been reportable as a special account for the past six months. This change is intended to substantively replicate § 17.02(c)(3)-(4), which provide that clearing members may stop providing Form 102B change updates and refresh updates, respectively, upon notifying the Commission or its designee that the relevant volume threshold account executed no trades in any product in the past six months on the reporting market at which the volume threshold account reached the reportable trading volume level.

Sections 17.02(b)(3) and (4) have also been modified to enable reporting parties to notify the Commission “or its designee” that an account is no longer reportable as a special account, based on the criteria described in these sections.

vii. § 17.02(c)—Section 17.01(b) Reports (via 102B)

NPRM Proposal

To address New Form 102B filings for volume threshold accounts, the Commission proposed to codify a new § 17.02(c). Proposed § 17.02(c) followed a structure similar to that of proposed § 17.02(b), with § 17.02(c)(1) directing reporting parties to

www.cftc.gov

for detailed instructions on the Form 102B filing process, and proposed § 17.02(c)(2)-(4) addressing the timing of initial Form 102B filings, 102B change updates, and 102B refresh updates, respectively.

Summary of Comments on NPRM Proposal

§ 17.02(c)(2)-(3) (new 102B filings and change 102B filings). Proposed § 17.02(c)(2)-(3) required firms to file a new Form 102B by 9:00 a.m. ET the following business day after the account becomes a volume threshold account; similarly, changes to a previously submitted Form 102B were required to be reported by 9:00 a.m. ET the following business day. See the discussion above of the comments received regarding Form 102A filings required by § 17.02(b)(2)-(3), which are also relevant to the new 102B and change 102B reporting obligations.

§ 17.02(c)(4) (refresh 102B filings). Proposed § 17.02(c)(4) required firms to resubmit the Form 102B every six months for each volume threshold account, in order to ensure that the information reported is frequently updated. Refresh updates were also required under this proposed rule on such later date (

i.e.,

later than six months) specified by the Commission or its designee. As noted above, FIA commented that this timeframe “will impose significant operational and financial burden on reporting firms,” and recommended that refresh updates instead be required every two years.

144

CME also recommended that refresh updates be required every two years.

145

144

CL-2012-FIA

supra

note 55 at 7.

145

CL-2012-CME

supra

note 55 at 3.

Discussion of Final Rule

No comments were received pertaining to proposed § 17.02(c)(1), and the Commission is adopting this proposed rule without modification. In light of the comments received, the Commission is making the following modifications to § 17.02(c)(2)-(4) and to new Form 102B:

§ 17.02(c)(2)-(3) (new 102B filings and change 102B filings). The Commission is modifying the reporting deadline for new and changed Form 102B filings, specifically with respect to the reporting of non-omnibus volume threshold accounts. Respondents are required to provide the names of non-omnibus volume threshold account owners and controllers reported on 102B by 9:00 a.m. the following business day. Respondents are required to provide the other contact details reported on 102B with respect to such parties (

i.e.,

the address, telephone number, etc. of non-omnibus volume threshold account owners and controllers) within three business days.

146

Notwithstanding this change to the reporting deadline with respect to non-omnibus volume threshold accounts, these final rules do not modify the reporting deadline for omnibus account information (question 4 on New Form 102B). Such omnibus account information must be reported by 9:00 a.m. the following business day.

146

Specifically, the information marked as `Follow-On Information' in questions 5 and 6 on New Form 102B may be provided within three business days. All other required fields on New Form 102B must be completed by 9:00 a.m. the following business day. See New Form 102B in the Appendix to these final rules for more information.

§ 17.02(c)(4) (refresh 102B filings). Refresh filings for volume threshold accounts will be required once per year, as opposed to once each six months (as proposed in the NPRM). In light of this change, the final rules provide that refresh updates are required on such other date specified by the Commission or its designee that is equal to or greater than six months, which is consistent with the alternative deadline language in proposed §§ 17.02 and 20.5.

