2014-17934

Federal Register, Volume 79 Issue 146 (Wednesday, July 30, 2014)

[Federal Register Volume 79, Number 146 (Wednesday, July 30, 2014)]

[Rules and Regulations]

[Pages 44125-44127]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2014-17934]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1, 30, and 140

RIN 3038-AD88

Enhancing Protections Afforded Customers and Customer Funds Held

by Futures Commission Merchants and Derivatives Clearing Organizations;

Correction

AGENCY: Commodity Futures Trading Commission.

ACTION: Correcting Amendments.

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

correcting final rules published in the Federal Register of November

14, 2013 (``final rules''). Those rules, which adopted new regulations

and amended existing regulations requiring enhanced customer

protections, risk management programs, internal monitoring and

controls, capital and liquidity standards, customer disclosures, and

auditing and examination programs for futures commission merchants,

took effect on January 13, 2014. This correction amends erroneous

cross-references found in three sections of the final rules.

Additionally, this correction amends one section of the final rules to

insert language that was in the proposed rulemaking, and which was

stated as being adopted in the preamble to the final rules, but was

erroneously omitted from the final rule text.

DATES: Effective on July 30, 2014.

FOR FURTHER INFORMATION CONTACT: Thomas Smith, Deputy Director, 202-

418-5495, [email protected], or Mark Bretscher, Attorney-Advisor, 312-

596-0529, [email protected], Division of Swap Dealer and Intermediary

Oversight, Commodity Futures Trading Commission, Three Lafayette

Centre, 1155 21st Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION: In the Federal Register of November 14, 2013

(78 FR 68506), the CFTC published final rules adopting new regulations

and amending existing regulations requiring enhanced customer

protections, risk management programs, internal monitoring and

controls, capital and liquidity standards, customer disclosures, and

auditing and examination programs for futures commission merchants.

Those rules in 17 CFR 1.23(d)(2) and 1.23(d)(3) include erroneous

cross-references to 17 CFR 1.23(c)(1) and 1.23(c)(2), which do not

exist. Instead, the cross-references should be to 17 CFR 1.23(d)(1) and

1.23(d)(2). Accordingly, the Commission is making a correcting

amendment which removes the erroneous cross-references to 17 CFR

1.23(c)(1) and 1.23(c)(2), contained in 17 CFR 1.23(d)(2) and

1.23(d)(3), and replaces them with corrected cross-references to 17 CFR

1.23(d)(1) and 1.23(d)(2).

Further, the final rules in 17 CFR 30.7(g)(4) include an erroneous

cross-reference to 17 CFR 30.7(h)(2), which should reference 17 CFR

30.7(l), and an erroneous cross-reference to 17 CFR 30.7(g)(2), which

should reference 17 CFR 30.7(g)(3). Also, 17 CFR 30.7(g)(5) contains an

erroneous cross-reference to 17 CFR 30.7(c)(1) and 30.7(c)(2), which

should reference 30.7(g)(3) and 30.7(g)(4). Thus, the Commission is

making a correcting amendment to 17 CFR 30.7(g)(4) and 30.7(g)(5) as

discussed above.

Additionally, the final rules in 17 CFR 30.7(d)(1) erroneously

omitted language that was contained in the proposed rulemaking

published on November 14, 2012; \1\ and was stated as having been

adopted in the preamble to the final rules.\2\ The erroneously omitted

language states that a futures commission merchant is not required to

obtain an acknowledgment letter from a derivatives clearing

organization (``DCO'') if the DCO maintains rules that have been

submitted to the Commission and that provide for the segregation of

customer funds in accordance with all relevant provisions of the

Commodity Exchange Act \3\ and Commission regulations. Thus, the

Commission is making a correcting amendment to 17 CFR 30.7(d)(1) to

rectify that error.

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\1\ 77 FR 67866 (November 14, 2012).

\2\ See 78 FR 68506 at 68578, fn 592.

