2023-13459
[Federal Register Volume 88, Number 122 (Tuesday, June 27, 2023)]
[Proposed Rules]
[Pages 41522-41540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13459]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 17
RIN 3038-AF27
Large Trader Reporting Requirements
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing revisions to the Commission's regulations that
set forth large trader position reporting requirements for futures and
options. First, the Commission is proposing to remove an outdated 80-
character submission standard and delegate certain authority to the
Office of Data and Technology to designate a modern submission standard
for certain reports required to be submitted. Second, the Commission is
proposing to replace certain enumerated data fields with an appendix
specifying applicable data elements and a separate Guidebook specifying
the form and manner for reporting. These revisions would modernize
large trader position reporting and align it with other reporting
structures set out in the Commission's regulations.
DATES: Comments must be submitted on or before August 28, 2023.
ADDRESSES: You may submit comments, identified by ``Large Trader
Reporting Requirements, RIN 3038-AF27,'' by any of the following
methods:
CFTC Comments Portal: https://comments.cftc.gov/. Select
the ``Submit Comments'' link for this rulemaking and follow the
instructions on the Public Comment Form.
Mail: Send to Christopher Kirkpatrick, 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.
Please submit your comments using only one of these methods. To
avoid possible delays with mail or in-person deliveries, submissions
through the CFTC Comments Portal are encouraged.
All comments must be submitted in English, or if not, accompanied
by an English translation. Comments will be posted as received to
https://comments.cftc.gov. You should submit only information that you
wish to make available publicly. If you wish the Commission to consider
information that you believe is exempt from disclosure under the
Freedom of Information Act (``FOIA''), a petition for confidential
treatment of the exempt information may be submitted according to the
procedures established in Sec. 145.9 of the Commission's
regulations.\1\
---------------------------------------------------------------------------
\1\ 17 CFR 145.9.
---------------------------------------------------------------------------
The Commission reserves the right, but shall have no obligation, to
review, pre-screen, filter, redact, refuse, or remove any or all
submissions from https://www.comments.cftc.gov that it may deem to be
inappropriate for publication, such as obscene language. All
submissions that have been redacted or removed that contain comments on
the merits of the rulemaking will be retained in the public comment
file and will be considered as required under the Administrative
Procedure Act and other applicable laws, and may be accessible under
FOIA.
FOR FURTHER INFORMATION CONTACT: Owen Kopon, Associate Chief Counsel,
at (202) 418-5360 or [email protected], Paul Chaffin, Assistant Chief
Counsel, at (202) 418-5185 or [email protected], Division of Market
Oversight, James Fay, IT Specialist, at (202) 418-5293 or
[email protected], Division of Data, or Daniel Prager, Research Economist,
(202) 418-5801 or [email protected], Office of the Chief Economist, in
each case at the Commodity Futures Trading Commission, 1155 21st Street
NW, Washington, DC 20581.
SUPPLEMENTARY INFORMATION:
I. Background
A. Introduction
Part 17 of the Commission's regulations governs large trader
reporting for futures and options.\2\ Among other things, those rules
require futures commission merchants (``FCMs''), foreign brokers,
clearing members, and certain reporting markets \3\ (FCMs, foreign
brokers, clearing members, and such reporting markets are collectively
referred to herein as ``reporting firms'') to report daily position
information of the largest futures and options traders to the
Commission.\4\
---------------------------------------------------------------------------
\2\ 17 CFR part 17.
\3\ For exclusively self-cleared contracts, designated contract
markets (``DCMs'') must report data required to be reported under
regulation 17.00(a) on behalf of clearing members. See 17 CFR
17.00(i).
\4\ 17 CFR 17.00(a).
---------------------------------------------------------------------------
The Commission uses these Sec. 17.00(a) large trader reports to
carry out its market surveillance programs, which include detection and
prevention of price manipulation, as well as enforcement of speculative
limits.\5\ Among other things, data reported under Part 17 enable the
Commission to identify large positions in single markets or across
markets, including by aggregating the positions of a particular
beneficial owner across multiple accounts held with multiple clearing
members. In addition to supporting the Commission's surveillance
programs, aggregated position data collected under Part 17 serves as
the basis of the Commission's weekly Commitments of Traders (``COT'')
report.\6\ Historically, a wide range of both commercial and
speculative traders have used the COT report for a variety of purposes
related to their trading activities.\7\ Finally, Part
[[Page 41523]]
17 data is an important source of data for fulfillment of the
Commission's market analysis program and to support Commission research
projects.
---------------------------------------------------------------------------
\5\ See, e.g., Final Rule, Reports; General Provisions; Adoption
of Final Rules, 49 FR 46116, 46116 (Nov. 23, 1984).
\6\ See, e.g., Comprehensive Review of the Commitments of
Traders Reporting Program, 71 FR 35627, 35630 (June 21, 2006)
(stating that the Commission generates the COT report using Part 17
data); Final rule and corrections, Reporting Requirements for
Contract Markets, Futures Commission Merchants, Members of Exchanges
and Large Traders, 46 FR 59960, 59961 n.6 (Dec. 8, 1981) (``[I]n
addition to market surveillance and enforcement of speculative
limits, large trader data provides the basis for the Commission's
monthly report on commitments of large traders.'').
\7\ See, e.g., CFTC, ``Commission Actions in Response to the
Comprehensive Review of the Commitments of Traders Reporting
Program,'' at 6 (Dec. 5, 2006), available at https://www.cftc.gov/idc/groups/public/@commitmentsoftraders/documents/file/noticeonsupplementalcotrept.pdf; see also CFTC, Staff Report on
Commodity Swap Dealers & Index Traders with Commission
Recommendations, at 46 (Sept. 2008), available at https://www.cftc.gov/idc/groups/public/@newsroom/documents/file/cftcstaffreportonswapdealers09.pdf (describing various market
participants' and researchers' uses for the COT report).
---------------------------------------------------------------------------
Since the 1980s, Sec. 17.00(g) has set forth both the submission
standard and data fields to be used in Sec. 17.00(a) large trader
reports.\8\ Section 17.00(g) requires reporting firms to submit data in
a highly-specified 80-character record format that is unique to Sec.
17.00(a) large trader reports. As technology and markets have evolved,
this record format has become outdated. It does not accommodate
information needed to represent certain contracts, and necessitates
manual work by staff to validate and ingest data.\9\ The Commission is
issuing a proposal to update data reporting under Sec. 17.00(a) by
removing Sec. 17.00(g)'s 80-character record format and delegating
authority to the Director of the Office of Data and Technology to
designate a modern data submission standard. Additionally, the
Commission proposes to replace the data fields enumerated in that Sec.
17.00(g) record format with a proposed Appendix C to Part 17 specifying
the data elements required to be reported, and to delegate to the
Director of the Office of Data and Technology the authority to specify
the form, manner, coding structure, and electronic data transmission
procedures for reporting these data elements under Part 17. These
changes would both address shortcomings of the current format for Part
17 data and align Part 17 reporting with the reporting structure set
out in Parts 16, 20, 39, 43, and 45.\10\
---------------------------------------------------------------------------
\8\ The final rule promulgating regulation 17.00(g) was
published in 1986. Final Rule, Reports Filed by Contract Markets,
Futures Commission Merchants, Clearing Members, Foreign Brokers, and
Large Traders, 51 FR 4712 (Feb. 7, 1986).
\9\ 17 CFR 17.00(g).
\10\ See 17 CFR part 16; 17 CFR part 20; 17 CFR part 39; 17 CFR
part 43; 17 CFR part 45.
---------------------------------------------------------------------------
B. Statutory and Regulatory Framework for Sec. 17.00(a) Large Trader
Reporting for Futures and Options
The reporting rules contained in Parts 15, 16, 17, 18, 19, and 21
of the Commission's regulations are structured to ensure that the
Commission receives adequate information to facilitate oversight of
futures and options markets via its market surveillance programs.\11\
Part 16 requires contract markets to submit certain data; Parts 17 and
21 require FCMs, clearing members, foreign brokers, and certain
reporting markets to submit certain data; and Parts 18 and 19 require
individual traders to submit certain data.\12\
---------------------------------------------------------------------------
\11\ See, e.g., Final Rule, Reporting Levels and Recordkeeping,
69 FR 76392, 76392 (Dec. 21, 2004).
\12\ See 17 CFR parts 16-19, 21.
---------------------------------------------------------------------------
The reporting rules are implemented by the Commission based on the
authority of sections 4a, 4c(b), 4g, and 4i of the Commodity Exchange
Act (``CEA''). Section 4a of the CEA permits the Commission to set and
approve exchange-set limits and enforce speculative position
limits.\13\ Section 4c(b) of the CEA gives the Commission plenary
authority to regulate transactions that involve commodity options.\14\
Section 4g of the CEA imposes reporting and recordkeeping obligations
on registered entities, and requires each registered entity to file
such reports as the Commission may require on proprietary and customer
transactions and positions in commodities for future delivery executed
on any board of trade.\15\ Additionally, Section 4g of the CEA requires
registered entities to maintain daily trading records as required by
the Commission and permits the Commission to require that such daily
trading records be made available to the Commission.\16\ Section 4i of
the CEA requires the filing of such reports as the Commission may
require when positions made or obtained on DCMs equal or exceed
Commission-set levels.\17\
---------------------------------------------------------------------------
\13\ 7 U.S.C. 6a. Section 4a of the CEA also permits the
Commission to set, approve, and enforce speculative position limits
with respect to swaps.
\14\ 7 U.S.C. 6c(b).
\15\ 7 U.S.C. 6g.
\16\ See id.
\17\ 7 U.S.C. 6i.
---------------------------------------------------------------------------
The Commission's large trader reporting regime for futures and
options requires reporting firms to submit, pursuant to Sec. 17.00(a),
daily reports to the Commission providing positions in open contracts
\18\ and identifying information for the futures and options trader
accounts that exceed Commission-set reporting levels--called special
accounts \19\--and requires large traders themselves to provide certain
identifying information.\20\ More specifically, Sec. 17.00(a) requires
reporting firms to submit a Sec. 17.00(a) large trader position
report--historically referred to as a ``series '01 report'' \21\--that
itemizes by special account certain positions, deliveries of futures,
and exchanges of futures for related positions associated with each
account that carries a reportable position.\22\ Section 17.01 requires,
separately, that reporting firms submit information, via Form 102A,\23\
identifying the traders behind special accounts by name, address, and
occupation, once an account accrues a reportable position.\24\
Reporting firms, as appropriate, submit Forms 102 to the Commission for
each account when that account becomes reportable as a special
account.\25\ By aggregating information from Sec. 17.00(a) large
trader position reports and Forms 102, the Commission can determine the
size of each reportable trader's overall positions across special
accounts held with multiple FCMs, clearing members, or foreign brokers.
---------------------------------------------------------------------------
\18\ ``Open contract'' means any commodity or commodity option
position held by any person on or subject to the rules of a board of
trade which have not expired, been exercised, or offset. See 17 CFR
1.3 and 17 CFR 15.00(n).
\19\ A ``special account'' means any commodity futures or
options account in which there is a ``reportable position.'' 17 CFR
15.00(r). A ``reportable position'' is any open contract position
held or controlled by a trader at the close of business in any one
futures contract of a commodity traded on any one contract market
that equals or exceeds the reportable levels fixed by the Commission
in regulation 15.03. 17 CFR 15.03.
\20\ 17 CFR part 18.
\21\ See, e.g., 17 CFR 15.02 (enumerating reports by ``Form
No.'').
\22\ 17 CFR 17.00(a).
\23\ See 17 CFR part 17, App'x A.
\24\ 17 CFR 17.01.
\25\ 17 CFR 17.02(b).
---------------------------------------------------------------------------
These data reported under Part 17 are used for the Commission's
market surveillance program, for generating the weekly COT report, for
market analysis, and for research projects.\26\ Section 17.00(g)
provides the data submission standard and data elements for the
reportable positions by special accounts--Sec. 17.00(a) large trader
report data, or series '01 report data--in the form of an 80-character
record format.\27\
---------------------------------------------------------------------------
\26\ See, e.g., Final Rule, Reports Filed by Contract Markets,
Futures Commission Merchants, Clearing Members, Foreign Brokers, and
Large Traders, 51 FR 4712, at 4712 (Feb. 7, 1986).
\27\ 17 CFR 17.00(g).
---------------------------------------------------------------------------
The Commission receives Sec. 17.00(a) large trader reports by 9
a.m. on the business day following the day to which the information
pertains.\28\ Information obtained from such reports is ingested into
the Commission's Integrated Surveillance System (``ISS''), where it may
be linked to ownership and control information for special accounts
reported pursuant to Sec. 17.01.\29\
---------------------------------------------------------------------------
\28\ 17 CFR 17.02(a).
\29\ ISS receives and stores end-of-day position reports
submitted to the CFTC and allows the Commission's divisions and
offices to monitor daily activities of large traders. See, e.g.,
Final Rule, Ownership and Control Reports, Form 102/102S, 40/40S,
and 71, 78 FR 69178, 69180 (Nov. 18, 2013). Among other things, ISS
is used to generate the COT report.
---------------------------------------------------------------------------
[[Page 41524]]
C. Shortcomings of the Sec. 17.00(g) Record Format
Section 17.00(g)'s 80-character record format has been in place
since 1986,\30\ and has become outdated and difficult for staff to use.
Historically, Part 17 has evolved alongside technological advances in
data transmission. At the time of the Commission's establishment, daily
reports with respect to special accounts could be submitted to the
Commission on paper series '01 forms.\31\ In 1984, the Commission
amended Part 17 to permit, but not require, reporting firms to submit
Part 17 reports on certain Commission-compatible data processing
media--at that time, computer printouts or magnetic tape.\32\ The
Commission found these methods improved data quality and saved time,
money, and effort for both the Commission and market participants.\33\
In 1986, the Commission revised Part 17 to specifically require that a
reporting firm submit reports in a machine-readable form compatible
with the Commission's data processing system, unless otherwise
authorized by the Commission.\34\ At that time, newly-established Sec.
17.00(g) set out the data fields to be reported and introduced an 80-
character submission standard based on Cobol Programming Language
descriptions.\35\ Market participants were required to submit Sec.
17.00(a) large trader position reports using compatible data processing
media, defined to include magnetic tape, magnetic diskette, or dial-up
data transmission at speeds up to 1200 baud asynchronous transmission
and 4800 baud synchronous transmission.\36\ The Commission made minor
amendments to the particulars of the 80-character record format in 1997
and, in recognition of evolving data transmission methods, revised the
definition of ``compatible data-processing media'' to delete its list
of specific compatible media and delegate to staff the authority to
define acceptable media.\37\ The 80-character record format has
remained largely unchanged since 1997. In 2004, the Commission revised
requirements that specified that reports be transmitted by ``dial-up''
to allow for more general transmission via internet connection,\38\ and
expanded the requirement that reporting firms include information
concerning volume attributable to exchanges of futures for physicals to
include information concerning exchanges of futures for derivatives
positions.\39\
---------------------------------------------------------------------------
\30\ See 51 FR 4712.
\31\ See, e.g., Final Rule, Rules Under the Commodity Exchange
Act, 41 FR 3192, 3208 (Jan. 21, 1976) (regulation 17.03 permitted
reporting of series 01 information on ``compatible data-processing
punched cards'' in addition to magnetic tape or discs). The
Commission's predecessor agency received regulation 17.00(a) large
trader reporting in a similar format. See, e.g., Supersedure of
Certain Regulations, 26 FR 2968, 2969 (Apr. 7, 1961).
