Contract Market Rule Review Procedures

COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1 and 5

Contract Market Rule Review Procedures

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rules.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is

amending Regulation 1.41 to revise the Commission's requirements with

respect to the number of copies of rule change proposals that an

exchange must provide to the Commission. The Commission also is

adopting amendments that would revise certain of the procedures and

standards set forth in the Commission's expedited approval rules,

Regulations 1.41(h) through 1.41(t), to reflect recent innovations by

the exchanges as well as miscellaneous amendments to the procedural

aspects of the expedited approval rules. Other proposed amendments

include miscellaneous clarifying amendments to the Commission's

Guideline No. 1.

EFFECTIVE DATE: February 14, 1994.

FOR FURTHER INFORMATION CONTACT: Richard A. Shilts, Supervisory

Economist, Division of Economic Analysis, Commodity Futures Trading

Commission, 2033 K Street, NW., Washington, DC 20581. Telephone: (202)

254-7303.

SUPPLEMENTARY INFORMATION:

I. Introduction

Section 5a(a)(12) of the Commodity Exchange Act (``Act''), 7 U.S.C.

7a(12), provides that all rules\1\ of a contract market which relate to

terms and conditions\2\ in futures or option contracts traded on or

subject to the rules of a contract market must be submitted to the

Commission for its prior approval. Section 5a(a)(12) further requires

that contract markets submit all other rules to the Commission. Such

other rules may be made effective ten days after Commission receipt

unless, within the ten-day period, the Exchange requests Commission

approval or the Commission notifies the Exchange that it intends to

review the rules for approval.

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\1\Commission Regulation 1.41(a)(1) defines ``rule'' of a

contract market as follows:

* * * any constitutional provision, article of incorporation,

bylaw, rule, regulation, resolution, interpretation, stated policy,

or instrument corresponding thereto, in whatever form adopted, and

any amendment or addition thereto or repeal thereof, made or issued

by a contract market, or by the governing board of thereof or any

committee thereof.

\2\Commission Regulation 1.41(a)(2) defines ``terms and

conditions'' as follows:

Any definition of the trading unit or the specific commodity

underlying a contract for the future delivery of a commodity or

commodity option contract, specification of settlement or delivery

standards and procedures, and establishment of buyers' and sellers'

rights and obligations under the contract. Terms and conditions

shall be deemed to include provisions relating to the following:

(i) Quality or quantity standards for a commodity and any

applicable exemptions or discounts;

(ii) Trading hours, trading months and the listing of contracts;

(iii) Minimum and maximum price limits and the establishment of

settlement prices;

(iv) Position limits and position reporting requirements;

(v) Delivery points and locational price differentials;

(vi) Delivery standards and procedures, including alternatives

to delivery and applicable penalties or sanctions for failure to

perform;

(vii) Settlement of the contract; and

(viii) Payment or collection of commodity option premiums or

margins.

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Commission Regulation 1.41 sets forth procedures for submitting

proposed exchange rules for Commission approval, permitting certain

exchange rules to go into effect without Commission approval, and

dealing with exchange emergency rules. All proposed exchange rules

relating to the terms and conditions of a commodity futures or option

contract must, and any other rule may, be submitted for prior

Commission approval, under Section 5a(a)(12) of the Act, pursuant to

procedures set forth in Regulation 1.41(b). Regulation 1.41(c) sets

forth the submission requirements for rules that do not relate to terms

and conditions and which may be placed into effect without Commission

approval ten days after receipt by the Commission. Regulation 1.41(d)

sets forth the submission requirements for rules that are exempt from

the requirements of Section 5a(a)(12) of the Act. Regulations 1.41(h)

through (t) set forth conditions under which, in lieu of submission

under Regulation 1.41(b), certain types of exchange rule proposals

relating to terms and conditions requiring Commission approval may be

deemed approved either upon adoption by the exchange or within a

specified number of days of Commission receipt, which ranges from one

to ten days.\3\

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\3\Regulations 1.41(e) and 1.41(f), respectively, set forth the

submission requirements for exchange membership and contract market

rules relating to temporary emergencies. These regulations are not

affected by the amendments proposed in this notice.

