[Federal Register: May 7, 2009 (Volume 74, Number 87)]
[Proposed Rules]
[Page 21290-21294]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07my09-20]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 1
RIN 3038-AC66
Revised Adjusted Net Capital Requirements for Futures Commission
Merchants and Introducing Brokers
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking; request for comments.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'')
proposes to amend its regulations that prescribe minimum adjusted net
capital (``ANC'') requirements for futures commission merchants
(``FCMs'') and introducing brokers (``IBs''). The proposed amendments
would increase the required minimum dollar amount of ANC, as defined in
the regulations, that an FCM must maintain from $250,000 to $1,000,000.
The proposed amendments also would increase the required minimum dollar
amount of ANC that IBs must maintain from $30,000 to $45,000. The
Commission also is proposing to amend the computation of an FCM's
margin-based minimum ANC requirement to incorporate into the
calculation customer and noncustomer positions in over-the-counter
derivative instruments that are submitted for clearing by the FCM to
derivatives clearing organizations (``DCOs'') or other clearing
organizations (``cleared OTC derivative positions''). In addition, the
Commission is proposing to amend the regulations to require that FCM
proprietary cleared OTC derivative positions be subject to capital
deductions in a manner that is consistent with the capital deductions
required by the Commission's regulations for FCM proprietary positions
in exchange-traded futures contracts and options contracts. Further,
the Commission proposes to amend the FCM capital computation to
increase the applicable percentage of the total margin-based
requirement for futures, options and cleared OTC derivative positions
in customer accounts from eight percent to ten percent and in
noncustomer accounts from four percent to ten percent. Lastly, the
Commission solicits public comments on the advisability of increasing
the ANC requirement for FCMs that are also securities brokers and
dealers by the amount of net capital required by the Securities and
Exchange Commission (``SEC'') Rule 15c3-1(a).
DATES: Submit comments on or before July 6, 2009.
ADDRESSES: You may submit comments, identified by RIN number, by any of
the following methods:
Federal eRulemaking Portal: http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov http://www.regulations.gov.
Follow the instructions for submitting comments.
Agency Web Site: http://www.cftc.gov. Follow the
instructions for submitting comments on the Web site.
E-mail: [email protected]. Include the RIN number in the
subject line of the message.
Fax: 202-418-5521.
Mail: David A. Stawick, Secretary of the Commission,
Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st
Street, NW., Washington, DC 20581.
Hand Delivery/Courier: Same as mail above.
FOR FURTHER INFORMATION CONTACT: Thelma Diaz, Associate Director,
Division of Clearing and Intermediary Oversight, 1155 21st Street, NW.,
Washington, DC 20581. Telephone number: 202-418-5137; facsimile number:
202-418-5547; and electronic mail: [email protected] or Mark Bretscher,
Special Counsel, Division of Clearing and Intermediary Oversight,
Commodity Futures Trading Commission, 525 W. Monroe, Suite 1100,
Chicago, Illinois 60661. Telephone number: 312-596-0529; facsimile
number: 312-596-0714; and electronic mail: [email protected].
SUPPLEMENTARY INFORMATION:
I. Minimum Financial Requirements for FCMs and IBs
Section 4f(b) of the Commodity Exchange Act (``Act'') provides that
FCMs and IBs must meet the minimum financial requirements that the
Commission ``may by regulation prescribe as necessary to insure'' that
FCMs and IBs meet their obligations as registrants.\1\ FCMs are subject
to higher capital requirements than IBs because the Act permits FCMs,
but not IBs, to hold funds of customers trading on designated contract
markets and to clear such positions with a DCO. In addition, Section 4d
of the Act and the Commission's regulations provide
[[Page 21291]]
further protection for customer funds by requiring that they be held as
``segregated'' funds that are separate and apart from the FCM's own
proprietary funds. Part 30 of the Commission's regulations also
requires FCMs to hold ``secured amount'' funds for U.S. customers
trading in non-U.S. futures markets.
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\1\ The Act is codified at 7 U.S.C. 1 et seq. The Commission
regulations cited herein may be found at 17 CFR Ch. I (2008).