\32\ Final Rule, Reports Filed by Contract Markets, Futures
Commission Merchants, Clearing Members, Foreign Brokers and Large
Traders, 51 FR 4712-01, 4713-14 (Feb. 7, 1986).
\33\ Id. at 4714; see also Proposed Rule, Reporting Requirements
for Contract Markets, Futures Commission Merchants, Clearing Members
and Traders, 50 FR 30450-01, 30452 (Jul. 26, 1985).
\34\ 51 FR at 4714.
\35\ 17 CFR 17.00(g) (1986). ``Cobol'' refers to Common Business
Oriented Language.
\36\ 17 CFR 15.00(1) (1986); see also 51 FR at 4714. By 1995,
the Commission received 95 percent of its futures large trader data
through dial-up transmission or on machine-readable media. See
Proposed Rule, Futures Commission Merchants, Clearing Members and
Foreign Brokers; Option Large Trader Reports Daily Filing
Requirements, 61 FR 37409-01, 37411 (Jul. 18, 1996).
\37\ See Final Rule, Recordkeeping: Reports by Futures
Commission Merchants, Clearing Members, Foreign Brokers, and Large
Traders, 85 FR 24026, 24028 (May 2, 1997).
\38\ See Final Rule, Reporting Levels and Recordkeeping, 69 FR
76392-01, 76394 (Dec. 21, 2004).
\39\ See id. at 76394.
---------------------------------------------------------------------------
Technology for financial reporting has further advanced since the
1990s. As a result, the record format for Sec. 17.00(a) large trader
reports has become outdated.
First, the Cobol Language submission standard embedded in current
Sec. 17.00(g) is outdated. No other CFTC reporting regime relies in
the same manner on a Cobol Language submission standard today.\40\
Outside of the Part 17 context, the Commission has transitioned to more
modern data submission standards, such as Financial Products Markup
Language (``FpML''),\41\ the Financial Information eXchange (``FIX'')
Protocol or Financial Information eXchange Markup Language
(``FIXML''),\42\ and other submission standards using extensible markup
language (``XML'').\43\ XML standards have the ability to capture
complex or customizable information about products \44\ beyond the
capabilities of the simpler Cobol Language used in the current Sec.
17.00(g) standard. The Commission converted reporting for transaction
data reporting by DCMs to an FIXML standard in the 2009 to 2010
period.\45\ XML-based standards like FpML and FIXML both have been
widely used by market participants and regulators to represent
financial data for purposes of electronically messaging and confirming
derivatives trades since at least 2011.\46\
---------------------------------------------------------------------------
\40\ In 2004, the Commission removed a Cobol Language record
format used for special calls under regulation 21.02 as part of the
process of modernizing the rules covering data and hard copy
submissions to the Commission under Parts 15 through 21. See id. at
76400 (removing regulation 21.02).
\41\ FpML is a freely-licensed business information exchange
standard for derivatives. See FpML, ``What is FpML[supreg]?,''
available at https://www.fpml.org/about/what-is-fpml/ (last visited
April 26, 2023).
\42\ See FIX Trading, ``What is FIX?,'' available at https://www.fixtrading.org/what-is-fix/ (last visited April 26, 2023).
\43\ See, e.g., Large Trader Reporting for Physical Commodity
Swaps: Division of Market Oversight Guidebook for Part 20 Reports
(June 22, 2015), available at https://www.cftc.gov/idc/groups/public/@newsroom/documents/file/ltrguidebook062215.pdf
(incorporating FpML and FIXML data standards for Part 20 reporting);
CFTC Technical Specification, Parts 43 and 45 swap data reporting
and public dissemination requirements, Version 3.0 (Sept. 30, 2021),
available at https://www.cftc.gov/media/6576/Part43_45TechnicalSpecification093021CLEAN/download (incorporating
FIXML data standard for Parts 43 and 45 reporting).
\44\ See id.
\45\ See Advanced Notice of Proposed Rulemaking, Account
Ownership and Control Information, 74 FR 31642, 31644 (July 2,
2009).
\46\ See CFTC and SEC, ``Joint Study on the Feasibility of
Mandating Algorithmic Descriptions for Derivatives,'' at 11 (Apr. 7,
2011), available at https://www.cftc.gov/sites/default/files/idc/groups/public/@swaps/documents/file/dfstudy_algo_040711.pdf.
---------------------------------------------------------------------------
Second, the current Sec. 17.00(g) record format has grown error-
prone. Correcting errors in Sec. 17.00(a) data is burdensome for both
Commission staff and industry. Uncorrected errors in such data impair
the Commission's ability to utilize data for surveillance and market
analysis. In addition to relying on data reported under Sec. 17.00(a)
for market surveillance, the Commission generates the weekly COT report
based on such data.\47\ Because the current Sec. 17.00(g) record
format does not support automated data quality checks from the
Commission back to reporting firms, Commission staff must manually
contact reporting firms to address errors, which has proven time-
consuming and inefficient. Reporting firms must, in turn, submit error
corrections. This error correction process puts the timeliness of the
COT report in jeopardy. The error correction process also imposes costs
on the Commission and on industry that could be reduced or avoided if
the Commission were able to implement automated data quality checks.
---------------------------------------------------------------------------
\47\ See, e.g., 46 FR at 59961 n.6.
---------------------------------------------------------------------------
Third, data received in the Sec. 17.00(g) record format is
difficult to query outside of ISS, limiting staff's flexibility in
working with this data and impeding staff's ability to integrate this
data with other data housed outside of ISS.
Fourth, new contract features have been introduced to the market
since the last revisions to Sec. 17.00(g), including certain features
which are in some cases not readily susceptible to representation
[[Page 41525]]
in Sec. 17.00(g)'s current 80-character record format. For example,
the current Sec. 17.00(g) submission standard contains a single data
field that allows the reporting firm to indicate the strike for an
option position, but cannot accommodate reporting strikes for a bounded
option position--a position in a contract that has both an upper and
lower strike--in that single data field. To accommodate data reporting
for such contracts, the Commission must undertake additional manual
work, including ingesting supplemental data reports. This is time-
consuming, inefficient, and introduces unnecessary risks of error.
In light of the above, the Commission is proposing to amend Part 17
to (1) remove the outdated 80-character record format and replace it
with provisions that delegate to staff the authority to designate a
modern data submission standard, and (2) replace the data fields
represented in the 80-character record format with an appendix of
applicable data elements and a Part 17 Guidebook to provide the form
and manner for submitting data reports. In introducing an appendix of
applicable data elements, the Commission also proposes to add data
elements necessary to represent positions in certain innovative
contracts in Sec. 17.00(a) reports and to indicate the types of
transactions that resulted in day-to-day changes in positions as
described below.
II. Proposed Rules
A. Sections 17.00(g), 17.00(h), and 17.03(d)--Submission Standard
As discussed above, the current Sec. 17.00(g) record format has
become outdated, error-prone, and difficult to use. The Commission is
proposing amendments to remove Sec. 17.00(g)'s current, outdated 80-
character record format and to replace it with provisions that allow
the Commission to implement modern data submission standards.\48\
Specifically, the Commission proposes to remove current Sec.
17.00(g)'s 80-character record format and amend Sec. 17.03(d) to
delegate authority to the Director of the Office of Data and Technology
to designate a submission standard for reports required under Sec.
17.00(a). That submission standard would be published in a Part 17
Guidebook. The Commission proposes replacing current Sec. 17.00(g)
with a provision requiring that a report under Sec. 17.00(a) include
all applicable data elements specified in a proposed Appendix C to Part
17, and be submitted in the form and manner provided in the Part 17
Guidebook. Delegated authority would facilitate implementing a
submission standard that accommodates technological advances and
provides efficiencies to market participants required to submit reports
required by Sec. 17.00(a).
---------------------------------------------------------------------------
\48\ 17 CFR 17.00(g).
---------------------------------------------------------------------------
1. Removal of the Sec. 17.00(g) Record Format and Delegation of
Authority to the Office of Data and Technology To Require Modern
Submission Standards
As discussed above, the current Sec. 17.00(g) record format has
become outdated. The Cobol Language submission standard is used nowhere
else in CFTC reporting, as the Commission has otherwise transitioned to
more modern data submission standards for data reporting across its
reporting regulations.\49\ That record format is also error-prone and
difficult to query outside of ISS, rendering large trader position data
difficult to integrate with other Commission data. And, that submission
standard lacks the flexibility to accommodate certain features of
innovative contracts.
---------------------------------------------------------------------------
\49\ See, e.g., See Advanced Notice of Proposed Rulemaking,
Account Ownership and Control Information, 74 FR 31642, 31644 (July
2, 2009) (regulation 16.02 data to be reported in FIXML); Large
Trader Reporting for Physical Commodity Swaps: Division of Market
Oversight Guidebook for Part 20 Reports (June 22, 2015), available
at https://www.cftc.gov/idc/groups/public/@newsroom/documents/file/ltrguidebook062215.pdf (incorporating FpML and FIXML data standards
for Part 20 reporting); CFTC Technical Specification, Parts 43 and
45 swap data reporting and public dissemination requirements,
Version 3.0 (Sept. 30, 2021), available at https://www.cftc.gov/media/6576/Part43_45TechnicalSpecification093021CLEAN/download
(incorporating FIXML data standard for Parts 43 and 45 reporting).
---------------------------------------------------------------------------
To replace the current Sec. 17.00(g) record format, the Commission
proposes to revise Sec. Sec. 17.00(g) and 17.03(d) to explicitly
delegate authority to the Director of the Office of Data and Technology
to determine the form and manner for reporting data required to be
reported under Sec. 17.00(a), including to establish the data
submission standard for such reports. Concurrently with the issuance of
this notice, the Office of Data and Technology has published a proposed
Part 17 Guidebook on the Commission's website, https://www.cftc.gov.
The proposed Part 17 Guidebook will specify the data submission
standard for reports required under Sec. 17.00(a), among other things.
Such an approach is consistent with the Commission's practice in other
data reporting regimes.\50\ To facilitate adaptation to modern data
standards, the Commission has delegated authority to the Divisions to
determine which data standards to permit or require in order to
accommodate the needs of different communities of users.\51\ The
Divisions exercise delegated authority through the publication of
guidebooks or technical specifications that set out the form, manner,
and timing for reporting data.
---------------------------------------------------------------------------
\50\ See, e.g., 17 CFR 45.15(a)(2) (delegating authority to
staff to determine whether to require reporting swap data using one
or more particular data standards (such as FIX, FpML, ISO 20022, or
some other standard), to accommodate the needs of different
communities of users); 17 CFR 20.8(d) (delegating authority to staff
to provide instructions or determine the format, coding structure,
and electronic data transmission procedures for submitting data
records and any other information required for large trader swaps
reporting under Part 20).
\51\ See, e.g., 17 CFR 20.8; 17 CFR 45.11; 17 CFR 45.15(a)(2).
---------------------------------------------------------------------------
The proposed Part 17 Guidebook specifies that reporting firms
submit Sec. 17.00(a) data in FIXML format. In its other reporting
regimes, the Commission typically requires modern XML submission
standards, such as FpML \52\ or FIXML.\53\ Receiving Part 17 data in a
modern submission format comparable to that used in the submission of
other datasets the Commission relies on would enable staff to more
easily analyze Part 17 data outside of ISS and to more easily integrate
Part 17 data with other Commission datasets. Notably, the Commission
receives Trade Capture Reports and Ownership and Control Reports in a
FIXML format.\54\ Section 17.00(a) position data can be linked to Sec.
16.02 transaction data through ownership and control data required to
[[Page 41526]]
be reported under Sec. 17.01.\55\ Receiving Sec. 17.00(a) position
data via FIXML and storing the same in ISS would facilitate linking ISS
data to Trade Capture Report data stored in the Commission's Trade
Surveillance System (``TSS''). Adopting an XML-based standard for large
trader position reports required under Sec. 17.00(a) should also
improve data quality by reducing the rate of errors.
---------------------------------------------------------------------------
\52\ See, e.g., Large Trader Reporting for Physical Commodity
Swaps: Division of Market Oversight Guidebook for Part 20 Reports
(June 22, 2015), available at https://www.cftc.gov/idc/groups/public/@newsroom/documents/file/ltrguidebook062215.pdf (permitting
submission using FpML).
\53\ See, e.g., id. (permitting submission of Part 20 reports
using FIXML); see also See Advanced Notice of Proposed Rulemaking,
Account Ownership and Control Information, 74 FR 31642, 31644 (July
2, 2009) (FIXML is used for reporting transaction data for futures
and options reporting under regulation 16.02). FIXML is an XML
standard using the Financial Information eXchange Protocol
(``FIX''); see also Notice of Proposed Rulemaking, Account Ownership
and Control Report, 75 FR, 41775, 41784 (July 19, 2010) (``Reporting
entities should submit the [ownership and control reports required
under regulation 17.01] weekly, in FIXML . . .''); see also Notice
of Proposed Rulemaking, Reporting and Information Requirements for
Derivatives Clearing Organizations, 87 FR 76698, 76704 (Dec. 15,
2022) (addressing use of FIXML standard for daily reporting required
of derivatives clearing organizations).
\54\ See Advanced Notice of Proposed Rulemaking, Account
Ownership and Control Information, 74 FR 31642, 31644 (July 2, 2009)
(FIXML scheduled to be implemented for Trade Capture Reports in
2009); Notice of Proposed Rulemaking, Account Ownership and Control
Report, 75 FR, 41775, 41784 (July 19, 2010) (``Reporting entities
should submit the [ownership and control reports required under
regulation 17.01] weekly, in FIXML . . .'').
\55\ 17 CFR 17.01. Trade Capture Reports contain trade and
related order book data at the transaction level organized by
trading account numbers, but do not generally contain biographical
information for the owners of those trading accounts. See Advanced
Notice of Proposed Rulemaking, Account Ownership and Control
Information, 74 FR 31642, 31644 (July 2, 2009). Such biographical
information is provided separately through Ownership and Control
Reports, which are submitted for special accounts identified under
Part 17. See id.
---------------------------------------------------------------------------
The Commission has previously recognized the importance of
flexibility with respect to promulgating reporting submission standards
to accommodate technological advances. For example, for Part 17
reporting, the Commission previously revised the definition of
``compatible data-processing media'' to remove enumeration of specific
media in part because it was impractical to define the term by
regulation since electronic media were evolving at such a rapid
pace.\56\ Elsewhere, for swaps large trader reporting under Part 20,
the Commission delegated to staff the authority to provide instructions
for and determine the format, coding structure, and electronic data
transmission procedures for submitting data records in order to allow
the Commission to respond to changing market and technological
conditions for the purpose of ensuring timely and accurate data
reporting.\57\ Such an approach allows the Commission to consult with
market participants and update reporting submission standards to remain
consistent with industry best practices.\58\
---------------------------------------------------------------------------
\56\ 62 FR at 24028; 17 CFR 15.00(d) (defining ``compatible data
processing media'' as data processing media approved by the
Commission or its designee).
\57\ Final Rule, Large Trader Reporting for Physical Commodity
Swaps, 76 FR 43851, 43857 (Jul. 22, 2011).
\58\ See, e.g., 76 FR at 43857 n.20 (explaining that ``the
Commission anticipates consulting with clearing organizations and
reporting entities before determining the format, coding structure,
and electronic data transmission procedures'' for Part 20 reports).
---------------------------------------------------------------------------
Amending Sec. Sec. 17.00(g) and 17.03(d) to facilitate
implementation of a modern data submission standard should also
simplify reporting for reporting firms. Although updating submission
standards will require technological changes for reporting firms, the
Commission believes that eliminating the use of the unique Sec.
