[Federal Register: July 8, 2003 (Volume 68, Number 130)]
[Rules and Regulations]
[Page 40498-40500]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jy03-9]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 30
Foreign Futures and Foreign Options Transactions
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rules.
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SUMMARY: The Commodity Futures Trading Commission (the ``Commission''
or ``CFTC'') is adopting amendments to Rule 30.5, which provides an
exemption from registration for firms located outside the U.S. that,
with regard to foreign futures and options, are acting in a capacity
that requires registration, other than registration as a futures
commission merchant. The amendments being adopted herein are necessary
to facilitate the ongoing program of converting from a paper-based
registration system to online registration. Currently, pursuant to Rule
30.5, firms that qualify for the exemption under the rule must file a
petition for exemption with the National Futures Association and
designate an agent for service of process in the U.S. The amendments
being adopted herein facilitate the electronic submission of petitions
for exemptions under Rule 30.5 through the online registration system
and are technical in nature.
EFFECTIVE DATE: July 8, 2003.
FOR FURTHER INFORMATION CONTACT: Lawrence B. Patent, Deputy Director,
Compliance and Registration Section, Division of Clearing and
Intermediary Oversight, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581.
Telephone: (202) 418-5439.
SUPPLEMENTARY INFORMATION:
I. Background
Commission Rule 30.5 provides an exemption from the registration
requirement for any person located outside the U.S. who is required to
be registered with the Commission under part 30 of the Commission's
rules, other than a person required to register as a futures commission
merchant (``FCM'')--i.e., an introducing broker (``IB''), commodity
pool operator (``CPO''), or commodity trading advisor (``CTA'').\1\
Pursuant to Rule 30.5, any person seeking exemption from registration
under the rule must designate an agent for service of process in the
U.S. and submit a petition for exemption to the National Futures
Association (``NFA''). The designated agent must be the FCM located in
the U.S. through which business is done, any registered futures
association (currently NFA is the only registered futures association),
or any person located in the U.S. in the business of providing services
as an agent for service of process.
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\1\ Commission rules referred to herein may be found at 17 CFR
Ch. I (2002).
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In June 2002, NFA implemented an electronic online registration
system (``ORS'') to replace a paper-based registration system. As part
of the ongoing program of updating the registration process, NFA has
submitted to the Commission for its approval, pursuant to Section 17(j)
of the Commodity Exchange Act (the ``Act''),\2\ amendments to NFA
registration rules that would require applicants seeking exemption
pursuant Commission Rule 30.5 to file such petitions electronically
through ORS. On July 1, 2003, the Commission approved these amendments
to the NFA registration rules.
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\2\ 7 U.S.C. 1 et seq. (2000).
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The addition of the Rule 30.5 exemption to NFA's ORS should
streamline the exemption process and provide a quicker and easier way
for persons to provide NFA with the required information and enable NFA
to process this information more efficiently and confirm exemption from
registration pursuant to Rule 30.5 more quickly. Additionally,
information on persons exempt from registration pursuant to Rule 30.5
should be more readily accessible by the public, NFA, and the
Commission.
II. The Rule Amendments
Under the ORS, persons submitting a petition for exemption from
registration pursuant to Rule 30.5 will file a Form 7-R. When a person
indicates that it wishes to process a Part 30 exemption application,
the ORS will follow the applicable ``path'' of the online Form 7-R,
requiring the person to submit the information required by Rule 30.5.
Currently, Rule 30.5 does not require a petition for exemption to be
completed on a particular form, but instead requires the petition to be
in writing and sets forth the information that must be included in the
petition. The Commission is amending Rule 30.5 to make clear that a
petition for exemption must be filed on a Form 7-R completed in
accordance with the instructions therein.
Current Rule 30.5 provides the postal address where the petition
should be submitted to NFA. As the petition will now be submitted
through the ORS, it is unnecessary to include the postal address in the
rule.
III. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA'') \3\ requires that
agencies, in proposing rules, consider the impact of those rules on
small businesses. The rule amendments being adopted herein will not
place any additional burdens since all persons seeking the exemption
provided for pursuant to Rule 30.5 are already subject to the filing
requirements of Rule 30.5. To the contrary, the amendments will help to
streamline and simplify the current exemption procedures. Accordingly,
the Chairman, on behalf of the Commission, certifies pursuant to
Section 3(a) of the RFA \4\ that the proposed rules will not have a
significant economic impact on a substantial number of small entities.
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\3\ 5 U.S.C. 601 et seq.
\4\ 5 U.S.C. 605(b).
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B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (``PRA'') \5\ 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 rule amendments do not require a
new collection of information on the part of any entities subject to
the proposed rule amendments. Accordingly, for purposes of the PRA, the
Commission certifies that these rule amendments will not impose any new
reporting or recordkeeping requirements. The Commission has submitted
hard copies of how the new Form 7-R path will appear in the electronic
registration system to the Office of Management and Budget.
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\5\ 44 U.S.C. 3501 et seq.
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C. Cost-Benefit Analysis
Section 15(a) of the Act 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) does not require the Commission to
quantify the costs and benefits of a new regulation or to determine
whether the 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.
Section 15(a) further specifies that costs and benefits shall be
evaluated in light of five broad areas of market and
[[Page 40499]]
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. Accordingly, the Commission could in
its discretion give greater weight to any one of the five enumerated
areas and could in its discretion determine that, notwithstanding its
costs, a particular rule was 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.