Sections 17.02(c)(3) and (4) have also been modified to enable reporting

parties to notify the Commission “or its designee” that an account is no longer reportable as a volume threshold account, based on the criteria described in these sections.

viii. § 17.03(a)-(g)—Delegation of Authority to the Director of the Office of Data and Technology or the Director of the Division of Market Oversight

NPRM Proposal

In the NPRM, the Commission proposed a number of new and revised provisions relating to the delegation of authority to solicit information on the OCR reporting forms. First, the Commission proposed to codify a new § 17.03(e) that provided the Director of ODT with delegated authority to make special calls to solicit information from omnibus volume threshold account originators and omnibus reportable sub-account originators on New Form 71. The Commission also proposed to codify (a) a new § 17.03(f) that provided the Director of DMO with delegated authority to determine the date on which each FCM, clearing member, or foreign broker shall update or otherwise resubmit every Form 102 that it has submitted to the Commission for each of its special accounts and (b) a new § 17.03(g) that provided the Director of DMO with delegated authority to determine the date on which each clearing member shall update or otherwise resubmit every Form 102 that it has submitted to the Commission for each of its volume threshold accounts.

Second, the Commission proposed to revise current § 17.03(a), which grants the Director of DMO the authority to determine whether FCMs, clearing members and foreign brokers can report certain information on series `01 forms, or can use some other format upon a determination that such person is unable to report the information using the standard transmission format.

147

More specifically, the NPRM revised § 17.03(a) to grant such authority to the Director of ODT, rather than the Director of DMO.

147

17 CFR 17.03(a).

Third, the Commission proposed to revise current § 17.03(b), which grants the Director of DMO the authority to approve the late submission of position reports and Form 102.

148

The NPRM revised § 17.03(b) to grant such authority to the Director of ODT, rather than the Director of DMO. The NPRM further revised § 17.03(b) to: (i) Replace the provision's cross-reference to § 17.01,

149

which the Commission proposed to strike, with cross-references to proposed §§ 17.01(a) and 17.01(b); and (ii) eliminate the provision's cross-reference to current § 17.01(g),

150

which the Commission also proposed to strike.

148

17 CFR 17.03(b).

149

17 CFR 17.01.

150

17 CFR 17.01(g).

Fourth, the Commission proposed to revise current § 17.03(c), which grants the Director of DMO the authority to permit reporting parties filing Form 102 to authenticate it through a means other than signing the form.

151

The NPRM revised § 17.03(c) to grant such authority to the Director of ODT, rather than the Director of DMO. The NPRM further revised § 17.03(c) to replace the provision's current cross-reference to § 17.01(f),

152

which the Commission proposed to strike, with a cross-reference to proposed § 17.01, and to address New Form 71.

151

17 CFR 17.03(c).

152

17 CFR 17.01(f).

Finally, the Commission proposed to revise current § 17.03(d), which grants the Director of DMO the authority to approve a format and coding structure other than that set forth in § 17.00(g).

153

The NPRM revised § 17.03(d) to grant such authority to the Director of ODT, rather than the Director of DMO.

153

17 CFR 17.03(d) and 17.00(g).

Discussion of Final Rule

No comments were received pertaining to the proposed rules, and the Commission is adopting proposed § 17.03(a)-(g) without modification.

C. Part 18

i. § 18.04—Statement of Reporting Trader

NPRM Proposal

Current § 18.04 (the “Statement of Reporting Trader”) requires every trader who holds or controls a reportable position to file a Form 40 upon special call by the Commission or its designee and to provide on Form 40 information required by current § 18.04(a)-(c).

154

In the NPRM, the Commission proposed to amend § 18.04 by striking all of its current provisions and replacing them as described below.

154

17 CFR 18.04(a)-(c).

First, and consistent with its approach to New Form 102, the Commission proposed to transition current § 18.04(a)-(c)'s detailed form content requirements from the regulatory text to New Form 40. Second, the Commission proposed to codify a new § 18.04(a) that, as with current § 18.04, would require every trader who holds or controls a reportable position to file a New Form 40 upon special call by the Commission or its designee. Finally, to accommodate volume threshold accounts and reportable sub-accounts identified on New Forms 102 and 71, the Commission proposed to codify a new § 18.04(b) that would require volume threshold account controllers, persons who own a volume threshold account, reportable sub-account controllers, and persons who own a reportable sub-account to file New Form 40 upon special call by the Commission or its designee.