17.00(g) record format and replacing it with a more commonly-used
submission standard may result in more efficient reporting.
Additionally, using a modern submission standard should facilitate
automated data quality checks from the Commission back to reporting
firms, which should reduce burdens associated with correcting data
errors and the time necessary to complete the correction process. A
more efficient error correction process will also, in turn, assist
staff in timely generating the weekly COT report. The Commission
invites comments on all aspects of the proposed Part 17 Guidebook in
addition to comments on this notice of proposed rulemaking.
2. Secure FTP Feed Versus Portal Submission
The Commission recognizes that reporting firms' technological
capabilities may vary based on relative size and experience of a given
reporting firm. For example, the Commission understands that today,
although some firms have automated the process for creating reports
required by Sec. 17.00(a), other firms manually create those reports.
Accordingly, the proposed Part 17 Guidebook offers two submission
methods for Sec. 17.00(a) data: (a) an XML-based, secure file transfer
protocol (``FTP'') data feed, and (b) a web-based portal to ingest
manual submissions. The Commission anticipates that such an approach
will provide greater flexibility to reporting firms. Reporting firms
may consider their existing data reporting infrastructure and the
volume of reports they expect to submit, among other factors, when
selecting their preferred submission method. The proposed Part 17
Guidebook provides detailed instructions for submitting under each
method.
3. Delegation of Authority To Determine the Form and Manner for Error
Corrections
Current Sec. 17.00(h) provides that, unless otherwise approved by
the Commission or its designee, corrections of errors and omissions in
data required to be reported under Sec. 17.00(a) shall be filed on
series '01 forms or in the format, coding structure and data
transmission procedures approved in writing by the Commission or its
designee.\59\ Consistent with the Commission's proposal to revise Part
17 to modernize the reporting of data under Sec. 17.00(a), the
Commission proposes updating the submission standard for error
corrections to mirror the submission standard for the data to be
corrected.
---------------------------------------------------------------------------
\59\ 17 CFR 17.00(h).
---------------------------------------------------------------------------
Today, reporting firms submit error corrections using the current
Sec. 17.00(g) record format.\60\ Upon receipt of a correction, staff
replaces the original, erroneous record with the corrected record.
Staff will employ a similar process to ingest error corrections
following the proposed removal of the current Sec. 17.00(g) record
format, such that corrected and omitted data will be submitted using
the new data submission standard published by the Office of Data and
Technology in the proposed Part 17 Guidebook pursuant to delegated
authority.\61\
---------------------------------------------------------------------------
\60\ Reports that correct errors or omissions populate the
``Record Type'' data field with a character that identifies that the
submitted record corrects an error or omission and provides further
information about that correction. See 17 CFR 17.00(g)(2)(xiv).
\61\ As discussed below, the Commission proposes to retain the
current ``Record type'' data field as a data element that will serve
to identify reports that correct errors or omissions.
---------------------------------------------------------------------------
Currently, staff manually notifies reporting firms when it
identifies errors in Sec. 17.00(a) reports submitted by those firms.
Following implementation of this proposal, the Commission expects to
automate this process to notify reporting firms of errors on the same
day erroneous reports are submitted. The Commission expects automating
this process will facilitate more rapid corrections to reported data,
which will improve the quality of the data used by Commission staff.
Request for Comment
The Commission requests comments on all aspects of the proposed
changes to regulations in Part 17, including proposed changes to
Sec. Sec. 17.00(a), 17.00(g) and 17.03(d). The Commission requests
specific comment on the following:
(1) The advantages and disadvantages of the proposed Part 17
Guidebook requiring a FIXML submission standard for reports required
under Sec. 17.00(a), including with respect to data quality,
implementation costs, and ongoing costs post-implementation.
(2) The proposal to permit reporting firms to submit Sec. 17.00(a)
large trader position reports through the Commission's web-based portal
as an alternative to submission by secure FTP.
(3) The advantages and disadvantages of correcting errors in data
required to be reported under Sec. 17.00(a) in the manner provided in
the proposed Part 17 Guidebook, including with respect to data quality,
implementation costs, and ongoing costs post-implementation.
[[Page 41527]]
B. Appendix C to Part 17 and Sec. 17.03(d)--Data Elements
1. Appendix C
As discussed above, in order to facilitate implementation of a
modern submission standard, the Commission proposes removing the record
format set out in Sec. 17.00(g). Removing that record format will
remove the data fields as well. To replace the data fields proposed to
be deleted from Sec. 17.00(g), the Commission proposes to add an
Appendix C to Part 17 specifying required data elements and defining
those elements. Enumerating required data elements in an appendix is
consistent with the approach taken for certain other Commission data
reporting regulations.\62\ In addition to retaining the data currently
required to be reported under Sec. 17.00(a), proposed Appendix C would
provide revised definitions and add certain data elements not currently
required by the Sec. 17.00(g) record format.
---------------------------------------------------------------------------
\62\ See, e.g., 17 CFR part 20 App'x B; 17 CFR part 43 App'x A;
17 CFR part 45 App'x 1.
---------------------------------------------------------------------------
The Commission is proposing to remove the definitions set out in
current Sec. 17.00(g)(2). The Commission is proposing to include
related definitions in Appendix C, revised to remove language providing
the form and manner for reporting data. Given that the current Sec.
17.00(g) record format will be removed from the rule and updated
guidance on the form and manner for reporting will be required, certain
of the Sec. 17.00(g)(2) definitions contain language that would become
superfluous. For example, for the ``Report Type'' data element, the
Commission is proposing not to include in Appendix C the portion of the
definition that specifies that ``[v]alid values'' to submit include
``RP'' for reporting positions, ``DN'' for reporting notices, and
``EP'' for reporting exchanges of futures for a commodity or for a
derivatives position.\63\
---------------------------------------------------------------------------
\63\ 17 CFR 17.00(g)(2)(i).
---------------------------------------------------------------------------
Rather than specifying the form and manner for reporting the Sec.
17.00(a) data elements in the rule, the Commission is proposing to
delegate authority to determine the form and manner for reporting each
data element to the Director of the Office of Data and Technology. To
implement this delegation of authority, the Commission is proposing to
amend Sec. 17.03(d) to provide that the Director of the Office of Data
and Technology would specify the form, manner, coding structure, and
electronic data transmission procedures for reports and submissions
under Sec. 17.00(a). The proposed Part 17 Guidebook would set forth
the form, manner, coding structure, and electronic data transmission
procedures for reporting the data elements in proposed Appendix C to
Part 17, and to determine whether to permit or require one or more
particular data standards.
Providing form and manner requirements through a Part 17 Guidebook
would bring the Part 17 framework in line with reporting under Parts
16, 20, 43, and 45, for which, rather than embedding technical
reporting details into regulation text, the Commission has delegated
authority to staff to set the form and manner for reporting outside of
the regulation text through a published technical specification or
guidebook.\64\ Implementing form and manner requirements through a Part
17 Guidebook will facilitate the Commission's ability to respond to
changing market conventions and technological conditions, to harmonize
submission standards with those of other authorities,\65\ and to
accommodate the introduction of innovative products.
---------------------------------------------------------------------------
\64\ See, e.g., 17 CFR 16.07(c), (d) (delegating authority to
staff to approve the format, coding structure and electronic data
transmission procedures used by reporting markets and to determine
the specific content of any daily trade and supporting data report);
17 CFR 20.2(d) (delegating authority to staff for providing
instructions or determining the format, coding structure, and
electronic data transmission procedures for submitting data records
and any other information required under this part); 17 CFR 43.7(a)
(delegating authority to staff to publish the technical
specification providing the form and manner for reporting and
publicly disseminating the swap transaction and pricing data
elements in appendix A of Part 43); 17 CFR 45.15(b)(1) (delegating
authority to staff to publish the technical specifications providing
the form and manner for reporting the swap data elements in appendix
1 to Part 45 to swap data repositories).
\65\ Final Rule, Swap Data Recordkeeping and Reporting
Requirements, 85 FR 75503, 75535 (Nov. 25, 2020) (``The Commission .
. . believes delegation to DMO will benefit data element
harmonization.''); see also Final Rule, Large Trader Reporting for
Physical Commodity Swaps, 76 FR 43851, 43857 (Jul. 22, 2011) (the
purpose of delegating authority to staff to provide ``instructions
for determining the format, coding structure, and electronic data
transmission procedures for submitting data records and any other
information required under [Part 20] . . . is to facilitate the
ability of the Commission to respond to changing market and
technological conditions for the purpose of ensuring timely and
accurate data reporting'').
---------------------------------------------------------------------------
As discussed above, concurrently with the issuance of this notice,
the Commission has published a proposed Part 17 Guidebook on its
website, https://www.cftc.gov. Commenters are invited to comment on
both the data submission standard in the proposed Part 17 Guidebook and
on the data elements in proposed Appendix C.
Request for Comment
The Commission requests comments on all aspects of the proposed
Part 17 Guidebook published at the time of publication of this notice
of proposed rulemaking.
2. Data Elements in Appendix C
Proposed Appendix C will maintain certain data elements included in
the current Sec. 17.00(g) record format, revise certain data elements
included in the current Sec. 17.00(g) record format, and add certain
data elements not previously included in the Sec. 17.00(g) record
format. The proposed additional data elements capture information not
captured by the current Sec. 17.00(g) record format that is necessary
to fulfill the Commission's surveillance and market analysis missions.
The form and manner for reporting each of these data elements would be
set forth in the proposed Part 17 Guidebook. The Commission invites
comment on any of the data elements proposed in Appendix C. This
section discusses these data elements below by category.
First, proposed Appendix C includes data elements currently
captured by the fields in the current Sec. 17.00(g) record format. In
some instances, those data elements are revised to account for the
introduction of a modern data submission standard. Second, proposed
Appendix C includes data elements necessary to facilitate a modern,
XML-based data submission standard, including data elements used to
manage ingestion of data, such as ``Total Message Count'' and ``Message
Type.'' Third, proposed Appendix C would add data elements necessary to
capture product-identifying information not captured by the current
record format, such as ``Ticker Symbol'' as well as certain data
elements necessary to capture information to represent innovative
contracts such as ``bounded contracts,'' options expiring to baskets of
futures, and other novel contracts. The current record format does not
allow reporting firms to represent all economically material terms of
such contracts, and as a result the Commission is in some instances
unable to determine whether certain special accounts carry positions in
the same or different products. Fourth, proposed Appendix C would add
data elements necessary to capture accurate information concerning
changes in positions of special accounts that is not available in
current Sec. 17.00(a) large trader reporting but would benefit the
Commission's surveillance programs and market analysis.
[[Page 41528]]
a. Category 1: Currently Reported Data Elements
Proposed Appendix C retains data elements capturing certain of the
information currently captured by Sec. 17.00(g)'s 80-character record
format.\66\ The 80-character record format captures certain information
necessary to process data,\67\ information concerning the reporting
firm and special account,\68\ product-identifying information,\69\ and
information concerning the direction or nature of the trades underlying
the position.\70\
---------------------------------------------------------------------------
\66\ These fields would include (1) Data Element #7 Record Type
(Action), (2) Data Element #8 Report Date, (3) Data Element #9
(Reporting Firm ID), (4) Data Element #11 Account ID, (5) Data
Element #12 Exchange Indicator, (6) Data Element #13 Commodity
Clearing Code, (7) Data Element #16 Maturity Month Year, (8) Data
Element #20 Strike Level, (9) Data Element #26 Put or Call
Indicator, (10) Data Element #27 Exercise Style, (11) Data Element
#30 Underlying Contract ID, (12) Data Element #31 Underlying
Maturity Month Year, (13) Data Element #32 Long Position, (14) Data
Element #33 Short Position, (15) Data Element #38 Delivery Notices
Stopped, and (16) Data Element #39 Delivery Notices Issued.
\67\ For example, ``Report Date,'' and ``Record Type.'' 17 CFR
17.00(g)(1).
\68\ For example, ``Reporting Firm'' and ``Account Number.'' 17
CFR 17.00(g)(1).
\69\ For example, ``Commodity Code,'' ``Expiration Date,'' and
``Exchange Code.''
\70\ For example, ``Report type,'' ``Put or Call,'' ``Strike
Price,'' ``Exercise Style,'' ``Long--Buy--Stopped,'' and ``Short--
Sell--Issued.''
---------------------------------------------------------------------------
Proposed Appendix C calls for certain of this information in a
different format than currently provided. For example, whereas the
current Sec. 17.00(g) record format captures information concerning
whether a position is long or short in a single field, proposed
Appendix C would capture long and short positions using separate data
elements (``Long Position'' and ``Short Position''). Similarly, whereas
the current Sec. 17.00(g) record format identifies exchanges of
futures for related positions using a single ``Report type'' field,
proposed Appendix C would capture information concerning such exchanges
in greater granularity through several data elements. As discussed
further below, this greater granularity will facilitate Commission
market surveillance and analysis programs.
b. Category 2: XML Implementation and Data Processing
Proposed Appendix C calls for certain data elements to facilitate
processing of data.\71\ Such data elements generally do not correspond
to analogous data elements in Sec. 17.00(g)'s record format. These
include data elements concerning the submission of messages to the
Commission, data elements identifying the sender and special account
controller, and data elements identifying the date and time of the
report. This information is necessary to enable the Commission to track
and manage reports received using an XML submission standard.
---------------------------------------------------------------------------
\71\ These fields would include (1) Data Element #1 Total
Message Count, (2) Data Element #2 Message Type, (3) Data Element #3
Sender ID, (4) Data Element #4 To ID, (5) Data Element #5 Message
Transmit Datetime, (6) Data Element #6 Report ID, and (7) Data
Element #10 Special Account Controller LEI.
---------------------------------------------------------------------------
The ``Special Account Controller LEI'' data element captures the
legal entity identifier (``LEI'') of the account controller. An LEI is
a unique code assigned to an entity in accordance with the standards
set by the Global Legal Identifier System.\72\ The ``Special Account
Controller LEI'' data element would allow the Commission to link data
reports submitted under Sec. 17.00(a) with other data reports
concerning the same counterparty. The Commission notes that not all
special account controllers possess a legal entity identifier, or
``LEI.'' Some special account controllers may be ineligible to receive
an LEI. For example, it is highly likely that a natural person who
controls a special account would be unable to obtain an LEI.\73\ For
clarity, the Commission expects the ``Special Account Controller LEI''
data element will be conditional--an LEI must be reported for special
accounts for which the special account controller is eligible to
receive an LEI, but an LEI need not be reported for special accounts
for which the special account controller is ineligible for an LEI. For
such accounts, the Commission will receive identifying information via
Form 102A.
---------------------------------------------------------------------------
\72\ The Global Legal Identifier System was established by the
finance ministers and the central bank governors of the Group of
Twenty nations and the Financial Stability Board. See Charter of the
Regulatory Oversight Committee For the Global Legal Entity
Identifier System, available at https://www.leiroc.org/publications/gls/roc_20190130-1.pdf.
\73\ The Commission has elsewhere discussed this issue in
regulations concerning reporting of swap data. See, e.g., Final
Rule, Swap Data Reporting and Recordkeeping, 85 FR 75503, 75520
(Nov. 25, 2020).
---------------------------------------------------------------------------
c. Category 3: Product Identification
Proposed Appendix C calls for reporting of certain data elements
that, where applicable, are necessary to identify and distinguish the
futures or option contract pertaining to the reported position.