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In submitting rules to the Commission under any of Regulations

1.41(b), 1.41(c), or 1.41(h) through (t), an exchange is required to

furnish three copies of the proposal to the Commission's Washington, DC

headquarters and one copy to the regional office of the Commission

having local jurisdiction over that exchange. For rules submitted under

the provisions of Regulation 1.41(d), an exchange is required to

furnish one copy of the proposal to the Commission's Washington, DC

headquarters and one copy to the regional office of the Commission

having local jurisdiction over that exchange.

Commission Regulation 1.41a sets forth procedures delegating to the

Directors of the Divisions of Trading and Markets (T&M) and Economic

Analysis (DEA) the authority to make certain decisions regarding rule

submissions. Specifically, this regulation delegates to the Directors

of T&M and DEA the authority to determine: (1) Whether to remit and not

accept for review rules submitted under Regulations 1.41(b), (c) or (d)

that do not comply with the applicable submission requirements of those

regulations; (2) whether a rule submission submitted under Regulation

1.41(c) or (d) relates to terms and conditions thus requiring prior

Commission approval pursuant to the provisions of Regulation 1.41(b);

(3) whether rules submitted under Regulation 1.41(c) do not require

prior approval under Section 5a(a)(12) of the Act and Regulation

1.41(b) and whether such rules may become effective prior to the

expiration of the ten-day period following receipt for such rules by

the Commission; and (4) whether proposals submitted under any of the

expedited procedures of Regulations 1.41(h) through (t) comply with the

applicable provisions of these regulations and, if not, to notify the

contract market that the submission is subject to the provisions of

Regulation 1.41(b).

II. Amendments to Regulation 1.41

The Commission is adopting amendments to Regulation 1.41 that would

revise the requirements of Regulations 1.41(b), 1.41(c) and 1.41(h)

through (t) to reduce to one from three the number of copies of rule

change proposals that an exchange must furnish to the Commission at its

Washington, DC headquarters for rule changes submitted under these

regulations. However, with respect to applications for contract market

designation, under the amendments the exchanges would continue to be

required to submit three copies of the application, including the

proposed rules, to the Commission at its Washington, DC headquarters.

Amendments to appendix A to part 5 of the Commission's regulations

reflect this continuing requirement.

Also, the Commission is eliminating the requirement that exchanges

must submit one copy of rules submitted under Regulations 1.41(d) and

1.41(h) through (t) to the regional office of the Commission having

local jurisdiction over that exchange. The exchanges would continue to

be required to submit one copy of rule proposals submitted under

Commission Regulations 1.41(b) and 1.41(c) to the regional office of

the Commission having local jurisdiction over that exchange.

The Commission has reviewed its procedures for processing rule

submissions under Regulations 1.41(b), 1.41(c), and 1.41(h) through

(t), and, as a result of that review, the Commission has determined

that the submission of more than one copy of a rule change proposal to

the Washington, DC headquarters is not necessary. Moreover, the

Commission has determined that, for rule change proposals submitted

under Regulations 1.41(d) and 1.41(h) through (t), the submission of a

copy of such rule to the regional office of the Commission having local

jurisdiction over that exchange also is not necessary.\4\ Further,

these amendments would diminish the paperwork burden on the exchanges

and would reduce costs associated with filing submissions under these

regulations.

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\4\These changes would not affect the current submission

requirements under paragraph (f) of Regulation 1.41 regarding

temporary emergency rules, where the exchange is required to notify

the Commission at its Washington, DC headquarters by the fastest

available means of communication. A written copy of the emergency

rule shall be furnished to the Commission at its Washington, DC

headquarters and two copies of the rule shall be furnished to the

regional office of the Commission having local jurisdiction over

that exchange.