Summary of Comments on NPRM Proposal

FIA and Joint Electric Association stated that the Form 40 (and the corresponding Form 40S) is overly complicated and extensive without a justified regulatory need.

155

The forms request information regarding the ownership structure of the reporting trader, including all direct and indirect parents and subsidiaries and information regarding their trading activities. FIA commented that “for some reporting traders, the number of parents and subsidiaries could number in the hundreds. Moreover, the reporting trader may not know, and may not be permitted to know, if the person in which the reporting trader has a 10 percent or greater interest engages in derivatives trading.”

156

FIA also noted that the Form 40 requires the reporting of persons that have a 10 percent or greater ownership interest in the reporting trader.

157

FIA viewed the 10 percent threshold as inconsistent with the precedent established by Commission Rule 45.6(a), which establishes a control definition based in part upon “the right to vote 25 percent or more of a class of voting interest.”

158

155

CL-2012-FIA

supra

note 55 at 8. CL-2012-Joint Electric Association

supra

note 55 at 3-4.

156

CL-2012-FIA

supra

note 55 at 8.

157

CL-2012-FIA

supra

note 55 at 5.

158

Id.

Joint Electric Association expressed concern that its members, which often enter into energy commodity swaps to hedge commercial risks, will not understand the terminology and purpose of the Form 40S.

159

They noted that Association members would, for the most part, be unlikely to have received an old Form 40. Joint Electric Association commented that “most of the words in the form were not revised to reflect the different market structure whereby swap counterparties transact directly with registered `swap dealers' . . . rather than through financial intermediaries or market professionals as is the case in the futures industry. As a result, commercial market participants receiving the New Form 40, if they have never seen old Form 40, have no context

within which to understand the new Form or their responsibilities to the Commission.”

160

159

CL-2012-Joint Electric Association

supra

note 55 at 3.

160

Id.

FIA recommended that, instead of requiring identification of indirect owners that have an ownership interest of 10 percent or more, “Form 40 be revised to require identification of indirect owners that have an ownership interest of 25 percent or more. Setting different indirect ownership levels for related purposes imposes an unnecessary operational burden on firms that must develop systems and procedures to assure compliance with these reporting requirements.”

161

CL-2012-FIA

supra

note 55 at 5.

Joint Electric Association recommended that various terms in the Form 40S (such as “reportable position,” “swap dealer” and “major swap participant”) should be clarified and made more understandable to a commercial end user of energy commodity swaps.

162

Joint Electric Association made several other recommendations to simplify the form and reduce the reporting burden on small entities, including the following: Provide a “regulatory reporting lite” version of the form, which would excuse commercial end users from completing the majority of the form;

163

permit small entities to deliver the form by paper, facsimile or email, rather than make electronic filing through a web portal;

164

excuse small entities from any requirement to periodically update the form in response to a subsequent special call by the Commission;

165

and establish procedures to limit the application of the special call authority to small entities.

166

162

CL-2012-Joint Electric Association

supra

note 55 at 4-5.

163

CL-2012-Joint Electric Association

supra

note 55 at 5.

164

CL-2012-Joint Electric Association

supra

note 55 at 6.

165

CL-2012-Joint Electric Association

supra

note 55 at 7.

166

Id.

Discussion of Final Rule

The Commission is adopting proposed § 18.04 without modifications.

The current Form 40 asks whether any person has a financial interest of 10 percent or more in the reporting trader. The Commission believes that it is appropriate to maintain the 10 percent threshold for reporting based on ownership that appears in current Form 40. The 10 percent threshold in current Form 40 allows the Commission to receive reporting on a greater number of ownership relationships than a 25 percent threshold would require, thereby benefiting the Commission's surveillance capabilities. The 10 percent threshold is also consistent with other Commission regulations, such as the aggregation requirements (based on 10 percent or greater ownership or equity interest) in § 150.4(b)-(c). The Commission notes that the 25 percent reporting threshold recommended by FIA reflects the definition of control for purposes of assigning legal entity identifiers (“LEIs”) to swap counterparties, a regulatory objective unrelated to the Form 40's objective of obtaining ownership and control information with regard to reporting traders.