Specifically, additional data elements are necessary to draw more
granular distinctions between certain contracts for reportable
positions,\74\ to accommodate reporting of positions in bounded or
barrier contracts,\75\ to accommodate reporting of positions in
contracts with non-price or non-numeric strikes,\76\ and to accommodate
reporting of positions in other innovative contracts.\77\
---------------------------------------------------------------------------
\74\ These fields would include (1) Data Element #14 Product
Type, (2) Data Element #15 Ticker Symbol, (3) Data Element #17
Maturity Time, (4) Data Element #18 Listing Date, and (5) Data
Element #19 Earliest Exercise Date.
\75\ These fields would include (1) Data Element #22 Cap Level,
(2) Data Element #23 Floor Level, (3) Data Element #24 Bound or
Barrier Type, (4) Data Element #25 Bound or Barrier Level, (5) Data
Element #28 Payout Amount, and (6) Data Element #29 Payout Type.
\76\ These fields would include Data Element #21 Alpha Strike,
as well as transposing the ``Strike Price'' field in the current
regulation 17.00(g) record format to Data Element #20, ``Strike
Level,'' in proposed Appendix C.
\77\ For example, Data Element #50 Product-Specific Terms.
---------------------------------------------------------------------------
Distinguishing Products. Certain additional fields are necessary to
precisely identify the product for a reported position. When Sec.
17.00(g) was promulgated and revised in the 1980s and 1990s, exchanges
listed a less diverse array of futures and options contracts than those
available today. More granular data is required to distinguish among
products in today's futures and options markets. Section 17.00(g)'s
current record format allows the Commission to identify the product for
a given position based on a combination of data points that indicate
whether the product is a futures or option contract and identify the
underlying commodity. That record format, however, is limited. For
example, that record format allows the Commission to identify the
underlying commodity through a ``Commodity Code'' field, which is
populated with an exchange-assigned code corresponding to a relevant
underlier.\78\ However, the ``Commodity Code'' field does not currently
enable the Commission to draw more granular distinctions between
products that reference the same commodity but have material
differences. A proposed ``Product Type'' field would allow the
Commission to differentiate between futures and options contracts that
use the same ``Commodity Code'' without separately relying on other
reported fields, which may be insufficient to adequately distinguish
between products in some instances.\79\ A proposed ``Ticker Symbol''
field would provide the Commission with the published ticker symbol
associated with the product on
[[Page 41529]]
the listing contract market.\80\ Proposed Appendix C would provide for
``Maturity Month Year'' and ``Underlying Maturity Month Year'' data
elements, where applicable, to be populated with a specific day when
necessary to characterize a product.\81\ Similarly, a ``Maturity Time''
data element, where applicable, would be populated with the expiration
time of an option or last trading time of a future for contracts that
have multiple expiration times within a single day. A ``Listing Date''
data element, where applicable, would be populated with the listing
date for options that had early expirations and were relisted with
identical strikes and expirations, allowing the Commission to
distinguish between tranches of closely related contracts. Absent such
a field, different tranches of certain options contracts might be
indistinguishable in ISS.\82\ An ``Earliest Exercise Date'' data
element would provide, where applicable, the date when American or
Bermuda options \83\ may be exercised, which would assist the
Commission in identifying more complex positions.
---------------------------------------------------------------------------
\78\ 17 CFR 17.00(g)(2)(vii) (the ``Commodity'' field reflects
an exchange-assigned commodity code for the futures and options
contract).
\79\ The Commission proposes to retain the ``Commodity Code''
field, but to rename it to ``Commodity Clearing Code,'' which more
accurately reflects industry terminology and provides consistency in
labeling between reports provided under Part 17 and Part 16.
\80\ Ticker symbols typically include a product code consisting
of a multi-letter code assigned to the underlier, a month code
consisting of a single alphabetical character assigned to a month or
quarter, and a year code consisting of a numerical code representing
a particular year.
\81\ This responds to the advent of certain futures and options
contracts with more varied maturity or expiration dates.
\82\ If a DCM lists an option that settles based on the
occurrence of a specified event--as opposed to expiring at a future
time that is certain at the time the contract is executed--and that
specified event may occur serially at multiple times, a ``Listing
Date'' data element would permit the Commission to distinguish
between iterations of that contract as it is re-listed following
expirations.
\83\ An American Option is an option that can be exercised at
any time prior to or on the expiration date. See CFTC, Futures
Glossary, available at https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm (last visited April 26,
2023). A Bermuda Option is an option which can be exercised on a
specified set of predetermined dates during the life of the option.
See id. In contrast, a European Option is an option that may only be
exercised on the expiration date. See id.
---------------------------------------------------------------------------
Bounded or Barrier Contracts. Certain of these data elements are
necessary to accurately report ``bounded'' \84\ or ``barrier'' \85\
contracts, including ``Cap Level,'' ``Floor Level,'' and ``Bound or
Barrier Level,'' as the current Sec. 17.00(g) record format does not
accommodate this information. A ``Bound or Barrier Type'' data element
would be necessary to identify the behavior of a product when it hits a
bound or barrier, including to distinguish between ``knock-in,''
``knock-out,'' and capped products.\86\ Receiving data sufficient to
understand the economics of bounded and barrier contracts would, among
other things, support the Commission's surveillance program. Position
data that more completely reflects the economics of positions in
bounded or barrier options would provide the Commission with greater
insight into, for example, potential cross-market manipulation. Where a
bounded or barrier contract references the price or value of a contract
or commodity listed in another market, a manipulative trader may trade
in that other market for the purpose of influencing the price or value
of that contract in order to hit or avoid a bound or barrier for an
options position held in the first market.
---------------------------------------------------------------------------
\84\ A bounded futures contract specifies upper and lower
boundaries, which limit short and long interest exposure. See, e.g.,
Eris Exchange, LLC, ``CFTC Regulation 40.2(a) Certification.
Notification Regarding the Initial Listing of Eris Exchange
Financially Settled Bounded Futures Contract on Bitcoin and Ether''
(Aug. 21, 2020), available at https://www.cftc.gov/sites/default/files/filings/ptc/20/08/ptc082420erisdcmdcm001.pdf.
\85\ A barrier option contract specifies a ``barrier,'' either a
price or an event, the occurrence of which triggers either a knock-
in or knock-out provision.
\86\ A knock-in is a provision in an option or other derivative
contract whereby the contract is activated only if the price of the
underlying instrument reaches a specified level before a specified
expiration date. A knock-out is a provision in an option whereby the
contract is immediately canceled if the price of the underlying
instrument reaches a specified level during the life of the
contract. See CFTC, Futures Glossary, available at https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm (last visited April 26, 2023).
---------------------------------------------------------------------------
To obtain comprehensive data concerning positions in bounded and
barrier contract and certain binary option contracts based on the
occurrence or non-occurrence of a specified event, proposed Appendix C
also includes ``Payout Amount'' and ``Payout Type'' data elements. The
proposed ``Payout Amount'' data element is intended to capture a cash
amount of the payout associated with a product where that amount may
not otherwise be determined based on reported data. The proposed
``Payout Type'' data element would allow the Commission to distinguish
between vanilla, capped, binary, and other options that use the same
Commodity Clearing Code.
Non-Price and Non-Numeric Strike Levels. Certain of the data
elements in Proposed Appendix C are necessary to accurately capture
information for options contracts that contain non-price and non-
numeric strike levels. Specifically, Sec. 17.00(g)'s record format's
``Strike Price'' field would be converted to two separate data
elements: ``Strike Level'' and ``Alpha Strike.'' These data elements,
respectively, would accommodate reporting of certain listed options
contracts with non-monetary threshold levels and non-numeric threshold
levels. For example, a binary option with U.S. Gross Domestic Product
(``GDP'') as an underlier would have a non-price strike--a GDP figure.
Other contracts that incorporate the occurrence or non-occurrence of a
specified event as an underlier might specify as strikes non-numeric
units, which would more appropriately be reported as a strike
``value,'' or ``Alpha Strike.'' For example, a binary option with
different categories of hurricane landfalls as strike values might
include as ``Alpha Strikes'' different categories of hurricane--for
example, ``Category 1 or higher'' or ``Category 2 or higher.''
Product-Specific Terms. To account for the likelihood that
exchanges will introduce contracts that include novel features,
proposed Appendix C includes a ``Product-Specific Terms'' data element.
For innovative contracts, this data element would be populated with
data reflecting economically material terms of contracts are not
otherwise able to be represented in the proposed Appendix C data
elements. The data element would not require reporting of any
information that is not already separately recorded by a DCM for
recordkeeping purposes. Future editions of the proposed Part 17
Guidebook would specify the form and manner of reporting positions in
products subject to reporting that includes the ``Product-Specific
Terms'' data element.
Reporting under this data element--as well as certain other data
elements designed to represent particular products, such as the
aforementioned fields designed to capture terms of bounded and barrier
contracts--would only be required to be reported for contracts that
cannot otherwise be represented in Part 17 reporting. Put differently,
for reporting firms that facilitate trading or clearing of contracts
that can be adequately represented in the other data elements in the
proposed Part 17 Guidebook, reporting data pursuant to the ``Product-
Specific Terms'' data element would not be required. Reporting firms
that do become involved in trading futures and options contracts for
which economically material terms are not otherwise reportable under
Sec. 17.00(a) may be required to report such data. Pursuant to the
proposed rule, the Director of the Office of Data and Technology would
have delegated authority to publish the form and manner of any product-
specific terms required to be reported pursuant to this proposed data
element.
[[Page 41530]]
d. Category 4: Information Concerning Changes in Positions
Proposed Appendix C would add data elements necessary to capture
accurate information regarding changes in positions that is not fully-
captured by the current Sec. 17.00(g) record format.\87\ Understanding
the nature and quantity of transactions that resulted in day-to-day
changes in positions of special accounts will provide Commission staff
with additional information for surveillance purposes, and will allow
Commission staff to link position data reported at the special account
level pursuant to Sec. 17.00(a) with transaction data reported at the
trading account level under Sec. 16.02.\88\ Additionally, information
identifying the nature and quantity of transactions that resulted in
day-to-day changes in positions of special accounts should provide
reporting firms with an additional tool to perform an internal
consistency review on data reported under Sec. 17.00(a), and therefore
enhance data quality.
---------------------------------------------------------------------------
\87\ These fields would include (1) Data Element #34 Contracts
Bought, (2) Data Element #35 Contracts Sold, (3) Data Element #36
EDRPs Bought, (4) Data Element #37 EDRPs Sold, (5) Data Element #38
Delivery Notices Stopped, (6) Data Element #39 Delivery Notices
Issued, (7) Data Element #40 Long Options Expired, (8) Data Element
#41 Short Options Expired, (9) Data Element #42 Long Options
Exercised, (10) Data Element #43 Short Options Exercised, (11) Data
Element #44 Long Futures Assigned, (12) Data Element #45 Short
Futures Assigned, (13) Data Element # 46 Long Transfers Sent, (14)
Data Element #47 Long Transfers Received, (15) Data Element #48
Short Transfers Sent, and (16) Data Element #49 Short Transfers
Received.
\88\ DCMs identify traders by account numbers, but certain DCMs
do not routinely collect detailed trader-identifying data. See,
e.g., Final Rule, Significant Price Discovery Contracts on Exempt
Commercial Markets, 74 FR 12178, 12185 (Mar. 23, 2009). The
Commission instead generally obtains such trader-identifying data
from FCMs, clearing members, and foreign brokers through regulation
17.01. 17 CFR 17.01.
---------------------------------------------------------------------------
Changes in positions are generally effected by buying and selling
contracts; the expiration or settlement of contracts, which may result
in assignments of contracts; or off-exchange transactions, such as
block-trades, exchanges of derivatives for related positions
(``EDRPs''), and transfers. Although the current Sec. 17.00(g) record
format requires reporting of the aggregate of certain EDRPs each day
and the total delivery notices issued and stopped via the ``Report
Type'' and ``Long-Buy-Stopped (Short-Sell-Issued)'' \89\ fields, it
otherwise does not capture data concerning changes in position.
Proposed Appendix C would include data elements necessary to capture
this information, as follows.
---------------------------------------------------------------------------
\89\ 17 CFR 17.00(g)(2)(i), (xi).
---------------------------------------------------------------------------
Contracts Bought and Sold. Proposed Appendix C includes data
elements to capture ``Contracts Bought'' and ``Contracts Sold.'' The
current Sec. 17.00(g) record format captures aggregate positions, but
does not reflect the amount of buying and selling associated with a
particular special account. Obtaining reliable and accurate counts of
gross buys and sells associated with a special account would enhance
the Commission's ability to differentiate between large position
holders that appear passive and large position holders that also trade
in significant quantities of contracts daily.
In addition to contracts bought and sold on-exchange, contracts
bought or sold via block trades are included in the sums reported as
``Contracts Bought'' and ``Contracts Sold.'' The Commission also
expects that contracts acquired through give-ups \90\ and allocations
will be included in the totals of ``Contracts Bought'' and ``Contracts
Sold,'' as such contracts would be treated as positions in the carrying
accounts through which they are ultimately cleared rather than
positions in the accounts that execute the transactions, if such
accounts differ from the accounts through which such transactions are
cleared.
---------------------------------------------------------------------------
\90\ The term ``give-up'' means an order executed by one broker
on behalf of another broker which clears and settles the order.
---------------------------------------------------------------------------
Exchanges of Derivatives for Related Positions (EDRPs). A DCM's
rules may authorize, for bona fide business purposes, privately-
negotiated exchanges of derivatives for related positions, or
``EDRPs.'' \91\ As discussed, the current Sec. 17.00(g) record format
requires reporting of aggregate EDRPs, but does not provide more
granular data necessary to understand whether a position was exchanged
for a physical commodity (exchanges for physical, or ``EFPs''),
exchanged for a swap or other derivative (exchanges for swaps, or
``EFSs,'' sometimes referred to as exchanges for risk, or ``EFRs''),
exchanged for an option, or exchanged for some other related position.
Proposed Appendix C includes an ``Exchanges of Derivatives for Related
Positions'' data element that is defined to require reporting firms to
disaggregate EDRP transactions by type of EDRP in the form and manner
for reporting set forth in the proposed Part 17 Guidebook. The proposed
Part 17 Guidebook requires reporting firms to disaggregate reporting of
EDRPs into EFPs bought and sold, EFSs bought and sold, and exchanges of
options for option (``EOOs'') bought and sold.\92\
---------------------------------------------------------------------------
\91\ See 17 CFR 38.500 (authorizing ``exchange[s] of''
``[f]utures in connection with a cash commodity transaction,''
``[f]utures for cash commodities,'' and ``[f]utures for swaps''). In
practice, such transactions are often referred to as ``exchanges of
futures for related positions'' or ``EFRPs.'' The Commission has
used the terminology ``exchanges of derivatives for related
positions'' or ``EDRPs'' because it believes this is a more accurate
and descriptive term given it includes transactions not limited to
futures, such as swaps. Noticed of Proposed Rulemaking, Core
Principles and Other Requirements for Designated Contract Markets,
75 FR 80572, 80593 (Dec. 22, 2010).
\92\ The Commission believes these three categories of EDRPs
capture current market practices, but recognizes the possibility
that a DCM or DCMs may, in the future, introduce additional EDRPs.
For example, DCMs could conceivably permit exchanges of futures for
futures. See, e.g., 75 FR at 80588 (recognizing that the term
``exchanges of derivatives for related position'' describes a
panoply of off-exchange transactions currently offered by DCMs
including, in addition to EFPs and EFSs, exchanges of futures for
futures). The Commission expects that if any DCM revises its
rulebook to permit an additional type of EDRP transaction, reporting
firms would also submit disaggregated data reflecting changes of
position effected through that type of EDRP transaction. For
example, if a DCM revised its rulebook to permit exchanges of
futures for futures, the proposed Part 17 Guidebook would be updated
to facilitate reporting firms submitting information reflecting
changes in positions resulting from exchanges of futures for
futures.