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As specified in Commission Regulation 1.17(a), the minimum dollar
amount of ANC that FCMs and IBs must maintain is $250,000 and $30,000,
respectively. The minimum ANC requirements in Commission Regulation
1.17(a) also set forth other computations which, if greater, will
increase the minimum capital requirement for the FCM or IB.
Specifically, the relevant provisions of Regulation 1.17(a)(1)(i)
require an FCM to maintain ANC equal to or in excess of the greatest
of: $250,000; the FCM's margin-based or ``risk-based'' capital
requirement, which is computed by adding together eight percent of the
total risk margin requirement for positions in customer accounts, plus
four percent of the total risk margin requirement for positions carried
in noncustomer accounts; the amount of ANC required by a registered
futures association of which the FCM is a member; or, if the FCM is
also a securities broker and dealer registered with the U.S. Securities
and Exchange Commission (``SEC''), the amount of net capital required
by SEC Rule 15c3-1(a), 17 CFR 240.15c3-1(a). For an IB, Commission
Regulation 1.17(a)(1)(iii) requires ANC that equals or exceeds the
greatest of: $30,000; the amount of ANC required by a registered
futures association of which the IB is a member; or for an IB also
registered with the SEC as securities broker and dealer, the amount of
net capital required by SEC Rule 15c3-1(a).
The minimum ANC requirements of $30,000 for IBs and $250,000 for
FCMs were adopted by the Commission over a decade ago,\2\ and are no
longer consistent with the regulatory objective of requiring these
registrants to maintain a minimum base of liquid capital from which to
meet their current financial obligations, including obligations to
customers. Adopting increased minimum ANC requirements for registrants
whose customers engage in exchange-traded futures activity would
recognize the striking increase over the past decade in the amount of
funds that such customers have deposited with their FCMs. As of August
31, 1995, approximately $30 billion of segregated and secured amount
funds were required to be held by FCMs for their customers, at a time
when there were 255 FCMs. As of December 31, 2008, the total amount of
such funds had escalated to approximately $200 billion, which 134 FCMs
were required to hold for their customers. Thus, not only has there
been a dramatic increase in the amount that FCMs must hold as
segregated and secured amount funds for their customers, but those
funds have become concentrated among far fewer FCMs, further supporting
additional measures to ensure the sound financial strength of such
firms.\3\
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\2\ The Commission increased the minimum ANC requirements of IBs
and FCMs to $30,000 and $250,000 in May of 1996. See 61 FR 19177
(May 1, 1996).
\3\ The Commission also notes that Congress recently recognized
the importance of appropriate minimum capital requirements for
registrants with obligations to customers by establishing a $20
million capital requirement for retail over-the-counter forex firms.
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Other considerations also support the proposed increase in FCM and
IB minimum dollar amount ANC requirements. As noted above, one of the
factors in determining the minimum ANC requirements for FCMs and IBs is
the minimum requirement imposed by a registered futures association of
which the FCM or IB is a member. The National Futures Association
(``NFA'') is the only registered futures association, and Commission
Regulation 170.15(a) requires each registered FCM to be a member of a
registered futures association. All registered IBs are also members of
the NFA. On July 31, 2006, NFA's amendments to Section 1 of its
Financial Requirements became effective, increasing its FCM members'
minimum ANC requirement from $250,000 to $500,000, and increasing the
required minimum dollar amount of ANC for member IBs from $30,000 to
$45,000. Consequently, when the NFA amended the minimum dollar amount
of ANC required of its member FCMs and IBs on July 31, 2006, the
required dollar level of minimum ANC for all FCMs and IBs increased to
$500,000 and $45,000 respectively. Therefore, the Commission's proposal
to increase the minimum dollar ANC requirement of IBs to $45,000 merely
harmonizes its regulations with NFA rules, which will simplify the
capital calculations of IBs. Lastly, Commission staff notes that the
number of FCMs that may have to add capital as a result of the proposed
ANC requirement of $1,000,000 is minimal and that the proposed
increased ANC requirement is appropriate for the reasons discussed
above. Accordingly, the Commission is proposing to amend Regulation
1.17(a)(1)(iii)(A) to raise the minimum dollar amount of required ANC
to $45,000 for IBs, and to amend Regulation 1.17(a)(1)(i)(A) to raise
the minimum dollar amount of required ANC for FCMs to $1,000,000. The
Commission is also proposing additional increases to ANC requirements
for FCMs, as discussed below.