\3\ 7 U.S.C. 1 et seq.

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Finally, the final rules in 17 CFR 140.91(a)(12) include an

erroneous cross-reference to 17 CFR 140.91(a)(8), which should

reference 17 CFR 140.91(a)(12). Thus, the Commission is making a

correcting amendment to 17 CFR 140.91(a)(12) that removes the erroneous

cross-reference to 17 CFR 140.91(a)(8) and replaces it with a cross-

reference to 17 CFR 140.91(a)(12).

List of Subjects

17 CFR Part 1

Brokers, Commodity futures, Consumer protection, Reporting and

recordkeeping requirements.

17 CFR Part 30

Commodity futures, Consumer protection, Currency, Reporting and

recordkeeping requirements.

17 CFR Part 140

Authority delegations (Government agencies), Organization and

functions (Government agencies).

In consideration of the foregoing, 17 CFR parts 1, 30, and 140 are

corrected by making the following correcting amendments:

PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

0

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

Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g,

6h, 6i, 6k, 6l, 6m, 6n, 6o, 6p, 6r, 6s, 7, 7a-1, 7a-2, 7b, 7b-3, 8,

9, 10a, 12,

[[Page 44126]]

12a, 12c, 13a, 13a-1, 16, 16a, 19, 21, 23, and 24, as amended by

Title VII of the Dodd-Frank Wall Street Reform and Consumer

Protection Act, Pub. L. 111-203, 124 Stat. 1376 (2010).

0

2. In Sec. 1.23, revise paragraph (d)(2) introductory text, paragraphs

(d)(2)(i) and (d)(2)(v), and paragraph (d)(3) introductory text to read

as follows:

Sec. 1.23 Interest of futures commission merchant in segregated

futures customer funds; additions and withdrawals.

* * * * *

(d) * * *

(2) The futures commission merchant files written notice of the

withdrawal or series of withdrawals, with the Commission and with its

designated self-regulatory organization immediately after the chief

executive officer, chief finance officer or other senior official as

described in paragraph (d)(1) of this section pre-approves the

withdrawal or series of withdrawals. The written notice must:

(i) Be signed by the chief executive officer, chief finance officer

or other senior official as described in paragraph (d)(1) of this

section that pre-approved the withdrawal, and give notice that the

futures commission merchant has withdrawn or intends to withdraw more

than 25 percent of its residual interest in segregated accounts holding

futures customer funds;

* * * * *

(v) Contain a representation by the chief executive officer, chief

finance officer or other senior official as described in paragraph

(d)(1) of this section that pre-approved the withdrawal, or series of

withdrawals, that, after due diligence, to such person's knowledge and

reasonable belief, the futures commission merchant remains in

compliance with the segregation requirements after the withdrawal. The

chief executive officer, chief finance officer or other senior official

as described in paragraph (d)(1) of this section must consider the

daily segregation calculation as of the close of business on the

previous business day and any other factors that may cause a material

change in the futures commission merchant's residual interest since the

close of business the previous business day, including known unsecured

futures customer debits or deficits, current day market activity and

any other withdrawals made from the futures accounts; and

* * * * *

(3) After making a withdrawal requiring the approval and notice

required in paragraphs (d)(1) and (2) of this section, and before the

completion of its next daily segregated funds calculation, no futures

commission merchant may make any further withdrawals from accounts

holding futures customer funds, except to or for the benefit of futures

customers, without, for each withdrawal, obtaining the approval

required under paragraph (d)(1) of this section and filing a written

notice in the manner specified under paragraph (d)(2) of this section

with the Commission and its designated self-regulatory organization

signed by the chief executive officer, chief finance officer, or other

senior official. The written notice must:

* * * * *

PART 30--FOREIGN FUTURES AND FOREIGN OPTIONS TRANSACTIONS

0

3. The authority citation for part 30 continues to read as follows:

Authority: 7 U.S.C. 1a, 2, 6, 6c, and 12a, unless otherwise

noted.