---------------------------------------------------------------------------
This would also effect an update to a record format devised largely
during the 1970s and 1980s, before EDRPs other than EFPs were commonly
used.\93\ EFSs, for example, were not explicitly authorized under the
CEA until 2000, years after the initial Sec. 17.00(g) record format
had been promulgated.\94\ In 2004, when the Commission amended the
Sec. 17.00(g) record format to require reporting of EDRPs generally,
including EFSs, rather than just EFPs, it did not require reporting
firms to distinguish among these different types of transactions, but
rather required that such reporting group together all EFPs, EFSs,
EFRs, EFOs \95\ or other exchanges of futures for a commodity or for a
derivatives position permitted by exchange rules, and report the sum
under the same category.\96\ At the time,
[[Page 41531]]
the Commission found this to be ``an appropriate approach because all
of these trades are similar in that they permit the exchange of a
futures position for an off-exchange position.'' \97\ The Commission
now, based on experience surveilling EDRP practices in futures and
options markets, proposes to require more granular differentiation in
reporting of different types of EDRPs. More granular differentiation
between the types of off-exchange transactions that effect changes in
positions will provide a better understanding of the methods by which
traders exit and enter positions. In particular, disaggregated EDRP
data allows staff to confirm market integrity when there are concerns
about a potential squeeze or other matters near the expiration of the
physical delivery contract.
---------------------------------------------------------------------------
\93\ Cf. CFTC, Division of Trade and Markets: Report on Exchange
of Futures for Physicals (1987) (analysis of EFPs published in 1987,
relying in part on data reported pursuant to regulation 17.00(a)).
\94\ See, e.g., Concept Release, Regulation of Noncompetitive
Transactions Executed on or Subject to the Rules of a Contract
Market, 63 FR 3708 (Jan. 26, 1998) (requesting comment on whether
Commission regulations should be modified in order to permit EFSs
and exchanges of futures for options); Proposed Rules, Execution of
Transactions: Regulation 1.38 and Guidance on Core Principle 9, 69
FR 39880, 39881 (July 1, 2004) (proposing amendments to regulation
1.38 to permit DCMs to allow exchanges of futures for another
derivatives position following the Commodity Futures Modernization
Act of 2000 amending the CEA to ``specifically allow[] the exchange
of futures for swaps''); see also 7 U.S.C. 7(b)(3).
\95\ ``EFOs'' refers to ``exchanges of futures for options.''
Final Rule, Reporting Levels and Recordkeeping, 69 FR 76392, 76394
(Dec. 21, 2004).
\96\ 69 FR at 76395.
\97\ Id.
---------------------------------------------------------------------------
Expirations and Settlement of Contracts. In addition to EDRP counts
and counts of contracts bought and sold, proposed Appendix C would add
data elements necessary to capture expirations and settlements,
including whether options were exercised and contracts assigned.
Proposed Appendix C would capture such information in ``Delivery
Notices Stopped,'' ``Delivery Notices Issued,'' ``Long Options
Expired,'' ``Short Options Expired,'' ``Long Options Exercised,''
``Short Options Exercised,'' ``Long Futures Assigned,'' and ``Short
Futures Assigned'' data elements. The current Sec. 17.00(g) record
format captures information concerning delivery notices stopped and
issued, but does not capture information concerning changes in
positions due to option expirations and exercises.
Transfers. The Commission also proposes to include ``Long Transfers
Sent,'' ``Long Transfers Received,'' ``Short Transfers Sent,'' and
``Short Transfers Received'' data elements to capture transfers of
contracts that effect a change in position in a special account. This
information is not directly captured by the current Sec. 17.00(g)
record format.
Internal Consistency Check for Data Concerning Changes in Position.
The inclusion in reports required under Sec. 17.00(a) of data elements
reflecting counts of transactions that resulted in day-to-day changes
in positions would enable reporting firms to perform internal
consistency checks on position reports before submitting those reports.
Specifically, the day-to-day change in the size of a position for a
particular special account should equal the net value of contracts
bought and sold, EDRPs bought and sold, expirations and assignments of
contracts, and transfers.
Request for Comment
The Commission requests comment on all aspects of proposed Appendix
C, including the proposed data elements enumerated therein. The
Commission requests specific comment on the following:
(4) Are there any data elements not included in proposed Appendix C
that commenters believe are necessary to obtain a complete and accurate
picture of positions held by large traders? If so, please identify such
data elements.
(5) Are there any transactions that would effect changes in
positions that are not accounted for by the Data Elements discussed in
Section II.B.2.d above? If so, please identify such transactions.
(6) Are there any data elements proposed to be added in Appendix C
that commenters believe are not necessary to obtain a complete and
accurate picture of positions held by large traders? If so, please
identify such data elements and explain why.
III. Compliance Date
The Commission understands that market participants would require
sufficient time to revise or build infrastructure to submit data
required under Sec. 17.00 using the proposed new submission standard.
In addition, given that proposed Appendix C would require the
submission of additional data elements beyond the information required
by the current Sec. 17.00(g) record format, the Commission understands
that reporting firms may need to make additional adjustments to
reporting systems.
The Commission expects that the compliance date for the rules
proposed herein would be 365 days following publication of a final rule
in the Federal Register.
The Commission also expects to permit reporting firms to begin
reporting under the proposed new regime for Sec. 17.00(a) reports in
advance of the compliance date, while continuing to permit reporting
firms to report under the current Sec. 17.00(g) record format. The
Commission believes that this approach will allow early adopters to
realize the advantages of reporting using a modern data submission
standard while allowing slower adopters sufficient time to modify and
test reporting systems.
Request for Comment
The Commission requests comment on all aspects of the proposed
compliance date. The Commission requests specific comment on the
following:
(7) Is the proposed compliance date of 365 days after publication
of a final rule in the Federal Register an appropriate amount of time
for compliance? If not, please propose an alternative timeline and
provide reasons supporting that alternative timeline.
IV. Related Matters
A. Cost-Benefit Considerations
1. Introduction
Section 15(a) \98\ of the CEA requires the Commission to consider
the costs and benefits of its actions before issuing a new regulation
or order under the CEA. By its terms, section 15(a) does not require
the Commission to quantify the costs and benefits of a new rule or to
determine whether the benefits of the adopted rule outweigh its costs.
Rather, section 15(a) requires the Commission to ``consider the costs
and benefits'' of a subject rule. Section 15(a) further specifies that
the costs and benefits of proposed rules shall be evaluated in light of
five broad areas of market and public concern: (1) Protection of market
participants and the public; (2) efficiency, competitiveness, and
financial integrity of futures markets; (3) price discovery; (4) sound
risk management practices; and (5) other public interest
considerations. In conducting its analysis, the Commission may, in its
discretion, give greater weight to any one of the five enumerated areas
of concern and may determine that, notwithstanding its costs, a
particular rule 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.
---------------------------------------------------------------------------
\98\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------
Although the Commission believes the proposed amendments would
create meaningful benefits for market participants and the public, the
Commission also recognizes that the proposed amendments would impose
costs. The Commission has endeavored to enumerate these costs and, when
possible, assign a quantitative value to the costs reporting entities
might face given the proposed changes. Where it is not possible to
reasonably quantify costs and benefits of the proposed amendments,
those costs and benefits are discussed qualitatively.
2. Background
The data required to be reported under Sec. 17.00(a) comprise core
data used by many divisions within the Commission, including the
Division of
[[Page 41532]]
Market Oversight (``DMO''), the Office of the Chief Economist
(``OCE''), and the Division of Enforcement (``DOE''). In addition,
Sec. 17.00(a) submissions are collated to produce the database from
which public COT reports are created. COT reports are used by news
media, researchers, academics, and industry professionals to describe
current trends in futures trading, conduct analysis of past trading
patterns, and inform current market strategies. The current Sec.
17.00(g) record format, which instructs reporting firms to submit data
in an 80-character, Cobol-based format, has been in effect since 1986
and was last revised in 2004.\99\ This current format limits the amount
of descriptive data that can be included in any given field. This
limits the Commission's ability to capture the economic characteristics
of certain products in Sec. 17.00(a) position reports and, in some
instances, prevents the Commission from distinguishing a position in
one contract from a position in another contract. In addition, the
current reporting fields do not allow for the granular reporting of
EDRPs, of certain futures and options contracts, and for complete
information reflecting day-to-day changes in position.
---------------------------------------------------------------------------
\99\ See Final Rule, Reporting Levels and Recordkeeping, 69 FR
76392-01, 76394 (Dec. 21, 2004).
---------------------------------------------------------------------------
3. Baselines
The costs and benefits considered herein use as a baseline the
reporting provided by reporting firms under current Part 17
regulations. In particular, entities are currently required to report
positions for special accounts \100\ by 9 a.m. on the business day
following the trading day \101\ and to correct errors as they are found
by either the Commission or the reporting entity.\102\ These elements
of the rule would not change under the new reporting requirements.
---------------------------------------------------------------------------
\100\ See 17 CFR 17.00(a).
\101\ See 17 CFR 17.02(a).
\102\ 17 CFR 17.00(h).
---------------------------------------------------------------------------
The Commission notes that this cost-benefit consideration is based
on its understanding that the derivatives market regulated by the
Commission functions internationally with: (1) transactions that
involve U.S. entities occurring across different international
jurisdictions; (2) some entities organized outside of the United States
that are registered with the Commission; and (3) some entities that
typically operate both within and outside the United States and that
follow substantially similar business practices wherever located. Where
the Commission does not specifically refer to matters of location, the
discussion of costs and benefits below refers to the effects of the
proposed regulations on all relevant derivatives activity, whether
based on their actual occurrence in the United States or on their
connection with, or effect on U.S. commerce.\103\
---------------------------------------------------------------------------
\103\ See, e.g., 7 U.S.C. 2(i).
---------------------------------------------------------------------------
4. Proposed Amendments to Part 17
The Commission proposes two categories of amendments to Part 17.
First, the Commission proposes to remove current Sec. 17.00(g)'s 80-
character record format and amend Sec. 17.03(d) to delegate authority
to the Director of the Office of Data and Technology to designate a
submission standard for reports required under Sec. 17.00(a). That
submission standard would be published in a Part 17 Guidebook, to be
published on the Commission's website. The proposed Part 17 Guidebook
designates a modern XML submission standard for submitting reports
required under Sec. 17.00(a). Second, the Commission proposes adding
an Appendix C to Part 17 enumerating data elements to be included in
Sec. 17.00(a) reports. The proposed data elements consist of (1)
certain data elements currently required to be reported under Sec.
17.00(g), (2) certain data elements necessary for processing files
submitted in XML, (3) certain data elements necessary to represent
innovative contracts that cannot currently be represented using the
Sec. 17.00(g) format, and (4) data elements necessary to understand
the transactions that resulted in day-to-day changes in positions of
large traders. The form and manner for reporting these data elements in
proposed Appendix C would be provided in the Part 17 Guidebook.
a. Change in Submission Standard From Current Sec. 17.00(g) Record
Format to a Modern Data Standard Designated in a Part 17 Guidebook
Currently, reporting firms submit Sec. 17.00(a) position reports
using Sec. 17.00(g)'s 80-character record format. The proposed
amendments would require such reports to be submitted using a
submission standard, which would be designated in a Part 17 Guidebook
published by the Office of Data and Technology on the Commission's
website. The proposed Part 17 Guidebook would require such submissions
to be made using an XML format similar to that used in other reporting
required by the Commission, including Trade Capture Reports submitted
pursuant to Sec. 16.02 and swap data reports submitted to swap data
repositories pursuant to Part 43 and Part 45.\104\ In order to collect
and transmit these reports to the Commission, reporting firms would
have to modify the systems they currently use to report Part 17 data.
---------------------------------------------------------------------------
\104\ See, e.g., Advanced Notice of Proposed Rulemaking, Account
Ownership and Control Information, 74 FR 31642, 31644 (July 2,
2009); 17 CFR 43.7(a)(1); 17 CFR 45.15(a)(2).
---------------------------------------------------------------------------
The Commission estimates there are currently over 300 reporting
firms submitting 17.00(a) reports. Reporting firms are divided between
DCMs, FCMs, clearing members, and foreign brokers, including some firms
that are registered under multiple categories. Over a 30-day period in
early 2023 there were 310 reporting firms submitting Sec. 17.00(a)
reports. The Commission estimates that approximately 74 of these
reporting firms automate the creation of Sec. 17.00(a) reports and 236
of these firms create and submit Sec. 17.00(a) reports manually. The
Commission believes that reporting firms that currently automate the
creation of Sec. 17.00(a) reports will continue to do so and will
submit such reports by secure FTP, and that reporting firms that
currently manually create Sec. 17.00(a) reports will continue these
practices rather than modifying their systems to facilitate reporting
by secure FTP. Firms that currently manually create Sec. 17.00(a)
reports may need to update systems used to manually generate those
reports.
1. Benefits
The proposed revisions concerning the data submission standard will
facilitate more rapid data ingestion for the Commission and increased
automation in ingesting data required to be reported under Sec.
17.00(a), which will reduce staff time devoted to data ingestion.
The proposed revisions concerning the data submission standard
should also enhance data quality. First, a modern data submission
standard should be less error-prone than the current Sec. 17.00(g)
record format. Second, a modern data submission standard should
facilitate automated, real-time error correction notifications, which
will reduce the amount of manual staff intervention in the error
correction process and should provide reporting firms with more
efficient timelines for correcting errors. By improving data quality
and enabling more rapid corrections of errors, the proposed revisions
concerning the data submission standard should ensure the timeliness of
COT reports.
The proposed revisions concerning the data submission standard
should simplify the error correction process for
[[Page 41533]]
reporting firms by automating and accelerating feedback concerning
errors.
The proposed revisions concerning the data submission standard
should enhance DMO's ability to monitor the markets, support DOE's
surveillance program, and facilitate OCE research projects.
2. Costs
The Commission believes that the changes proposed to Part 17 would
cause reporting firms to modify their systems to collect and submit
data using a new data submission standard. The cost of such
modifications is likely to vary from entity to entity. Under the
proposed Part 17 Guidebook, reporting firms would submit reports
required under Sec. 17.00(a) using an XML submission standard.
The Commission expects more sophisticated reporting firms that
submit a substantial number of daily reports, such as FCMs, will build
systems to report using the XML submission standard designated in the
proposed Part 17 Guidebook, and will arrange to automate daily
submissions using a secure FTP data feed. The Commission estimates that
74 entities will submit reports in in this manner. The Commission
estimates those entities would incur a one-time initial cost of
approximately $29,800 for each entity (200 hours x $149/hour) to modify
and test their systems, or an estimated aggregate dollar cost of
$2,205,200 (74 entities x $29,800).\105\ The Commission understands
that some reporting firms today submit reports required under Sec.
17.00(a) manually through the CFTC Portal, and believes that many of
those firms would continue to do so under the new submission standard.
The Commission estimates that 236 entities would continue to manually
report through the CFTC Portal and would incur a one-time initial cost
of approximately $1,310 to update their systems (10 hours x $131/hour)
for each entity, or an estimated aggregate dollar cost of $309,160 (236
entities x $1,310).\106\
---------------------------------------------------------------------------
\105\ For costs associated with upgrading reporting systems for
secure FTP filers, the Commission estimates that modifications and
testing will be undertaken by computer and information research
scientists, database architects, software developers, programmers,
and testers. The associated costs are taken from the U.S. Bureau of
Labor Statistics' Occupational Employment and Wage Statistics,
available at https://www.bls.gov/oes/2021/may/oes_nat, and adjusted
with a multiple of 2.5 to account for benefits and overhead costs.