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The Commission also is adopting amendments that would clarify and

update the standards set forth in the expedited approval procedures in

paragraphs (h), (l), (o), (p), and (q) of Regulation 1.41. Paragraph

(h) establishes an expedited review procedure for changes to the

composition, computation, or method of stock selection of a stock index

in which a contract market is designated to trade futures contracts, or

options on such futures contracts. Currently, such changes are deemed

approved upon adoption by the contract market if: (i) The index is

compiled for commercial purposes by an independent third party; (ii)

the change is consistent with a rule of the contract market which has

been approved by the Commission for this purpose which specifically

defines, or establishes standards governing, the composition of the

stock index upon which the designated futures contracts are authorized

to trade; (iii) the contract market provides the Commission with

written notice of the change within five days after the change is

adopted by the contract market; and (iv) the contract market labels the

written notice as being submitted under Regulation 1.41(h). This

expedited procedure was established because routine changes to an index

to maintain its continuity were not expected to require detailed review

by the Commission under paragraph (b) of Regulation 1.41.

Based on approximately 10 years of experience in administering the

provisions of Regulation 1.41(h), the Commission has determined that

the submission to the Commission on a routine basis of changes which

relate to maintaining the continuity of a stock index is not necessary.

Further, deleting this requirement would reduce the paperwork burden on

the exchanges.

Accordingly, the amendment to Regulation 1.41(h) would delete items

(iii) and (iv) above, so that a contract market no longer would be

required to submit routinely to the Commission a written notice of a

change in the composition, computation, or method of stock selection

that is made to maintain the continuity of a stock index in which that

contract market is designated to trade futures or futures option

contracts. In order for such a change to be deemed approved by the

Commission pursuant to Regulation 1.41(h) as amended, the index must

continue to be compiled for commercial purposes by an independent third

party, and the change must be consistent with a rule of the contract

market which has been approved by the Commission for this purpose which

defines, or establishes standards governing, the composition of the

stock index. Under the amended regulation, however, such changes would

not routinely be required to be submitted to the Commission following

adoption by the exchange. As currently provided, contract markets would

continue to be required to submit to the Commission for review and

approval under Regulation 1.41(b) all changes to the composition,

computation, or method of stock selection that are for purposes other

than the continuity of the index.

Further, under amended Regulation 1.41(h), contract markets would

be required to provide to the Commission, upon special call to the

contract market, information regarding the composition, computation, or

method of stock selection of the index, including any change or changes

related to the continuity of the index, or any other issues relating to

the index, as instructed, and within the time, and for the period,

specified in the call. Such a special call would provide the Commission

with information, as requested, to assure that the contract market

continued to meet its regulatory obligations.

Paragraph (l) of Regulation 1.41 establishes an expedited procedure

for changes in trading months. Such changes are deemed approved 10 days

after the Commission receives written notification of the proposal,

provided certain conditions are satisfied. The amendment to paragraph

(l) would clarify that this paragraph applies to exchange proposals to

delist contract months without open interest as well as to exchange

proposals to list new months. In that regard, the division directors or

their delegees routinely process requests to delist contact months

under Regulation 1.41(l), as long as the months to be delisted have no

open interest. The amendment simply clarifies the division directors'

delegated authority in this regard.

Paragraph (o) establishes an expedited procedure for changes in

strike price listing procedures. Such changes are deemed approved 10

days after the Commission receives written notification of the

proposal, provided certain conditions are satisfied. The amendment to

paragraph (o) would clarify that this paragraph applies to exchange

proposals to amend strike price listing procedures for listed options

without open interest, as well as for options not listed, at the time

the rule goes into effect.

Paragraph (p) establishes an expedited procedure for changes in the

last trading day of an option contract. Such changes are deemed

approved 10 days after the Commission receives written notification of

the proposal, provided certain conditions are satisfied. One amendment

to paragraph (p) would clarify that this paragraph applies to listed

options without open interest, as well as to options not listed, at the

time the rule goes into effect. Another amendment is non-substantive

and would correct a typographical error in section (3) of that

paragraph. Specifically, the amendment would clarify that the

Commission will, within 10 days after receipt of a submission regarding

a change in option last trading day specifications, notify the contract

market if the change appears to not be consistent with the provisions

of this paragraph.