II. Proposed Amendment To Include Cleared OTC Positions in the
Calculation of an FCM's Minimum Net Capital Requirement
The Commission's minimum financial requirements provide protection
to customers and other market participants by requiring FCMs and IBs to
maintain minimum levels of liquid assets in excess of their liabilities
to finance their business activities. In 2004, the Commission amended
Regulation 1.17(a)(1)(i)(B) to include a ``risk-based'' computation
based on the margin, or performance bond, requirements for the FCM's
customers and noncustomers. Specifically, Commission Regulation
1.17(a)(1)(i)(B) requires an FCM to compute its risk-based capital
requirement as the sum of: (1) Eight percent of the total risk margin
\4\ requirement for positions carried by the FCM in ``customer
accounts'', as defined in Regulation 1.17(b)(7), and (2) four percent
of the total risk margin requirement for positions carried by the FCM
in ``noncustomer accounts'', as defined in Regulation 1.17(b)(4). The
Commission did not revise its regulations with respect to proprietary
futures and granted options positions of FCMs, as such positions were
already subject to capital deductions under Commission Regulation
1.17(c)(5)(x). In general, an FCM's proprietary futures and granted
options positions are subject to a deduction equal to 100 percent of
the maintenance margin requirement for positions that are cleared by
clearing organizations of which the FCM is a clearing member, and 150
percent of the maintenance margin requirement for positions that are
cleared by clearing organizations of which the FCM is not a clearing
member.
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\4\ The term ``risk margin'' is defined at Commission Regulation
1.17(b)(8).
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In adopting risk-based capital requirements in Regulation 1.17 with
respect to the futures and options positions of FCM customers and
noncustomers, the Commission noted that the amendments included any
customer positions, including non-futures positions, that were held in
customer segregated accounts established in accordance with the
provisions of Section 4d of the Act and Commission regulations. Various
DCOs,
[[Page 21292]]
as part of their increasing efforts to clear OTC derivative
instruments,\5\ have requested Commission orders authorizing their
clearing FCMs to commingle customers' money, securities, and other
property margining OTC-cleared derivative positions with the money,
securities, and other property deposited by said customers to margin
futures and options positions in segregated accounts established
pursuant to Section 4d of the Act.\6\ Therefore, the risk exposure of
clearing OTC derivative instruments extends not only to the FCM, but
also to the segregated funds of its OTC, futures and options customers.
Where OTC customer funds are commingled with the funds of futures and
options customers, the Commission deemed it necessary to include OTC
customer positions in the definition of ``customer accounts'' for
purposes of computing an FCM's risk-based capital requirement.
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\5\ OTC derivative instrument is defined by Section 408(2) of
the Federal Deposit Insurance Corporation Improvement Act, 12
U.S.C.A. 4421. As defined there, the term ``over-the-counter
derivative instrument'' includes ``(A) any agreement, contract, or
transaction, including the terms and conditions incorporated by
reference in any such agreement, contract, or transaction, which is
an interest rate swap, option, or forward agreement, including a
rate floor, rate cap, rate collar, cross-currency rate swap, basis
swap, and forward rate agreement; a same day-tomorrow, tomorrow-
next, forward, or other foreign exchange or precious metals
agreement; a currency swap, option, or forward agreement; an equity
index or equity swap, option, or forward agreement; a debt index or
debt swap, option, or forward agreement; a credit spread or credit
swap, option, or forward agreement; a commodity index or commodity
swap, option, or forward agreement; and a weather swap, weather
derivative, or weather option; (B) any agreement, contract or
transaction similar to any other agreement, contract, or transaction
referred to in this clause that is presently, or in the future
becomes, regularly entered into by parties that participate in swap
transactions (including terms and conditions incorporated by
reference in the agreement) and that is a forward, swap, or option
on one or more occurrences of any event, rates, currencies,
commodities, equity securities or other equity instruments, debt
securities or other debt instruments, economic or other indices or
measures of economic or other risk or value; (C) any agreement,
contract, or transaction excluded from the Commodity Exchange Act
under section 2(c), 2(d), 2(f), or 2(g) of such Act, or exempted
under section 2(h) or 4(c) of such Act; and (D) any option to enter
into any, or any combination of, agreements, contracts or
transactions referred to in this subparagraph.''