\106\ For costs associated with upgrading reporting systems for
CFTC Portal filers, the Commission estimates that the necessary
modifications will be undertaken by data scientists. The associated
costs are taken from the U.S. Bureau of Labor Statistics'
Occupational Employment and Wage Statistics, available at https://www.bls.gov/oes/2021/may/oes_nat, and adjusted with a multiple of
2.5 to account for benefits and overhead costs.
---------------------------------------------------------------------------
On an ongoing basis, the Commission believes that the 310 estimated
reporting firms would incur minimal additional costs above the baseline
once setup is complete. However, the Commission estimates that
approximately 74 entities filing using secure FTP may incur an ongoing
operation and maintenance cost of $3,576 per year (2 hours per month x
$149 per hour) per entity to maintain their systems, or an estimated
aggregate annual cost of $264,624 (74 entities x $3,756). In addition,
the Commission estimates that 236 entities filing manually would incur
ongoing additional costs of $3,144 per year (2 hours per month x $131
per hour) per entity to maintain their systems, or an estimated
aggregate annual cost of $741,984 (236 entities x $3,144). However, the
Commission believes that costs associated with correcting errors would
be reduced due to improved data validation at the time of ingest.
These cost estimates are based on a number of assumptions and cover
a number of tasks required by reporting firms to design, test, and
implement an updated data system based on an XML submission standard.
These tasks include defining requirements, developing an extraction
query, developing an interim extraction format (such as a CSV, or
``comma-separated values,'' file), developing validations, developing
formatting conversions, developing a framework to execute tasks on a
repeatable basis, and finally, integration and testing.
(C) Request for Comment
The Commission requests comment on the range of costs reporting
markets, FCMs, clearing members, and foreign brokers would incur to
implement an XML submission standard to comply with the proposed
amendments. Are there additional costs or benefits that the Commission
should consider? Commenters are encouraged to include both qualitative
and quantitative assessments of these benefits.
b. Changes in Data Elements Reported
As detailed above, the current 80-character Sec. 17.00(g) format
does not allow for flexibility in the reporting of certain types of
futures, such as bounded futures, and options, such as capped or
barrier options. The proposed amendments would enable these products to
be identified in Sec. 17.00(a) reports, and would capture additional
information reflecting changes in position, including reporting
concerning numbers of transfers, reporting of numbers of expirations of
contracts, and more granular reporting of EDRPs, including specifying
the type of related product (physical, swap, or option). Additionally,
the expanded reporting regime instills flexibility such that the
proposed Part 17 Guidebook can facilitate reporting of positions in
products with innovative features.
(A) Benefits
The proposed additional fields necessary to identify certain
contracts will facilitate collection of more robust market information
for the Commission, including allowing the Commission to distinguish
between positions in different contracts that may not currently be
distinguishable. The proposed additional fields necessary to identify
changes in positions, including more granular information concerning
types of EDRPs, would also allow the Commission to collect better
market information. Additionally, obtaining accurate, granular
information concerning daily changes in position should improve data
quality. These data elements will enable reporting firms to perform an
internal consistency check to confirm the accuracy of data, which
should reduce reporting errors.
Obtaining accurate, granular information concerning daily changes
in position would also support the Commission's surveillance and
monitoring programs. This data would provide the Commission with a more
comprehensive understanding concerning the nature of changes in
positions--as opposed to merely understanding the scope of positions--
and should further facilitate linking position data reported under
Sec. 17.00(a) \107\ with transaction data reporting under Sec.
16.02.\108\
---------------------------------------------------------------------------
\107\ 17 CFR 17.00(a).
\108\ 17 CFR 16.02.
---------------------------------------------------------------------------
(B) Costs
The proposed amendments will require reporting firms to report
certain additional data elements to the Commission beyond those
elements required by the current Sec. 17.00(g) record format.
CFTC staff experienced in designing data reporting, ingestion, and
validation systems, estimate that for the 74 reporting firms that
automate reporting through a secure file transfer protocol, the process
of upgrading and testing systems to collect and report new fields will
require them to incur on average 400 hours to update, test, and
implement the proposed additional data elements required by proposed
[[Page 41534]]
Appendix C, for a total of 29,600 hours across all FTP filers at an
hourly wage rate of $149. This would amount to total capital and start-
up costs of $4,410,400 across all FTP filers (400 hours x 74 FTP filers
x $149 = $4,410,400). In addition, the Commission estimates that these
firms may each incur one-time costs of up to $1,000 for equipment
modifications associated with these changes.
The Commission estimates that the 236 reporting firms that manually
input data required to be reported under Sec. 17.00(a) into the CFTC
Portal will incur on average 20 hours to implement additional data
elements required by proposed Appendix C, or 4,720 total hours across
all manual filers, at an hourly wage rate of $131 per hour. The
Commission estimates that in the aggregate manual filers will incur
total capital and start-up costs associated with updating, testing and
implementing new data elements of $618,320 (4,720 hours x $131/hour).
On an ongoing basis, there would be minimal additional costs
related to the addition of new data elements, since reporting entities
would not be required to submit substantially more information than the
baseline. For example, the Commission does not believe that the
proposed amendments are likely to affect the overall number of reports
submitted annually under Sec. 17.00(a). However, given the additional
data elements required by the proposed amendments, the Commission
estimates that 74 entities who automate their reporting systems may
each incur an ongoing operation and maintenance cost of $3,576 per year
(2 hours per month x $149 per hour) per entity, or an estimated
aggregate annual cost of $264,624 (74 entities x $3,576) related to
implementation of the new data elements. In addition, the Commission
estimates that 236 firms that manually file reports may incur ongoing
operation and maintenance costs of $3,144 per year (2 hours per month x
$131 per hour) per entity as a result of implementing the proposed
amendments implementing new data elements, or an estimated aggregate
annual cost of $741,984 (236 entities x $3,144).
These cost estimates are based on a number of assumptions and cover
a number of tasks required by the reporting firms to design, test, and
implement an updated data system based on an XML format. These tasks
include defining requirements, developing an extraction query,
developing an interim extraction format (such as a CSV, or ``comma-
separated values,'' file), developing validations, developing
formatting conversions, developing a framework to execute tasks on a
repeatable basis, and finally, integration and testing.
Additionally, these costs may be mitigated because certain of the
proposed data elements are conditional and will only be applicable to a
small subset of the reporting firms. For example, if a particular FCM
is not a participant on an exchange that lists ``bounded'' or
``barrier'' contracts, that FCM will not be required to report proposed
data elements that are conditional and only applicable to positions in
``bounded'' or ``barrier'' contracts.
(C) Request for Comment
The Commission requests comment on the range of costs reporting
markets, FCMs, clearing members, and foreign brokers would incur to
report the data elements described in the proposed amendments. Are
there additional costs or benefits that the Commission should consider?
Are there any data elements proposed to be added in Appendix C that
commenters believe would be unduly onerous or burdensome to report
pursuant to part 17? If so, please identify such data elements and
explain why. Commenters are encouraged to include both qualitative and
quantitative assessments of these benefits. Specific areas of interest
include the following: the necessity of collecting additional fields in
order to obtain a complete view of futures and options positions across
all markets; (ii) evaluations of the accuracy of the Commission's
estimate of the burden of the proposed information reporting; (iii)
determining whether there are ways to enhance the utility of reported
information; and (iv) minimizing the burden of additional data
collection to reporting entities.
5. Section 15(a) Considerations
CEA Section 15(a) \109\ requires the Commission to consider the
costs and benefits of the proposed amendments to Part 17 with respect
to the following factors: (1) Protection of market participants and the
public; (2) efficiency, competitiveness, and financial integrity of
futures markets; (3) price discovery; (4) sound risk management
practices; and (5) other public interest considerations. A discussion
of these proposed amendments in light of the CEA Section 15(a) factors
is set out immediately below.
---------------------------------------------------------------------------
\109\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------
a. Protection of Market Participants and the Public
The Commission expects that the changes to Part 17 reporting will
lead to improvements in the Commission's ability to collect data on
large traders. The Commission expects better validation of data at
ingest, leading to more efficient error corrections compared to the old
reporting format. The Commission expects these enhancements would occur
without sacrificing the Commission's ability to perform comprehensive
oversight of the market.
Additionally, reducing the risk of errors and delays in the
publication of the COT report would benefit the public by providing
more accurate data on positions held by large traders.
Furthermore, higher-quality and more granular position data from
large traders would improve the Commission's oversight and enforcement
capabilities and, in turn, would aid the Commission in protecting
markets, participants, and the public in general.
b. Efficiency, Competitiveness, and Financial Integrity of Futures
Markets
The Commission believes the proposed amendments would improve the
accuracy and completeness of futures and options position data
available to the Commission by improving data quality and providing
Commission staff with a more complete understanding of the products
comprising certain positions. In particular, the proposed rule would
allow for more complete reporting of EDRPs and complex futures and
options positions. Access to more accurate and complete data would in
turn assist the Commission with, among other things, evaluating if
certain traders are in violation of position limits, monitoring
concentrations of risk exposures, and preventing fraud and market
manipulation. In addition, as described above, the proposed amendments
are expected to improve the efficiency of data reporting and analysis
by reducing the number of reporting errors and automating data validity
and error corrections processes.
c. Price Discovery
The Commission does not believe the proposed rules would have a
significant impact on price discovery.
d. Sound Risk Management Practices
The Commission believes the proposed rule changes would improve the
data quality associated with futures and options position reporting
required under Sec. 17.00(a). The proposed additional data elements
would capture
[[Page 41535]]
more complete product information for certain positions and more
complete information concerning changes in position would provide the
Commission with an expanded view of the marketplace that would enable
the Commission to more effectively identify disruptive or manipulative
trading activity. These improvements in the reporting would allow the
Commission to evaluate risk throughout the futures and related markets.
The Commission does not believe that the costs arising from the
proposed rules would threaten the ability of market participants to
manage risks.
e. Other Public Interest Considerations
The Commission believes that the increased reliability and detail
resulting from improvements to data reporting would further other
public interest considerations, including transparency in the futures
market to the public and detection of fraud or manipulation.
Additionally, the reporting structure would provide additional
flexibility to collect information on new products developed by
exchanges, thereby allowing for those exchanges to innovate and respond
to the demands of the marketplace while still providing traders'
positions to the Commission.
f. General Request for Comment
The Commission generally requests comment on all aspects of its
cost-benefit considerations, including the identification and
assessment of any costs and benefits not discussed herein; data and any
other information to assist or otherwise inform the Commission's
ability to quantify or qualitatively describe the costs and benefits of
the proposed amendments; and substantiating data, statistics, and any
other information to support positions posited by commenters with
respect to the Commission's discussion. The Commission welcomes comment
on such costs, particularly from existing reporting firms that can
provide quantitative cost data based on their respective experiences.
Commenters may also suggest other alternatives to the proposed
approach.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act \110\ (``RFA'') requires that
agencies, in proposing rules, consider the impact of those rules on
small business or, in the statute's parlance, ``small entities.'' \111\
These amendments affect large traders, FCMs, and other similar
entities. The Commission has defined ``small entities'' as used by the
Commission in evaluating the impact of its rules in accordance with the
RFA.\112\ In that statement, the Commission concluded that large
traders and FCMs are not considered small entities for purposes of the
RFA. Thus, under section 3(a) of the RFA,\113\ the Chairman, on behalf
of the Commission, certifies that this proposed rule will not have a
significant economic impact on a substantial number of small entities.
The Commission nonetheless invites comment from any firm which believes
that these rules would have a significant economic impact on its
operations.
---------------------------------------------------------------------------
\110\ 5 U.S.C. 601 et seq.
\111\ See 5 U.S.C. 603. The RFA applies to rules subject to
notice and comment rulemakings issued pursuant to section 553(b) of
the Administrative Procedure Act, 5 U.S.C. 553(b), or any other law.
Id.
\112\ See Policy Statement and Final Establishment of
Definitions, 47 FR 18618 (Apr. 30, 1982).
\113\ 5 U.S.C. 605(b).
---------------------------------------------------------------------------
C. Paperwork Reduction Act
The Paperwork Reduction Act (``PRA'') \114\ imposes certain
requirements on federal agencies, including the Commission, in
connection with agencies' conducting or sponsoring any collection of
information, as defined by the PRA. This proposed rulemaking would
result in the collection of information within the meaning of the PRA,
as discussed below. The proposed rulemaking contains collections of
information for which the Commission has previously received control
number 3038-0009 from the Office of Management and Budget
(``OMB'').\115\
---------------------------------------------------------------------------
\114\ 44 U.S.C. 3501 et seq.
\115\ For the previously approved estimates, see ICR Reference
No: 202303-3038-002, available at https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202303-3038-002.
---------------------------------------------------------------------------
The Commission is proposing to amend the above information
collection to accommodate newly proposed and revised information
collection requirements for participants in the futures and options
markets that require approval from OMB under the PRA. The amendments
are expected to modify the existing annual burden for complying with
certain requirements of Part 17. Specifically, the Commission is
proposing to amend Sec. Sec. 17.00(a), 17.00(g), 17.00(h), and
17.03(d), which set out (1) the data submission standard and (2) the
data elements for large trader reports required to be filed under Sec.
17.00(a), among other things.\116\ The Commission has previously
estimated that the reporting requirements associated with Sec. 17.00
of the Commission's regulations entail an estimated 17,160 burden hours
for all reporting firms.\117\ The Commission is revising its total
burden estimates for this clearance to reflect updated estimates of the
number of respondents to the collection. The Commission is also
estimating the total capital and start-up costs and ongoing operation
and maintenance costs associated with the proposed amendments to the
Part 17 regulations described herein.
---------------------------------------------------------------------------
\116\ The Commission proposes two categories of amendments to
Part 17. First, the Commission proposes to remove current regulation
17.00(g)'s 80-character record format and amend regulation 17.03(d)
to delegate authority to the Director of the Office of Data and
Technology to determine the form, manner, coding structure, and
electronic data transmission procedures for reporting the data
elements in Appendix C to Part 17 and to determine whether to permit
or require one or more particular data standards for reports
required under regulation 17.00(a). That submission standard would
be published in a Part 17 Guidebook, to be published on the
Commission's website. The proposed Part 17 Guidebook designates a
modern XML submission standard for submitting reports required under
regulation 17.00(a). Second, the Commission proposes adding an
Appendix C to Part 17 enumerating data elements to be included in
regulation 17.00(a) reports. The proposed data elements consist of
(1) certain data elements currently required to be reported under
regulation 17.00(g), (2) certain data elements necessary for
processing files submitted in XML, (3) certain data elements
necessary to represent innovative contracts that cannot currently be
represented using the regulation 17.00(g) format, and (4) data
elements necessary to understand the transactions that resulted in
day-to-day changes in positions of large traders. The form and
manner for reporting these data elements in proposed Appendix C
would be provided in the Part 17 Guidebook. The burden estimates
provided in this section take into account the burden associated
with reporting using a modern XML submission standard and reporting
the data elements as set out in proposed Appendix C, in compliance
with the proposed Part 17 Guidebook.
\117\ See ICR Reference No: 202303-3038-002, available at
https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202303-3038-002.
---------------------------------------------------------------------------
The Commission is therefore submitting this proposal to the OMB for
its review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11.