Paragraph (q) of Regulation 1.41 provides that changes related to

``cabinet trade'' provisions for options may be approved under

expedited procedures. A cabinet trade currently is defined as an option

trade that represents a closing transaction for both parties to the

trade and which is specifically identified as such in the contract

market's rules. The amendments to paragraph (q) revise the expedited

approval standard to remove the requirement that option cabinet trade

rules eligible for treatment under this paragraph must involve closing

transactions exclusively. This revision in the expedited approval

standard reflects recent innovations by the exchanges with respect to

cabinet trade provisions. An amendment to section (3) of that paragraph

is non-substantive and corrects a typographical error. Specifically,

the amendment clarifies that the Commission will, within 10 days after

receipt of a submission regarding a change in the cabinet trade

provisions of an option contract, notify the contract market if the

change appears to not be consistent with the provisions of this

paragraph.

III. Amendments to Regulation 1.41a

In connection with the foregoing amendments to Regulation 1.41, the

Commission is adopting amendments to paragraph (a)(5) of Regulation

1.41a. Currently, as noted above, this regulation delegates to the

Director of the Division of Trading and Markets and to the Director of

the Division of Economic Analysis, or their respective delegees,

authority to determine whether changes submitted under paragraphs (h)-

(t) of Regulation 1.41 are inconsistent with the relevant provisions of

those paragraphs and to notify contract markets if such submissions are

to be subject to the usual review procedures under Section 5a(a)(12) of

the Act and Regulation 1.41(b).

One amendment to Regulation 1.41a provides that the Director of the

Division of Trading and Markets and the Director of the Division of

Economic Analysis, or their respective delegees, have the delegated

authority to give notice that rules submitted pursuant to

Secs. 1.41(k)-(t) comply with the provisions of Secs. 1.41(k)-(t), as

applicable, and therefore shall be deemed approved prior to the end of

the period specified in the applicable rule. Such period commences on

the day the rule is received by the Commission at its Washington, DC

headquarters. The Commission has received requests from exchanges for

notice that rules submitted under the expedited procedures of

Secs. 1.41(k)-(t) are deemed approved prior to the end of the specified

period in order to provide for timely implementation of rules to

respond to rapidly changing market conditions or to avoid a market

problem.

Another amendment to Regulation 1.41a would expand the delegated

authority of the Director of the Division of Trading and Markets and

the Director of the Division of Economic Analysis, or their respective

delegees, to notify a contract market that a rule submitted under

Section 5a(a)(12) of the Act and Sec. 1.41(b) will be treated as if

submitted pursuant to Secs. 1.41(h)-(t), as applicable, if the rule

submitted pursuant to the provisions of Sec. 1.41(b) complies with any

of the provisions of Secs. 1.41(h)-(t). Current procedures can delay

processing of the proposal and impede timely implementation of the

rule.

IV. Amendments to Commission Guideline No. 1

Guideline No. 1 sets forth the Commission's economic and public

interest requirements for initial and continuing designation of a

contract market in a particular commodity. The Commission is proposing

to revise this guideline to correct an improper rule reference.

Specifically, item 5 in column 2 of the ``Option Designation Checklist

For Options On Futures Contracts'' (option on futures checklist) and

the ``Option Designation Checklist For Options on Physicals'' (option

on physicals checklist) regarding the option expiration criteria cites

Commission Regulation 33.4(d)(1) as the applicable Commission

regulation for these criteria. However, as a result of substantive

revisions to the Commission's option regulations adopted in September

1991 (56 FR 43694), many of the Commission's option regulations were

renumbered, including Regulation 33.4(d)(1) which was renumbered as

33.4(b)(2). Therefore, the Commission hereby is amending the option

checklists to replace 33.4(d)(1) with 33.4(b)(2) as the cited

Commission regulation for the option expiration criteria in each of

those checklists.

Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq.,

requires that agencies, in adopting rules, consider their impact on

small businesses. The Commission has previously determined that

contract markets are not small entities for purposes of the Regulatory

Flexibility Act. 47 FR 18618 (April 30, 1982). Moreover, no additional

regulatory burdens are imposed by these amendments. Therefore, the

Acting Chairman on behalf of the Commission hereby certifies, pursuant

to 5 U.S.C. 605(b), that the action taken herein will not have a

significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

The Paperwork Reduction Act of 1980 (PRA), 44 U.S.C. 3501 et seq.,

imposes certain requirements on federal agencies (including the

Commission) in connection with their conducting or sponsoring any

collection of information as defined by the Paperwork Reduction Act. In

compliance with the Act, the Commission has submitted these amended

rules and their associated information collection requirements to the

Office of Management and Budget.