The questions added to New Form 40 will provide the Commission with crucial information regarding reporting traders' ownership and control relationships and business activities. The Commission will utilize this information to perform more comprehensive oversight and surveillance of regulated derivatives markets, including by better understanding relationships that may exist among market participants, and to facilitate analysis of potentially disruptive or manipulative trading activity. The definitions of “swap dealer” and “major swap participant,” which are the subject of a comment by Joint Electric Association, have now been finalized.

167

In response to Joint Electric Association's other comments, the Commission expects New Form 40 to affect only a small subset of respondents that may be “small entities” for purposes of the Regulatory Flexibility Act.

168

This is due, in part, to the fact that the Commission will send New Form 40 on a discretionary basis in response to the reporting of an account that reaches a minimum position or volume threshold. The Commission does not expect that small entities will typically reach such reporting thresholds.

169

167

See

Commission, Further Definition of “Swap Dealer,” “Security-Based Swap Dealer,” “Major Swap Participant,” “Major Security-Based Swap Participant” and “Eligible Swap Participant”, 77 FR 30596 (May 23, 2012).

168

The Regulatory Flexibility Act requires that agencies consider whether the rules they propose will have a significant economic impact on a substantial number of small entities and, if so, provide a regulatory flexibility analysis regarding the impact.

See

NPRM

supra

note 10 at 43990 and section VIII(C)

infra.

169

See supra

the discussion of the RTVL for volume-based reporting in section VII(xiv). As noted above, the RTVL has been calibrated to yield information with respect to those trading accounts that are responsible for a substantial percentage of trading volume, while minimizing the proposed regulations' impact on low-volume accounts whose trading activity does not warrant inclusion in the reporting regime.

Finally, the Commission declines to accept the proposal by Joint Electric Association that respondents retain the option to file by paper, facsimile or email. The Commission believes that the automation of Form 40, and the use of auto-population on the web-based Form, will result in increased efficiencies for the Commission and the majority of reporting parties. As noted in section VIII(A) below, the Commission expects that the majority of reporting parties will submit Form 40 via the web-based portal, as opposed to via an FTP data feed. The auto-population of certain data fields on the portal will reduce the burden and complexity of the submission process. As a result, the Commission estimates that the time required to update information contained in New Form 40 using the web-based portal will be

de minimis

for most reporting parties.

ii. § 18.05—Maintenance of Books and Records

NPRM Proposal

Current § 18.05 requires traders who hold or control reportable positions to maintain books and records regarding all positions and transactions in the commodity in which they have reportable positions.

170

In addition, current § 18.05 requires that the trader furnish the Commission with information concerning such positions upon request. The Commission proposed to expand § 18.05 to also impose books and records requirements upon (a) volume threshold account controllers and owners of volume threshold accounts reported on New Form 102B and (b) reportable sub-account controllers and persons who own a reportable sub-account reported on New Form 71.

170

17 CFR 18.05.

Discussion of Final Rule

No comments were received pertaining to the proposed rule. As noted above, the Commission proposed to expand § 18.05 to impose books and records requirements on volume threshold account controllers and owners of volume threshold accounts reported on New Form 102B and reportable sub-account controllers and persons who own a reportable sub-account reported on New Form 71. The Commission also notes that the definition of reportable trading volume encompasses trading on both DCMs and SEFs. Accordingly, the Commission is adopting § 18.05 as proposed, with the clarification that the books and records required to be kept by volume threshold

account controllers, owners of volume threshold accounts, reportable sub-account controllers, and persons who own reportable sub-accounts include books and records with respect to both their futures and swap market activities.

D. Part 20

i. § 20.5—Series S Filings

NPRM Proposal

As with Forms 102 and 40, the Commission proposed to transfer the list of data points required in Form 102S from the relevant regulatory text (

i.e.,

§ 20.5)

171

to the form itself. More specifically, the Commission proposed to eliminate the data points specified in § 20.5(a)(1), and to revise

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