Responses to this collection of information by reporting firms pursuant
to the Part 17 regulations would be mandatory. The Commission will
protect proprietary information according to the Freedom of Information
Act \118\ and 17 CFR 145, ``Commission Records and Information.'' In
addition, CEA section 8(a)(1) strictly prohibits the Commission, unless
specifically authorized by the CEA, from making public data and
information that would separately disclose the business transactions or
market positions of any person and trade secrets or names of
customers.\119\ The Commission is also required to protect certain
information contained in a government system of
[[Page 41536]]
records according to the Privacy Act of 1974.\120\
---------------------------------------------------------------------------
\118\ 5 U.S.C. 552.
\119\ 7 U.S.C. 12(a)(1).
\120\ 5 U.S.C. 552a.
---------------------------------------------------------------------------
The Commission expects that requiring reporting pursuant to a
modern data standard will not require reporting firms to submit
substantially more information than is currently required. Accordingly,
the Commission is retaining its previous estimated numbers of reports,
burden hours per report, and average burden hour cost. However, based
on review of recent data from 2023, the Commission is reducing its
estimate of the number of respondents from 330 to 310. Accordingly, the
Commission is reducing its estimate from the previous 17,160 burden
hours for all reporting firms \121\ to 16,120 burden hours. In
addition, the Commission anticipates that implementation of a modern
submission standard as proposed in the rules should reduce or eliminate
manual corrections and resubmissions that occur under the currently
operative regulations.
---------------------------------------------------------------------------
\121\ See ICR Reference No: 202303-3038-002, available at
https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202303-3038-002.
---------------------------------------------------------------------------
The aggregate annual estimate for the reporting burden associated
with Part 17, as amended by the proposal,\122\ would be as follows:
---------------------------------------------------------------------------
\122\ The previous burden estimates for 17 CFR 17.00 are
available at Notice, Agency Information Collection Activities Under
OMB Review, 88 FR 18127 (Mar. 27, 2023).
---------------------------------------------------------------------------
Estimated number of respondents: 310.
Estimated Average Burden Hours per Respondent: 52 hours.
Estimated total annual burden on Respondents: 16,120 hours.
Frequency of collection: Periodically.
In addition, the Commission anticipates that the proposed rules
will result in annual capital and start-up costs as well as operating
and maintenance costs, consisting of (1) start-up costs to implement
the proposed rule changes, (2) operating and maintenance costs to
implement the proposed rule changes, and (3) costs to modify equipment
as necessary to comply with the proposed rule changes. The Commission
estimates that some respondents may report by secure FTP (``FTP
filers'') and some firms may report manually (``manual filers''), and
that the total capital and start-up costs will vary based on whether a
respondent is an FTP Filer or a Manual Filer.
The Commission estimates that FTP filers would comprise 74
respondents. The Commission estimates that these respondents would
incur one-time initial costs associated with (1) modifying systems to
adopt a new data standard, (2) updating and testing systems to
implement new data elements, and (3) modifying equipment to implement
new data elements. First, the Commission estimates that such firms
would incur a one-time initial burden of 200 hours per entity to modify
their systems to adopt changes to the data submission standard
described in this proposed rulemaking, for a total estimated 14,800
total hours. Second, the Commission estimates that FTP filers will
incur total capital and start-up costs associated with updating,
testing, and implementing new data elements of 400 hours, for a total
estimated 29,600 hours. Third, the Commission also estimates that FTP
filers would incur one-time costs of $1,000 to modify equipment to
implement new data elements. This would amount to $6,689,600 (((200 +
400 hours) x 74 FTP filers x $149 \123\)) + (74 FTP filers x $1,000) =
$6,689,600).
---------------------------------------------------------------------------
\123\ For the cost calculations for FTP submitters, Commission
staff used a composite (blended) wage rate by averaging the hour
wages for (1) Computer Research Scientists, (2) Database Architects,
(3) Software Developers, and (4) Developers, Programmers, and
Testers. Per the U.S. Bureau of Labor Statistics, national industry-
specific occupational employment and wage estimates from May 2021,
the mean hourly wage for a computer research scientist is $68.58,
database architect is $58.58, software developer is $58.17, and
developers, programmers, and testers is $54.68. See U.S. Bureau of
Labor Statistics' Occupational Employment and Wage Statistics,
available at https://www.bls.gov/oes/2021/may/oes_nat. The average
of those wages is $59.42. Commission staff has applied a multiplier
of 2.5 times to account for benefits and overhead. The Commission is
therefore using an hourly wage rate of $149 for FTP submitters.
---------------------------------------------------------------------------
In addition, the Commission estimates that as a result of
implementing that new data submission standard, these 74 FTP filers may
incur additional operating and maintenance costs of 24 hours per year,
for 1,776 total hours, resulting in costs of $264,624 (24 hours x 74
FTP filers x $149 \124\ = $264,624), and, as a result of implementing
new data elements, these 74 FTP filers may incur additional operating
and maintenance costs of 24 hours per year, for 1,776 total hours,
resulting in costs of $264,624 (24 hours x 74 FTP filers x $149 \125\ =
$264,624). This yields additional annual operating and maintenance
costs of $529,248 for FTP filers.
---------------------------------------------------------------------------
\124\ See id.
\125\ See id.
---------------------------------------------------------------------------
The Commission estimates that manual filers would comprise 236
reporting firms. The Commission estimates that these respondents would
incur one-time initial costs associated with (1) modifying systems to
adopt a new data standard and (2) updating and testing systems to
implement new data elements. First, the Commission estimates such
respondents would incur a one-time initial burden of 10 hours to modify
their systems to implement a new data standard, for a total estimated
2,360 total hours. Second, the Commission estimates that manual filers
will incur an average one-time cost of 20 hours to implement additional
data elements required by proposed Appendix C, for a total estimated
4,720 total hours. This would amount to aggregate one-time initial
costs of $927,480 ((10 hours + 20 hours) x 236 manual filers x $131
\126\ = $927,480).
---------------------------------------------------------------------------
\126\ For the cost calculations for manual submitters,
Commission staff used the wage rate for Data Scientists. Per the
U.S. Bureau of Labor Statistics, national industry-specific
occupational employment and wage estimates from May 2021, the mean
hourly wage for a data scientist is $52.24. See U.S. Bureau of Labor
Statistics' Occupational Employment and Wage Statistics, available
at https://www.bls.gov/oes/2021/may/oes_nat. Commission staff has
applied a multiplier of 2.5 times to account for benefits and
overhead. The Commission is therefore using an hourly wage rate of
$131 for manual submitters.
---------------------------------------------------------------------------
In addition, the Commission estimates that as a result of
implementing that new data submission standard, these 236 manual filers
may incur additional operating and maintenance costs of 24 hours per
year, for 5,664 total hours, for an associated cost of $741,984 (24
hours x 236 manual filers x $131 \127\ = $741,984), and, as a result of
implementing new data elements, these 236 manual filers may incur
additional operating and maintenance costs of 24 hours per year, for
5,664 total hours, for an associated cost of $741,984 (24 hours x 236
manual filers x $131 \128\ = $741,984). This yields additional annual
operating and maintenance costs of $1,483,968 for manual filers.
---------------------------------------------------------------------------
\127\ See id.
\128\ See id.
---------------------------------------------------------------------------
Accordingly, the total estimated capital and start-up costs across
all 310 reporting entities is $7,617,080 ($6,689,600 + $927,480 =
$7,617,080). Based on five-year, straight line depreciation, this
amounts to annualized total capital and start-up costs for all covered
entities of $1,523,416. The total estimated annual operating and
maintenance costs across all entities is $2,013,216 ($529,248 for FTP
filers + $1,483,968 for manual filers = $2,013,216). The Commission
estimates that total annual capital and start-up costs and operation
and maintenance costs for all covered entities would be $3,536,632
($1,523,416 + $2,013,216 = $3,536,632).
Request for Comment
The Commission invites the public and other Federal agencies to
comment
[[Page 41537]]
on any aspect of the proposed information collection requirements
discussed above. The Commission will consider public comments on this
proposed collection of information in:
(1) Evaluating whether the proposed collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information will have a practical
use;
(2) Evaluating the accuracy of the estimated burden of the proposed
collection of information, including the degree to which the
methodology and the assumptions that the Commission employed were
valid;
(3) Enhancing the quality, utility, and clarity of the information
proposed to be collected; and
(4) Minimizing the burden of the proposed information collection
requirements on reporting firms, including through the use of
appropriate automated, electronic, mechanical, or other technological
information collection techniques, e.g., permitting electronic
submission of responses.
Copies of the submission from the Commission to OMB are available
from the CFTC Clearance Officer, 1155 21st Street NW, Washington, DC
20581, (202) 418-5160 or from https://RegInfo.gov. Organizations and
individuals desiring to submit comments on the proposed information
collection requirements should send those comments to:
The Office of Information and Regulatory Affairs, Office
of Management and Budget, Room 10235, New Executive Office Building,
Washington, DC 20503, Attn: Desk Officer of the Commodity Futures
Trading Commission;
(202) 395-6566 (fax); or
[email protected] (email).
Please provide the Commission with a copy of submitted comments so
that comments can be summarized and addressed in the final rulemaking,
and please refer to the ADDRESSES section of this rulemaking for
instructions on submitting comments to the Commission. OMB is required
to make a decision concerning the proposed information collection
requirements between 30 and 60 days after publication of this release
in the Federal Register. Therefore, a comment to OMB is best assured of
receiving full consideration if OMB receives it within 30 calendar days
of publication of this release. Nothing in the foregoing affects the
deadline enumerated above for public comment to the Commission on the
proposed rules.
D. Antitrust Considerations
CEA section 15(b) requires the Commission to take into
consideration the public interest to be protected by the antitrust laws
and endeavor to take the least anticompetitive means of achieving the
objectives of the CEA in issuing any order or adopting any Commission
rule or regulation.
The Commission does not anticipate that the proposed amendments to
Part 17 would result in anti-competitive behavior. The Commission
encourages comments from the public on any aspect of the proposal that
may have the potential to be inconsistent with the antitrust laws or
anticompetitive in nature.
List of Subjects in 17 CFR Part 17
Brokers, Commodity futures, Reporting and recordkeeping
requirements, Swaps.
For the reasons stated in the preamble, the Commodity Futures
Trading Commission proposes to amend part 17 of title 17 of the Code of
Federal Regulations as follows:
PART 17--REPORTS BY REPORTING MARKETS, FUTURES COMMISSION
MERCHANTS, CLEARING MEMBERS, AND FOREIGN BROKERS
0
1. The authority citation for part 17 continues to read as follows:
Authority: 7 U.S.C. 2, 6a, 6c, 6d, 6f, 6g, 6i, 6t, 7, 7a, and
12a.
0
2. In Sec. 17.00, revise paragraphs (a)(1), (g), and (h) to read as
follows:
Sec. 17.00 Information to be furnished by futures commission
merchants, clearing members, and foreign brokers.
* * * * *
(a) * * *
(1) Each futures commission merchant, clearing member and foreign
broker shall submit a report to the Commission for each business day
with respect to all special accounts carried by the futures commission
merchant, clearing member or foreign broker, except for accounts
carried on the books of another futures commission merchant or clearing
member on a fully-disclosed basis. Except as otherwise authorized by
the Commission or its designee, such report shall be made pursuant to
paragraph (g) of this section. The report shall show each futures
position, separately for each reporting market and for each future, and
each put and call options position separately for each reporting
market, expiration and strike price en each special account as of the
close of market on the day covered by the report and, in addition, the
number of futures and options contracts bought and sold, the quantity
of exchanges of futures or options for commodities or for derivatives
positions, the number of delivery notices issued for each such account
by the clearing organization of a reporting market and the number
stopped by the account, the number of long and short options expired
and exercised, the number of long and short futures assigned, and the
number of long and short transfers sent and received. The report shall
also show all positions in all contract months and option expirations
of that same commodity on the same reporting market for which the
special account is reportable.
* * * * *
(g) Media and file characteristics. Except as otherwise approved by
the Commission or its designee, all of the applicable data elements set
forth in appendix C to this Part shall be included in a report required
by Sec. 17.00(a), and shall be submitted together in a single file.
The report shall be submitted in the form and manner published by the
Commission or its designee pursuant to Sec. 17.03.
(h) Correction of errors and omissions. Except as otherwise
approved by the Commission or its designee, corrections to errors and
omissions in data provided pursuant to Sec. 17.00(a) shall be
submitted in the form and manner published by the Commission or its
designee pursuant to Sec. 17.03.
* * * * *
0
3. In Sec. 17.03, revise paragraphs (a) and (d) to read as follows:
Sec. 17.03 Delegation of authority to the Director of the Office of
Data and Technology or the Director of the Division of Market
Oversight.
* * * * *
(a) Pursuant to Sec. 17.00(a) and (h), the authority shall be
designated to the Director of the Office of Data and Technology to
determine whether futures commission merchants, clearing members, and
foreign brokers may report the information required under Sec.
17.00(a) and (h) using some format other than that required under Sec.
17.00(g) upon a determination that such person is unable to report the
information using the format, coding structure, or electronic data
transmission procedures otherwise required.
* * * * *
(d) Pursuant to Sec. 17.00(a), (g), and (h), the authority shall
be designated to the Director of the Office of Data and Technology to
determine the form, manner, coding structure, and electronic data
transmission procedures for reporting the data elements in appendix
[[Page 41538]]
C to this part and to determine whether to permit or require one or
more particular data standards.
* * * * *
0
4. Add appendix C to part 17 to read as follows:
------------------------------------------------------------------------
Data element name Definition for data element
------------------------------------------------------------------------
1............... Total Message Count The total number of reports
included in the file.
2............... Message Type....... Message report type.
3............... Sender ID.......... The CFTC-issued reporting firm
identifier.
4............... To ID.............. Indicates the report was
submitted to the CFTC.
5............... Message Transmit The date and time the file was
Datetime. created.
6............... Report ID.......... A unique identifier assigned to
each position report.
7............... Record Type Indicates the action that
(Action). triggered the Position Report.
8............... Report Date........ The date of the information being
reported.
9............... Reporting Firm ID.. CFTC assigned identifier for the
reporting firm.
10.............. Special Account The Legal Entity Identifier
Controller LEI. issued to the special account
controller.
11.............. Account ID......... A unique account identifier,
assigned by the reporting firm
to each special account.
Assignment of the account number
is subject to the provisions of
Sec. 17.00(b) and Appendix A
of this part (Form 102).
12.............. Exchange Indicator. The exchange where the contract
is traded.
13.............. Commodity Clearing The clearinghouse-assigned
Code. commodity code for the futures
or options contract.
14.............. Product Type....... Type of Product.
15.............. Ticker Symbol...... Ticker symbol of the product
traded.
16.............. Maturity Month Year Month and year of the delivery or
maturity of the product, as
applicable. Day must be provided
when necessary to characterize a
product.
17.............. Maturity Time...... The expiration time of an option
or last trading time of a
future.
18.............. Listing Date....... Product listing date.
19.............. First Exercise Date The earliest time at which notice
of exercise can be given.
20.............. Strike Level....... Numeric option moneyness
criterion.
21.............. Alpha Strike....... Non-Numeric option moneyness
criterion.
22.............. Cap Level.......... Ceiling value of a capped option
or bounded future.
23.............. Floor Level........ Floor value of a capped option or
bounded future.
24.............. Bound or Barrier Behavior of the product when it
Type. hits the bound or barrier.
25.............. Bound or Barrier Bound or barrier level of a
Level. contingent option.
26.............. Put or Call Nature of the option exercise.
Indicator.
27.............. Exercise Style..... Type of exercise of an option.
28.............. Payout Amount...... Cash amount indicating the payout
associated with the product.
29.............. Payout Type........ The type of valuation method or
payout trigger.