While these amended rules result in no increased burden, the group

of rules (OMB control # 3038-0007) of which they are a part has the

following burden:

Average Burden Hours per Response: 50.34.

Number of Respondents: 10,727,182.

Frequency of Response: Monthly.

Persons wishing to comment on the estimated paperwork burden

associated with these amended rules should contact Gary Waxman, Office

of Management and Budget, room 3228, NEOB, Washington, DC 20503. Copies

of the information collection submission to OMB are available from Joe

F. Mink, CFTC Clearance Officer, 2033 K Street, NW., Washington, DC

20581, (202) 254-9735.

C. Notice and Comment

Section 553(b) of the Administrative Procedure Act, 5 U.S.C.

553(b), requires in most instances that a notice of proposed rulemaking

be published in the Federal Register and that opportunity for comment

be provided when an agency promulgates new regulations. Section 553(b)

sets forth an exception, however, for rules of agency organization,

procedure, or practice. The instant amendments provide expedited

procedures for the approval of certain contract market rules. The

Commission has determined that these amendments, which will reduce the

burden on the exchanges, relate to Commission procedure and practice

and therefore that notice and comment is not required.

Section 553(b) also sets forth an exception to the requirement of

notice and opportunity for public comment when the Commission for good

cause finds such notice and public comment are unnecessary or contrary

to the public interest. The Commission finds that notice and public

comment on the rule changes announced herein are unnecessary because

the changes are procedural in nature and do not establish any new

obligations under the Act.

List of Subjects in 17 CFR Parts 1 and 5

Commodity futures, Contract market rules, Consumer protection, Rule

review procedures, Reporting and recordkeeping requirements.

In consideration of the foregoing and pursuant to the authority

contained in the Commodity Exchange Act and, in particular, sections

4c, 5a, and 8a thereof, 7 U.S.C. 6c, 7a and 12a, the Commission hereby

amends parts 1 and 5 of chapter I of title 17 of the Code of Federal

Regulations as follows:

PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

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

Authority: 7 U.S.C. 2, 2a, 4, 4a, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g,

6h, 6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c,

13a, 13a-1, 16, 16a, 19, 21, 23, and 24, unless otherwise stated.

2. Section 1.41 is amended by revising paragraphs (b) introductory

text, (c)(1), (d)(2) and (h), by redesignating (l)(1)(iii) as

(l)(1)(iv) and adding a new (l)(1)(iii), and by revising (o)(1)(ii),

(p)(2)(ii), (p)(3), and (q) to read as follows:

Sec. 1.41 Contract market rules; submission of rules to the

Commission; exemption of certain rules.

* * * * *

(b) Submission of rules for prior Commission approval. Except as

provided herein and in paragraph (f) of this section, all proposed

contract market rules that relate to terms and conditions and any other

rules that the Commission has determined pursuant to paragraph (c) of

this section require prior approval must, and any other rule may, be

submitted to the Commission for approval pursuant to section 5a(a)(12)

of the Act prior to their proposed effective dates. One copy of each

such rule submitted under this section shall be furnished to the

Commission at its Washington, DC headquarters, and, excluding

submissions under paragraphs (h) through (t) of this section, one copy

shall be furnished to the regional office of the Commission having

local jurisdiction over the contract market. Provided, however, that

for submissions under appendix A to part 5 of the Commission's

Regulations with respect to contract market designation applications,

three copies of such submissions shall be furnished to the Commission

at its Washington, DC headquarters. Each submission under this

paragraph (b) shall, in the following order:

* * * * *

(c) Rules that do not relate to terms and conditions. (1) Except as

provided in paragraphs (d) and (f) of this section (exempt or temporary

emergency rules), one copy of any rule which does not relate to terms

and conditions or which a contract market proposes to place into effect

without submission to the Commission for approval under section

5a(a)(12) of the Act and paragraph (b) of this section shall be

furnished to the Commission at its Washington, DC headquarters at least

ten days prior to its proposed effective date. One copy also shall be

transmitted by the contract market to the regional office of the

Commission having local jurisdiction over the contract market. Each

such submission shall be labeled as being submitted pursuant to

paragraph (c) of this section and include the information required by

paragraphs (b)(2) through (b)(5) of this section.