These amendments are intended to facilitate a streamlined exemption
process that would result in quicker processing of petitions. The
Commission is considering the costs and benefits of these rules in
light of the specific provisions of section 15(a) of the Act:
1. Protection of market participants and the public. While the
amendments are expected to lessen the burden imposed upon persons
submitting petitions for exemption, they do not affect the requirements
to qualify for the exemption. Accordingly, they should have no effect
on the Commission's ability to protect market participants and the
public.
2. Efficiency and competition. The amendments are expected to
benefit efficiency and competition by more quickly facilitating entry
into the industry and by enabling information to be collected and made
available in a more timely manner.
3. Financial integrity of futures markets and price discovery. The
amendments should have no effect, from the standpoint of imposing costs
or creating benefits, on the financial integrity or price discovery
function of the futures and options markets.
4. Sound risk management practices. The amendments being adopted
herein should have no effect on the risk management practices of the
futures and options industry.
5. Other public interest considerations. The amendments, in
facilitating the ongoing program of building an online registration
system, are expected to result in a system that is easier to use and
more efficient in its processing exemption applications. Additionally,
the system should permit more information about persons exempt from
registration pursuant to Rule 30.5 be readily accessible by the public
more quickly.
After considering these factors, the Commission has determined to
adopt the amendments discussed above.
D. Administrative Procedure Act
The Commission has determined that the amendments discussed herein
relate solely to agency organization, procedure, and practice.
Accordingly, the provisions of the Administrative Procedure Act that
generally require notice of proposed rulemaking and that provide other
opportunities for public participation are not applicable.\6\ The
Commission further finds that, because the amendments relieve a
restriction, in so far as they provide for a process that will make the
submission of a petition for exemption under Rule 30.5, and the
subsequent confirmation of such exemption, quicker and more efficient,
and the amendments have no adverse effect upon a member of the public,
there is good cause to make it effective less than thirty days after
publication in the Federal Register.\7\
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\6\ 5 U.S.C. 553(b)(3)(A).
\7\ See 5 U.S.C. 553(d).
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List of Subjects in 17 CFR Part 30
Commodity futures, consumer protection, fraud.
0
For the reasons discussed in the foregoing, the Commission hereby
amends Chapter I of Title 17 of the Code of Federal Regulations as
follows:
PART 30--FOREIGN FUTURES AND FOREIGN OPTIONS TRANSACTIONS
0
1. The authority citation for Part 30 is revised to read as follows:
Authority: 7 U.S.C. 1a, 2, 6, 6c, and 12a, unless otherwise
noted.
0
2. Section 30.5 is amended as follows:
0
a. By revising the introductory text;
0
b. By revising paragraph (a);
0
c. By revising paragraph (b); and
0
d. By removing paragraph (e).
The revisions read as follows:
Sec. 30.5 Alternative procedures for non-domestic persons.
Any person not located in the United States, its territories or
possessions, who is required in accordance with the provisions of this
part to be registered with the Commission, other than a person required
to be registered as a futures commission merchant, may apply for an
exemption from registration under this part by filing with the National
Futures Association a Form 7-R completed and filed in accordance with
the instructions thereto and designating an agent for service of
process, as specified below. A person who receives confirmation of an
exemption pursuant to this section must engage in all transactions
subject to regulation under Part 30 through a registered futures
commission merchant or a foreign broker who has received confirmation
of an exemption pursuant to Sec. 30.10 in accordance with the
provisions of Sec. 30.3(b).
(a) Agent for service of process. Any person who seeks exemption
from registration under this part shall enter into a written agency
agreement with the futures commission merchant located in the United
States through which business is done, with any registered futures
association, or any other person located in the United States in the
business of providing services as an agent for service of process,
pursuant to which agreement such futures commission merchant or other
person is authorized to serve as the agent of such person for purposes
of accepting delivery and service of communications issued by or on
behalf of the Commission, U.S. Department of Justice, any self-
regulatory organization, or any foreign futures or foreign options
customer. If the written agency agreement is entered into with any
person other than the futures commission merchant through which
business is done, the futures commission merchant or foreign broker who
has received confirmation of an exemption pursuant to Sec. 30.10 with
whom business is conducted must be expressly identified in such agency
agreement. Service or delivery of any communication issued by or on
behalf of the Commission, U.S. Department of Justice, any self-
regulatory organization or any foreign futures or foreign options
customer, pursuant to such agreement, shall constitute valid and
effective service or delivery upon such person. Unless otherwise
specified by the Commission, the agreement required by this section
shall be filed with the National Futures Association. For the purposes
of this section, the term ``communication'' includes any summons,
complaint, order, subpoena, request for information, or notice, as well
as any other written document or correspondence relating to any
activities of such person subject to regulation under this part.
(b) Termination of agreement. Whenever the agreement referred to in
paragraph (a) of this section is terminated or is otherwise no longer
in effect, the futures commission merchant or any other person that is
party to the agreement shall immediately notify the National Futures
Association and the futures commission merchant through which business
is done, as appropriate. Upon notice, a futures commission merchant
shall not accept from the person that has entered into such agreement
any order, other than liquidating order(s), for, or on behalf of
[[Page 40500]]
a foreign futures or foreign options customer. Notwithstanding the
termination of the agreement referred to in paragraph (a) of this
section, service or delivery of any communication issued by or on
behalf of the Commission, U.S. Department of Justice, any self-
regulatory organization, or any foreign futures or foreign options
customer pursuant to the agreement shall nonetheless constitute valid
and effective service or delivery upon such person with respect to any
transaction entered into on or before the date of the termination of
the agreement.
* * * * *
Issued in Washington, DC, on July 1, 2003, by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 03-17145 Filed 7-7-03; 8:45 am]
BILLING CODE 6351-01-P