\6\ Examples of Commission orders under Section 4d of the Act
related to OTC clearing by DCOs include an Order dated May 30, 2002
regarding Treatment of Funds Held in Connection with the Clearing of
Over-the-Counter Products by the New York Mercantile Exchange, and
also Orders dated March 3, 2006 and September 26, 2008 regarding
Treatment of Funds Held in Connection with the Clearing of Over-the-
Counter Products by Chicago Mercantile Exchange, Inc.
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The Commission now proposes further amendments to Regulation 1.17,
in order to require FCMs to account for all cleared OTC derivative
positions the FCM carries for customers, whether or not included in a
Section 4d segregated customer account, in the FCM's risk-based capital
calculations. The proposed amendments would apply to OTC derivative
instruments cleared in either the U.S. or abroad by any organization
that is permitted to clear such products under the laws of the relevant
jurisdiction.\7\ As drafted, the proposed capital requirements would
also apply to credit default swaps, if these OTC derivative instruments
are submitted for clearing on any U.S. DCO or foreign clearing
organization and carried in accounts on the books of the FCM.
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\7\ Some examples of OTC-clearing by foreign clearing
organizations include ICE, which clears through IceClear Europe, and
Bclear, an exchange service launched by Euronext/Liffe, which brings
derivatives transactions to LCH.Clearnet for clearing. The proposed
rule would also include OTC-clearing by multilateral clearing
organizations authorized under Section 409 of the Federal Deposit
Insurance Corporation Improvement Act and any securities clearing
organization.
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The Commission is proposing these amendments because FCMs and DCOs
have become significant clearers of OTC derivative instruments. This
has increased the risk exposure of FCMs in a manner that is not
currently reflected in Regulation 1.17. Therefore, the Commission
proposes to amend Regulation 1.17 in order to expand the definitions of
``customer account'' in Regulation 1.17(b)(7), ``noncustomer account''
in Regulation 1.17(b)(4), and ``proprietary account'' in Regulation
1.17(b)(3) to include cleared OTC derivative positions. Cleared OTC
derivative positions would be defined in proposed Regulation 1.17(b)(9)
as over the counter derivative instrument positions of any person \8\
in accounts carried on the books of the FCM and cleared by any
organization permitted to clear such instruments under the laws of the
relevant jurisdiction. Additionally, Commission Regulation 1.17(b)(2)
is proposed to be amended to include references to ``cleared OTC
customers'', which would be defined in a proposed new paragraph (b)(10)
to mean any person that is not a proprietary person as defined in
Commission Regulation Sec. 1.3(y) and for whom the FCM carries on its
books one or more accounts for such person's OTC-cleared derivative
positions. Finally, the Commission is also proposing to amend
Regulation 1.17(c)(5)(x) to require FCMs to take proprietary capital
deductions for their cleared OTC derivative positions similar to the
capital deductions required for their proprietary futures and options
positions. The Commission notes that pursuant to the proposed
rulemaking, capital deductions to be applied to cleared OTC derivative
positions in proprietary accounts do not apply to ``covered''
positions, as that term is defined in Commission Regulation 1.17(j).
Therefore, the Commission is soliciting comments on the advisability of
revising Commission Regulation 1.17(j) to reflect that cleared OTC
positions in proprietary accounts may be covered by positions which
would qualify as cover for proprietary futures and options positions.
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\8\ The term ``person'' is defined in CFTC Regulation. 1.3(u).
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The proposed amendments continue the Commission's efforts to
enhance and update the Commission's ANC regulation to reflect the
increasing diversity of positions that are submitted for clearing by
clearing FCMs for their customers and noncustomers. In contemplation of
this proposed rule making, the Commission notes that the clearinghouses
that clear these OTC derivative instruments typically already require
margin for both exchange-traded and OTC positions, regardless of
whether the positions are held in customer segregated accounts.