* * * * *

(d) * * *

(2) Rules that are exempt from the requirements of section

5a(a)(12) of the Act in accordance with the provisions of this

paragraph (d) shall nonetheless be submitted to the Commission pursuant

to the provisions of section 5a(a)(1) of the Act. Each such submission

shall be labeled as being submitted pursuant to section 5a(a)(1) of the

Act and paragraph (d) of this section. One copy of each such submission

shall be furnished to the Commission at its Washington, DC

headquarters.

* * * * *

(h) Stock index contracts. (1) Notwithstanding the provisions of

paragraph (b) of this section, all changes in the composition,

computation, or method of stock selection of a stock index in which a

contract market is designated to trade futures contracts, or options on

such futures contracts, shall be deemed approved by the Commission at

the time such changes are adopted by a contract market if:

(i) The index is compiled for commercial purposes by an independent

third party; and

(ii) The change is consistent with a rule of the contract market

which has been approved by the Commission for this purpose which

specifically defines, or establishes standards governing, the

composition of the stock index upon which the designated futures

contracts are authorized to trade.

(2) The contract market must provide to the Commission, upon

special call, information regarding the composition, computation, or

method of stock selection of the index, including any change or

changes, or any other issues relating to the index, as instructed, and

within such time, and for such a period, specified in the call.

* * * * *

(l) * * *

(1) * * *

(iii) For proposals to delist previously listed futures or option

contract months, the months to be delisted have no open interest at the

time of delisting.

* * * * *

(o) * * *

(1) * * *

(ii) The amended rule does not affect any option with open interest

at the time the rule goes into effect.

* * * * *

(p) * * *

(2) * * *

(ii) The amended last trading day rule does not apply to any option

with open interest at the time the rule goes into effect.

* * * * *

(3) The Commission will, within 10 days after receipt by the

Commission of notice of a change in the last trading day specification

of an option contract, notify the contract market making the submission

if it appears that the change is not consistent with the provisions of

this paragraph. Upon such notification by the Commission to the

contract market, the change will be subject to the usual procedures

under section 5a(a)(12) of the Act and paragraph (b) of this section.

(q) Option cabinet trade provisions. (1) For purposes of this

paragraph, a cabinet trade is defined as an option trade that

represents a transaction whereby the per-contract value of the cabinet

trade is less than the per-contract value associated with a trade at

the existing minimum premium fluctuation specified in the contract

market's rules for that option contract.

(2) Notwithstanding the provisions of paragraph (b) of this

section, all initial specifications of, and changes to, option cabinet

trade provisions shall be deemed approved by the Commission 10 days

after written notice of such change is received by the Commission if:

(i) The initial specification of a cabinet trade rule or a change

thereto provides that the per-contract value (or values) of the cabinet

trade is (are) less than the per-contract value associated with a trade

at the existing minimum premium fluctuation specified in the contract

market's rules for that option contract.

(ii) The contract market labels the written notice as being

submitted pursuant to paragraph (q) of this section.

(3) The Commission will, within 10 days after receipt by the

Commission of notice of a change in the cabinet trade provisions of an

option contract, notify the contract market making the submission if it

appears that the change is not consistent with the provisions of this

paragraph. Upon such notification by the Commission to the contract

market, the change will be subject to the usual procedures under

section 5a(a)(12) of the Act and paragraph (b) of this section.

* * * * *

3. Section 1.41a is amended by revising paragraph (a)(5) to read as

follows:

Sec. 1.41a Delegation of authority to the Directors of the Division of

Trading and Markets and the Division of Economic Analysis to process

certain contract market rules.