0

4. In Sec. 30.7, revise paragraph (d)(1), paragraph (g)(4)

introductory text, paragraph (g)(4)(v), and paragraph (g)(5)

introductory text to read as follows:

Sec. 30.7 Treatment of foreign futures or foreign options secured

amount.

* * * * *

(d) Written acknowledgment from depositories. (1) A futures

commission merchant must obtain a written acknowledgment from each

depository prior to or contemporaneously with the opening of an account

by the futures commission merchant with such depository; Provided,

however, that a written acknowledgment need not be obtained from a

derivatives clearing organization that has adopted and submitted to the

Commission rules that provide for the separate holding of foreign

futures or foreign options secured amount, in accordance with all

relevant provisions of the Act, this part and the regulations and

orders promulgated thereunder, of all funds held on behalf of 30.7

customers and all instruments purchased with funds set aside as the

foreign futures or foreign options secured amount as provided for under

paragraph (h) of this section.

* * * * *

(g) * * *

(4) A futures commission merchant must file written notice of the

withdrawal or series of withdrawals that exceed 25 percent of the

futures commission merchant's residual interest in 30.7 customer funds

as computed under paragraph (l) of this section with the Commission and

with its designated self-regulatory organization immediately after the

chief executive officer, chief finance officer or other senior official

as described in paragraph (g)(3) of this section pre-approves the

withdrawal or series of withdrawals. The written notice must:

* * * * *

(v) Contain a representation by the chief executive officer, chief

finance officer or other senior official as described in paragraph

(g)(3) of this section that pre-approved the withdrawal, or series of

withdrawals, that to such person's knowledge and reasonable belief, the

futures commission merchant remains in compliance with the secured

amount requirements after the withdrawal. The chief executive officer,

chief finance officer or other appropriate senior official as described

in paragraph (g)(3) of this section must consider the daily 30.7

calculation as of the close of business on the previous business day

and any other factors that may cause a material change in the futures

commission's residual interest since the close of business the previous

business day, including known unsecured customer debits or deficits,

current day market activity and any other withdrawals made from the

30.7 customer accounts; and

* * * * *

(5) After making a withdrawal requiring the approval and notice

required in paragraphs (g)(3) and (4) of this section, and before the

next daily secured amount calculation, no futures commission merchant

may make any further withdrawals from accounts holding 30.7 customer

funds, except to or for the benefit of 30.7 customers, without, for

each withdrawal, obtaining the approval required under paragraph (g)(3)

of this section and filing a written notice with the Commission under

paragraph (g)(4)(vi) of this section and its designated self-regulatory

organization signed by the chief executive officer, chief finance

officer, or other senior official. The written notice must:

* * * * *

PART 140--ORGANIZATION, FUNCTIONS, AND PROCEDURES OF THE COMMISSION

0

5. The authority citation for part 140 continues to read as follows:

Authority: 7 U.S.C. 2(a)(12), 12a, 13(c), 13(d), 13(e), and

16(b).

0

6. In Sec. 140.91, revise paragraph (a)(12) to read as follows:

[[Page 44127]]

Sec. 140.91 Delegation of authority to the Director of the Division

of Clearing and Risk and to the Director of the Division of Swap Dealer

and Intermediary Oversight.

(a) * * *

(12) All functions reserved to the Commission in Sec. 41.41 of

this chapter. Any action taken pursuant to the delegation of authority

under this paragraph (a)(12) shall be made with the concurrence of the

General Counsel or, in his or her absence, a Deputy General Counsel.

* * * * *

Issued in Washington, DC, on July 25, 2014, by the Commission.

Christopher J. Kirkpatrick,

Acting Secretary of the Commission.

[FR Doc. 2014-17934 Filed 7-29-14; 8:45 am]

BILLING CODE 6351-01-P

 

Last Updated: July 30, 2014