Furthermore, the margin requirements for cleared OTC derivative
positions are often calculated in the same manner as that for exchange-
traded products. As such, it is quite appropriate to include cleared
OTC derivative positions in the calculation of an FCM's minimum ANC.
However, to ensure adequate capital requirements where the
clearinghouse imposes margin or performance bond requirements only for
clearing level accounts but does not prescribe minimum margin
requirements for customer or noncustomer accounts at the FCM level, the
Commission also proposes to amend the definition of ``risk margin'' in
Commission Regulation 1.17(b)(8) to mean ``the level of maintenance
margin or performance bond required for the customer or noncustomer
positions by the applicable exchanges or clearing organizations, and,
where margin or performance bond is required only for accounts at the
clearing organization, for purposes of the FCM's risk-based capital
calculations applying the same margin or performance bond requirements
to customer and noncustomer positions in accounts carried by the FCM.''
III. Proposed Amendment To Increase Applicable Percentage for Customer
and Noncustomer Positions
As noted above, currently, an FCM's risk-based capital calculations
includes a lower required percentage of risk maintenance margin for
noncustomer
[[Page 21293]]
positions (four percent) than the required percentage for the same
positions in customer accounts (eight percent). The Commission believes
that rigorous standards for FCM financial strength support the increase
of the required percentages. As such, the Commission is proposing to
amend Regulation 1.17 so that an FCM's risk-based capital requirement
is ten percent of the total risk margin requirement for positions
carried by the FCM in both ``customer accounts'', as defined in
Regulation 1.17(b)(7), and ``noncustomer accounts'', as defined in
Regulation 1.17(b)(4).
With respect to noncustomer accounts, the Commission notes that in
general non-customers are persons affiliated with the FCM including
certain employees and officers of the FCM. In adopting this lower
percentage for noncustomer positions, the Commission noted that these
percentages were the same as those contained in the self-regulatory
organization rules upon which the Commission's regulation was modeled,
and that it was the belief of these self-regulatory organizations that
noncustomers' accounts reflected less credit risk to FCMs and the
clearing system. In more recent times, the Commission has observed that
the risk associated with noncustomer accounts may not necessarily be
less than the risk associated with customer accounts under conditions
of financial stress for the FCM. Therefore, to increase the financial
integrity of the futures markets, the Commission is proposing to amend
Regulation 1.17 to apply the same percentage requirement for both
customer and noncustomer accounts. As part of its assessment of the
proposed amendments, the Commission has been advised by staff that,
based on the information included in financial reports filed by FCMs
with the Commission, it appears that some FCMs whose minimum capital
requirements are determined under the risk-based computations do not
currently hold sufficient levels of capital to satisfy the proposed
amended requirements, but that the overwhelming majority do hold levels
of capital that are sufficient to satisfy the proposed new
requirements.
IV. Proposed Effective Date
Because some FCMs may need time to raise additional capital, the
Commission is contemplating making the effective date for any final
rule amendments to Regulation 1.17 that it adopts effective 60 days
from the date of publication of the final regulations in the Federal
Register.
V. Solicitation of Comments
The Commission requests comments on each of the proposed amendments
to Regulation 1.17 that are described in this release, and also as to
the proposed effective date. The Commission is further soliciting
comments on the advisability of expanding ANC requirements for FCMs
that are also securities brokers and dealers (``FCM/BDs''), by
increasing their ANC by the amount of net capital required by SEC Rule
15c3-1(a). Currently, Commission Regulation 1.17 and SEC Regulation
15c3-1 require FCM/BDs to compare the amounts of capital required under
the SEC's and Commission's regulations, and to maintain capital in
excess of whichever amount is greater.
The Commission notes that in event of liquidation, the adjusted net
capital of an FCM that is also a securities broker and dealer is
available to satisfy any unsecured claims of creditors, including any
unsecured claims of both its futures and securities customers. The
equity available to satisfy such unsecured claims of customers, would
be increased if the FCM/BD's capital requirement was not based only on
the higher of the CFTC's or SEC's requirements, but rather the combined
requirements of the two regulations. This would help ensure that the
FCM/BD's capital requirements reflected more fully the scope of
customer activity by both its securities and futures customers.