(a) * * *

(5) Pursuant to Secs. 1.41(h) through (t) to determine:

(i) Whether contract market rules submitted pursuant to Section

5a(a)(12) of the Act and the provisions of Secs. 1.41(h) through (t)

comply with the provisions of Secs. 1.41(h) through (t), as applicable;

(ii) To give notice that rules submitted pursuant to Secs. 1.41(k)

through (t) comply with the provisions of Secs. 1.41(k) through (t), as

applicable, and therefore shall be deemed approved prior to the end of

the period specified in the applicable rule, commencing on the day the

rule is received by the Commission at its Washington, DC headquarters;

(iii) If contract market rules submitted pursuant to the provisions

of Secs. 1.41(h) through (t) do not comply with the applicable

provisions of these regulations, to notify the submitting contract

market that such rules are therefore subject to the procedures

specified in Section 5a(a)(12) of the Act and Sec. 1.41(b); and

(iv) If contract market rules submitted pursuant to the provisions

of Sec. 1.41(b) comply with any of the provisions of Secs. 1.41(h)

through (t), to notify the contract market that such rules will be

treated as if submitted pursuant to Secs. 1.41(h) through (t) as

applicable.

* * * * *

PART 5--DESIGNATION OF AND CONTINUING COMPLIANCE BY CONTRACT

MARKETS

4. The authority citation for part 5 continues to read as follows:

Authority: 7 U.S.C. 6c, 7, 7a, 8 and 12a, unless otherwise

noted.

5. Appendix A to part 5, Commission Guideline No. 1, is amended by

revising the introductory text of the appendix and by revising the

option designation checklists in paragraph (b)(2) and paragraph (c)(5)

to read as follows:

Appendix A to Part 5--Guideline No. 1; Interpretive Statement Regarding

Economic and Public Interest Requirements for Contract Market

Designation

For purposes of a board of trade seeking designation as a contract

market and thereafter for the purpose of demonstrating continued

compliance with the requirements of sections 4c, 5 and 5a of the

Commodity Exchange Act, and regulations thereunder, the following shall

be provided to the Commission. The board of trade shall furnish to the

Commission at its Washington, DC headquarters three copies of the

application including the proposed rules.

* * * * *

(b) * * *

(2) * * *

Option Designation Checklist for Options on Futures Contracts

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Applicable Met by

Criteria Commission Rule, Standard exchange rule

17 CFR number

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

1. Speculative 1.61............ Combined net

limits. position in futures

and options on a

futures-equivalent

basis at the

futures position

levels, with inter-

month spread

exemptions that are

consistent with

those of the

futures contracts.

2. Aggregation 1.61(g)......... Same as section

rule. 1.61(g) of this

chapter or

previously approved

language.

3. Reporting 15.00(b)(2)..... 50 contracts or

level. fewer.

4. Strike prices 33.4(b)(1)...... Procedures for

listing strikes are

specified and

automatic.

5. Option 33.4(b)(2)...... Options, except for

expiration. options on cash-

settled futures

contracts, expire

not less than one

business day before

the earlier of the

last trading day or

the first notice

day of the

underlying futures

contract.

6. Minimum tick. 33.4(d)......... Tick is equal to, or

less than, the

underlying futures

tick.

7. Daily price 33.4(d)......... Price limit, if any,

limit, if is equal to, or

specified. greater than,

underlying futures

price limit .

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* * * * *

(c) * * *

(5) * * *

Option Designation Checklist for Options on Physicals

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

Applicable Met by

Criteria Commission Rule, Standard exchange rule

17 CFR number

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

1. Speculative 1.61............ If there is a

limits. futures contract in

the same commodity

on the same

exchange, combined

futures and options

on a futures-

equivalent basis at

the futures

position levels,

with inter-month

spread exemptions

that are consistent

with those of the

futures contracts.

2. Aggregation 1.61(g)......... Same as Section

rule. 1.61(g) of this

chapter or

previously approved

language.

3. Reporting 15.00(b)(2)..... 50 contracts or

level. fewer.

4. Strike prices 33.4(b)(1)...... Procedures for

listing strikes are

specified and

automatic.

5. Option 33.4(b)(2)...... Options expire not

expiration. less than one

business day before

the earlier of the

last trading day or

the first notice

day of any futures

contract in the

same or a related

commodity, except

for cash-settled

futures contracts .

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* * * * *

Issued in Washington, DC on January 10, 1994, by the Commission.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 94-962 Filed 1-13-94; 8:45 am]

BILLING CODE 6351-01-M