Therefore, the Commission is soliciting comments on the advisability of
increasing ANC requirements of FCMs that are also securities brokers
and dealers by the amount of net capital required by SEC Rule 15c3-
1(a).
VI. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,
requires that agencies, in proposing rules, consider the impact of
those rules on small businesses. The rule amendments proposed herein
would affect FCMs and non-guaranteed IBs. The Commission has previously
determined that, based upon the fiduciary nature of FCM/customer
relationships, as well as the requirement that FCMs meet minimum
financial requirements, FCMs should be excluded from the definition of
small entity.\9\
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\9\ See 47 FR 18618, 18619 (Apr. 30, 1982).
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With respect to IBs, the Commission stated that it is appropriate
to evaluate within the context of a particular rule proposal whether
some or all IBs should be considered to be small entities and, if so,
to analyze the economic impact on such entities at that time.\10\ The
proposed amendment to the minimum ANC requirement for an IB would
conform the Commission's requirement to that of the NFA and, therefore,
should have no impact on an IB's financial operations. Thus, if
adopted, the proposal would not have a significant economic impact on a
substantial number of IBs. Therefore, pursuant to Section 3(a) of the
RFA, 5 U.S.C. 605(b), the Chairman certifies that these proposed rule
amendments will not have a significant economic impact on a substantial
number of small entities.
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\10\ See 48 FR 35248, 35275-78 (Aug. 3, 1983).
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B. Paperwork Reduction Act
The Paperwork Reduction Act of 1990, (``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 PRA. The proposed inclusion
of OTC-cleared products in the risk-based net capital calculation
requires no change in line item 22A of the Statement of the Computation
of Minimum Capital Requirements on Form 1-FR-FCM. There is a change to
Line 22.B as a result of increasing the minimum dollar requirement to
$1,000,000, however, this is a minor change and would not alter the
reporting burden. The proposed increase in the percentage requirements
applicable to risk margin requirements for customer and noncustomer
positions included in risk-based capital calculation constitutes a
minor change to line item 22 of the Form 1-FR-FCM, as does the minor
change to Line 16 to include OTC-cleared products, but neither change
would alter the related reporting burden. Therefore, the amendments
proposed herein have minimal burden.
Persons wishing to comment on the estimated paperwork burden
associated with these proposed rule amendments should contact Mark
Bretscher, Division of Clearing and Intermediary Oversight, 525 W.
Monroe St., Chicago, IL 60661, (312) 596-0529.
C. Cost-Benefit Analysis
Section 15(a) of the Act, as amended by Section 119 of the
Commodity Futures Modernization Act,\11\ requires the Commission to
consider the costs and benefits of its action before issuing a new
regulation under the Act. By its terms, Section 15(a) as amended does
not require the Commission to quantify the costs and benefits of a new
regulation or to determine whether the
[[Page 21294]]
benefits of the proposed regulation outweigh its costs. Rather, Section
15(a) simply requires the Commission to ``consider the costs and
benefits'' of its action.
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\11\ 7 U.S.C. 19(a).
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Section 15(a) further specifies that costs and benefits shall be
evaluated in light of five broad areas of market and public concern:
Protection of market participants and the public; efficiency,
competitiveness, and financial integrity of futures markets; price
discovery; sound risk management practices; and other public interest
considerations. The Commission, in its discretion, can choose to give
greater weight to any one of the five enumerated areas and determine
that, notwithstanding its costs, a particular regulation is necessary
or appropriate to protect the public interest or to effectuate any of
the provisions or to accomplish any of the purposes of the Act.
The proposed amendments will result in additional protection of
market participants and the public, enhancements to sound risk
management practices, enhanced financial integrity of futures markets
and other public interest considerations and should have no effect on
the following areas: efficiency, competitiveness or price discovery.
Specifically, if adopted, the proposed amendments will increase the
minimum required dollar amount of ANC for FCMs from $250,000 to
$1,000,000; increase the minimum required dollar amount of ANC for IBs
from $30,000 to $45,000; require an FCM's risk based capital
computation to include risk margin for OTC-cleared positions; and
increase from 4 percent and 8 percent to 10 percent the applicable
percentage of risk margin for all noncustomer and customer positions
held by the FCM respectively.
After considering these factors, the Commission has determined to
propose the amendments to Regulation 1.17 discussed above. The
Commission invites public comment on its application of the cost-
benefit provision. Commenters also are invited to submit any data that
they may have quantifying the costs and benefits of the proposed
amendments with their comment letters.
List of Subjects in 17 CFR Part 1
Brokers, Commodity futures, Minimum financial requirements,
Reporting and recordkeeping requirements.
In consideration of the foregoing and pursuant to the authority
contained in the Commodity Exchange Act and, in particular, Sections
4f, 4g and 8a(5) thereof, 7 U.S.C. 6f, 6g and 12a(5), the Commission
hereby proposes to amend 17 CFR part 1 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. 1a, 2, 5, 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, as amended by the Commodity
Futures Modernization Act of 2000, appendix E of Pub. L. 106-554,
114 Stat. 2763 (2000).
2. Section 1.17 is amended by:
a. Revising paragraphs (a)(1)(i)(A), (a)(1)(i)(B), and
(a)(1)(iii)(A);
b. Revising paragraphs (b)(2), (b)(3), introductory text of (b)(4),
introductory text of (b)(7) and introductory text of (b)(8),
c. Adding new paragraphs (b)(9) and (b)(10), and
d. Revising paragraph (c)(5)(x) to read as follows:
Sec. 1.17 Minimum financial requirements for futures commission
merchants and introducing brokers.
(a)(1)(i) * * *
(A) $1,000,000;
(B) The futures commission merchant's risk-based capital
requirement, computed as ten percent of the total risk margin
requirement for positions carried by the futures commission merchant in
customer accounts and noncustomer accounts.
* * * * *
(iii) * * *
(A) $45,000;
* * * * *
(b) * * *
(2) Customer means customer (as defined in Sec. 1.3(k)), option
customer (as defined in Sec. 1.3(jj) and in Sec. 32.1(c) of this
chapter), cleared over the counter customer (as defined in Sec.
1.17(b)(10)), and includes a foreign futures, foreign options customer
(as defined in Sec. 30.1(c) of this chapter).
(3) Proprietary account means an account in which commodity
futures, options or cleared over the counter derivative positions are
carried on the books of the applicant or registrant for the applicant
or registrant itself, or for general partners in the applicant or
registrant.
(4) Noncustomer account means an account in which commodity
futures, options or cleared over the counter derivative positions are
carried on the books of the applicant or registrant which is either:
* * * * *
(7) Customer account means an account in which commodity futures,
options or cleared over the counter derivative positions are carried on
the books of the applicant or registrant which is either:
* * * * *
(8) Risk Margin for an account means the level of maintenance
margin or performance bond required for the customer or noncustomer
positions by the applicable exchanges or clearing organizations, and,
where margin or performance bond is required only for accounts at the
clearing organization, for purposes of the FCM's risk-based capital
calculations applying the same margin or performance bond requirements
to customer and noncustomer positions in accounts carried by the FCM,
subject to the following.
* * * * *
(9) Cleared over the counter derivative positions means ``over the
counter derivative instrument'' (as defined in 12 U.S.C. 4421)
positions of any person in accounts carried on the books of the futures
commission merchant and cleared by any organization permitted to clear
such instruments under the laws of the relevant jurisdiction.
(10) Cleared over the counter customer means any person that is not
a proprietary person as defined in Sec. 1.3(y) and for whom the
futures commission merchant carries on its books one or more accounts
for the over the counter-cleared derivative positions of such person.
(c) * * *
(5) * * *
(x) In the case of open futures contracts or cleared OTC derivative
positions and granted (sold) commodity options held in proprietary
accounts carried by the applicant or registrant which are not covered
by a position held by the applicant or registrant or which are not the
result of a ``changer trade'' made in accordance with the rules of a
contract market:
* * * * *
Issued in Washington, DC, on April 30, 2009 by the Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. E9-10459 Filed 5-6-09; 8:45 am]
BILLING CODE P
Last Updated: May 9, 2012