30.............. Underlying Contract The instrument that forms the
ID. basis of an option.
31.............. Underlying Maturity Underlying delivery year and
Month Year. month (and day where
applicable).
32.............. Long Position...... The total of long open contracts
carried at the end of the day.
33.............. Short Position..... The total of short open contracts
carried at the end of the day.
34.............. Contracts Bought... The total quantity of contracts
bought (gross) during the day
associated with a special
account, including all block
trades and trade allocations
such as give-ups, even if the
give-ups are processed beyond
T+1. Do not include exchanges of
derivatives for related
positions EDRPs (EFP, EFS or
EFR, EOO) or transfers.
35.............. Contracts Sold..... The total quantity of contracts
sold (gross) during the day
associated with a special
account, including all block
trades and trade allocations
such as give-ups, even if the
give-ups are processed beyond
T+1. Do not include exchanges of
derivatives for related
positions EDRPs (EFP, EFS or
EFR, EOO) or transfers.
36.............. EDRPs Bought....... The quantity of purchases of
futures or options in connection
with exchanges of futures or
options for related positions
(``EDRPs'') done pursuant to a
DCM's rules, disaggregated into
quantity of purchases of futures
or options in connection with
EDRPs by type of EDRP, including
exchanges of futures for
physical, exchanges of futures
for risk, exchanges of options
for options, and any other EDRP
offered pursuant to a DCM's
rules.
37.............. EDRPs Sold......... The quantity of sales of futures
or options in connection with
EDRPs done pursuant to a DCM's
rules, disaggregated into
quantity of sales of futures or
options in connection with EDRPs
by type of EDRP, including
exchanges of futures for
physical, exchanges of futures
for risk, exchanges of options
for options, and any other EDRP
offered pursuant to a DCM's
rules.
38.............. Delivery Notices The number of futures contracts
Stopped. for which delivery notices have
been stopped during a day.
39.............. Delivery Notices The number of futures contracts
Issued. for which delivery notices have
been issued during a day.
40.............. Long Options Long options positions expired
Expired. without being exercised.
41.............. Short Options Short options positions expired
Expired. without being exercised.
42.............. Long Options Long options positions exercised
Exercised. during the day.
43.............. Short Options Short options positions exercised
Exercised. during the day.
44.............. Long Futures Long futures assigned as the
Assigned. result of an option exercise.
45.............. Short Futures Short futures assigned as the
Assigned. result of an option exercise.
46.............. Long Transfers Sent Long positions sent through other
transfers during the day. (Do
not include give-ups.)
47.............. Long Transfers Long positions received through
Received. other transfers during the day.
(Do not include
give[hyphen]ups.)
48.............. Short Transfers Short positions sent through
Sent. other transfers during the day.
(Do not include give-ups.)
[[Page 41539]]
49.............. Short Transfers Short positions received through
Received. other transfers during the day.
(Do not include
give[hyphen]ups.)
50.............. Product-Specific Terms of the contract that are
Terms. economically material to the
contract, maintained in the
ordinary course of business by
the reporting market listing the
contract, and not otherwise
required to be reported under
the data elements in this
Appendix.
------------------------------------------------------------------------
Issued in Washington, DC, on June 20, 2023, by the Commission.
Robert Sidman,
Deputy Secretary of the Commission.
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendices to Large Trader Reporting Requirements--Voting Summary and
Commissioners' Statements
Appendix 1--Voting Summary
On this matter, Chairman Behnam and Commissioners Johnson,
Goldsmith Romero, Mersinger, and Pham voted in the affirmative. No
Commissioner voted in the negative.
Appendix 2--Statement of Chairman Rostin Behnam in Support of the
Notice of Proposed Rulemaking on Amendments to Part 17 Large Trader
Reporting Requirements
I support today's proposed rule which would modernize and create
a path for efficient future modernization of large trader data
reporting under Part 17 of the Commission's regulations. The
proposal also seeks to align Part 17 data and reporting with the
reporting structure in Parts 16, 20, 39, 43, and 45.
Part 17 governs large trader reporting for futures and options,
and requires certain registrants to report daily position
information for the largest futures and options traders. The
Commission uses the large trader reports for surveillance (detection
and prevention of price manipulation) and enforcement of speculative
limits. These reports also provide the basis for the Commission's
weekly Commitments of Traders (``COT'') report, which is used by a
wide range of commercial and speculative traders, and was itself
recently modernized to include an updated interface that simplifies
the downloading of COT data and an Application Program Interface
(API), which enables an easier automated download process.\1\
---------------------------------------------------------------------------
\1\ See Press Release Number 8612-22, CFTC, CFTC Launches New
Commitments of Traders Reports (Oct. 20, 2022), CFTC Launches New
Commitments of Traders Reports, available at https://www.cftc.gov/PressRoom/PressReleases/8612-22.
---------------------------------------------------------------------------
Large trader data and the COT report alike are tools of the
trade, and ensuring that they are usable internally and externally
promotes transparency and efficiency as we carry out our regulatory
and enforcement functions. Submission standards and data fields for
the report (Sec. 17.00(g)) were promulgated in 1986 and last
updated in 1997, and have become outdated and difficult for staff to
use. The proposal seeks to modernize the format standards and data
fields by: removing the 80-character format and delegating authority
to the Director of the Division of Data (DOD) to designate a modern
data submission standard; replacing the data fields enumerated in
the regulation with a new Appendix C specifying data elements to be
reported; and delegating to the DOD Director the authority to
specify the form, manner, coding structure, and electronic data
transmission procedures for reporting.
The Part 17 proposal is accompanied by the contemporaneous
publication of a proposed Part 17 Guidebook on the Commission's
website. The proposed Guidebook designates a modern FIXML submission
standard for submitting reports required under Sec. 17.00(a). The
proposal includes a general description of the Guidebook and
requests comments from the public.
At their core, rules like this support foundational compliance
and unequivocally support our efforts in ensuring that end-users and
individual and institutional investors alike can measure and
understand risks. Further, this rule will allow a better
understanding that those trading in our markets are being monitored,
and their impacts and influence within such markets, constantly
measured and evaluated.
Appendix 3--Statement of Commissioner Kristin N. Johnson In Support of
Notice of Proposed Rulemaking on Large Trader Reporting Requirements
I strongly support issuing the proposal on Large Trader
Reporting Requirements. Large trader reports ``effectuate the
Commission's market and financial surveillance programs by providing
information concerning the size and composition'' of Commission
regulated markets and the accounts that hold the largest positional
exposures.\1\ The Commission's large trader reporting system serves
as a foundational tool for protecting market integrity as well as
price discovery and hedging utility of futures contracts for
commercial end-users. Despite technology-based formatting
limitations, the large trader reporting system has admirably
supported the Commission's market surveillance and position limits
enforcement programs for decades.
---------------------------------------------------------------------------
\1\ Notice of Proposed Rulemaking, Position Limits for
Derivatives, 78 FR 75,680, 75,741 (Dec. 12, 2013).
---------------------------------------------------------------------------
Among other uses, data reported under Part 17 enables the
Commission to identify large positions in single markets or across
markets, including by aggregating positions of a particular
beneficial owner across multiple accounts held with multiple
clearing members. This data also supports the Commission's
surveillance programs and serves as the basis of the Commission's
weekly Commitment of Traders (``COT'') reports. In addition, the
data required to be reported under Sec. 17.00(a) comprise core data
used by many divisions within the Commission, including the Division
of Market Oversight (``DMO''), the Office of the Chief Economist
(``OCE''), and the Division of Enforcement.
Requiring reporting in an extensible markup language (``XML'')
protocol as proposed is consistent with current regulatory practices
and reconciles the format for transmitting large trader reports with
the Commission's transactional reporting structures for designated
contract markets, derivatives clearing organizations, physical
commodity swaps, and swap data repositories.\2\ This harmonization,
if properly implemented, should unlock surveillance synergies and
allow the Commission's Integrated Surveillance System, where large
trader reports are housed, to interact with other reporting
frameworks including Ownership and Control Reports, which are
triggered when accounts exceed volume thresholds,\3\ and Trade
Capture Reports, which contain transaction level and related order
book data.\4\
---------------------------------------------------------------------------
\2\ Notice of Proposed Rulemaking, Large Trader Reporting
Requirements at 14 (Jun. 7, 2023), https://www.cftc.gov/media/8716/votingdraft060723_17CFRPart17/download (hereinafter ``Large Trader
Proposal'').
\3\ 17 CFR 17.01.
\4\ 17 CFR 16.02.
---------------------------------------------------------------------------
Although the proposal preserves the core data that large trader
reports collect today, it also measuredly proposes to integrate
complementary data that is not fully reflected in current reports.
Access to more fulsome and reliable data will improve the
Commission's understanding of how traders employ certain
transactions and serve as a deterrent to potential abusive trading
practices.
The proposal would also require reporting data elements that
capture ``Contracts Bought'' and ``Contracts Sold'' instead of
reporting aggregated positions that do not presently consider the
amount of buying and selling associated with a particular special
account from one trading day to the next.\5\ I am heartened by the
proposal's one-year compliance period,\6\ and I encourage
stakeholders to meaningfully engage with this proposal to enhance
the Commission's regulatory mandate without placing undue burdens on
the firms that potentially would have to comply with new
requirements.
---------------------------------------------------------------------------
\5\ Large Trader Proposal at 29 to 30.
\6\ Large Trader Proposal at 34.
---------------------------------------------------------------------------
I commend staff--Owen Kopon and Paul Chaffin from DMO, James Fay
from the
[[Page 41540]]
Division of Data, and Daniel Prager from OCE--for bringing to the
Commission a thoughtful proposal for modernizing large trader
reports.
Appendix 4--Statement of Commissioner Christy Goldsmith Romero on
Strengthening and Modernizing Large Trader Reporting Requirements for
Transparency and Market Integrity
At my confirmation hearing for this role, I testified, ``If
confirmed, my highest priority would be to work to ensure that the
markets are working well--that they are open, fair, and competitive.
. . . Whether focused on hard commodities like agriculture, energy,
or metals, or on the financial sector, the Commission plays a
critical role in ensuring that these markets work well. That starts
with the Agricultural sector--the farmers, ranchers, and producers
our nation depends on--to put food on our tables and contribute to
our nation's economic activity. For our farmers and ranchers to help
drive our economy and feed the world, they need U.S. derivatives
markets for risk management and price discovery.'' \1\
---------------------------------------------------------------------------
\1\ Statement of Christy Goldsmith Romero, Confirmation Hearing,
U.S. Senate Committee on Agriculture, Nutrition, and Forestry (Mar.
2, 2022) available at https://www.agriculture.senate.gov/imo/media/doc/Testimony_Goldsmith%20Romero.pdf.
---------------------------------------------------------------------------
Transparency is critical to fair and orderly markets. It
provides the market confidence that pricing is appropriate, reflects
market fundaments, and is free of manipulation and excessive
speculation. This confidence is reflected in the fact that the
Commission's Commitments of Traders report that reports position
information for the largest traders in our markets is consistently
the most downloaded item from our website. Market participants, news
media, researchers, academics, and industry professionals, use these
reports to determine current trends, conduct analysis of trading
patterns, and inform market strategies. The importance of these
reports was highlighted when the Commission had to postpone the
reports temporarily after the cyber attack on Ion Markets.\2\
---------------------------------------------------------------------------
\2\ See CFTC, CFTC Announces Postponement of Commitment of
Traders Report, (Feb. 16, 2023) available at https://www.cftc.gov/PressRoom/PressReleases/8662-23.
---------------------------------------------------------------------------
Fair and orderly markets also require confidence that the
Commission is monitoring markets and taking strong action to promote
market integrity. The Commitments of Traders report is a tool in the
Commission's market surveillance program and enforcement program to
deter and catch market manipulation and excessive speculation. As I
have visited with our nation's farmers and producers, I have heard
about their need for the Commission to protect the integrity of our
markets, to ensure that prices are not artificially increased,
thereby unfairly raising input costs.
The Commission has a critical mission to deter and combat excess
speculation in our markets--which I discussed Monday in a recent
enforcement action.\3\ In September, I proposed that the CFTC use
its expertise and data to study whether prices in key commodities
markets are being determined by market fundamentals, and to root out
any manipulation and excessive speculation so that families and
businesses aren't forced to pay artificially increased prices.\4\
These deep dive studies would need data on the activity of the
largest traders in our markets--which is the sole focus of these
reporting requirements.
---------------------------------------------------------------------------
\3\ See CFTC Commissioner Christy Goldsmith Romero, The
Importance of Protecting Commodity Markets Against Excess
Speculation in the Ghost Cattle Fraud Case, (June 5, 2023) Statement
of Commissioner Goldsmith Romero on the Importance of Protecting
Commodity Markets Against Excessive Speculation in the Ghost Cattle
Fraud Case CFTC v. Cody Easterday available at https://www.cftc.gov/PressRoom/SpeechesTestimony/romerostatement060523.
\4\ See Opening Statement of Commissioner Christy Goldsmith
Romero Before the Energy and Environmental Markets Advisory
Committee, Opening Statement of Commissioner Christy Goldsmith
Romero Before the Energy and Environmental Markets Advisory
Committee (September 20, 2022) available at https://www.cftc.gov/PressRoom/SpeechesTestimony/romerostatement092022.
---------------------------------------------------------------------------
The Commission will benefit from strengthening and modernizing
this important surveillance tool, as will the public. I particularly
appreciate the recognition of the need to determine positions across
markets for more comprehensive data, and for data quality
improvements. The proposed changes would enhance the Commission's
ability to identify disruptive or manipulative trading activity. For
these reasons, I support the proposed rule. I thank the staff and
look forward to public comment.
Appendix 5--Statement of Commissioner Caroline D. Pham in Support of
Notice of Proposed Rulemaking for Large Trader Reporting Requirements
Under Part 17
Today, the Commodity Futures Trading Commission (Commission or
CFTC) is considering whether to propose revisions that would update
the outdated large trader reporting submission standards in Part 17
of the Commission's regulations. I am pleased to support this
proposed rulemaking because the CFTC relies on its large trader
reporting data to generate its weekly Commitment of Traders (COT)
Report and to carry out our important market surveillance functions.
Part 17 is the CFTC's regulatory framework that outlines the
reporting obligations for clearing members, including futures
commission merchants (FCMs) and foreign brokers, collectively known
as reporting firms. Part 17 requires these reporting firms to submit
daily trade data to the CFTC, which includes data on open interest,
positions held, and other relevant position information on futures
and options on futures.
This framework allows the CFTC to maintain an up-to-date and
accurate picture of the markets, ensuring that market participants
and end-users have the necessary information for price discovery and
risk management. By regularly collecting and publishing this market
data through the CFTC's COT Report, Part 17 helps maintain market
integrity and fosters transparency, providing valuable insights into
market trends and dynamics.
The COT Report has been vital to our derivatives market since
its inception in 1962. The report provides a weekly summary of the
open interest positions held by various categories of market
participants, including commercial traders, non-commercial traders,
and nonreportable positions. By understanding the positions held by
commercial and noncommercial traders, market participants and end-
users can better manage their risk exposure, assess the supply and
demand fundamentals that drive price movements, and gauge the
overall sentiment in markets, enabling market participants to make
informed decisions about their own positions and strategies.
Part 17 data is also used by the CFTC to monitor market
activities and to detect potential fraud, market manipulation, and
position limit violations. Collecting position data that accurately
reflects the full picture of a market participant's position also
enables the CFTC to assess the financial risks presented by large
customer positions to registrants such as FCMs, and derivatives
clearing organizations (DCOs).
As we deliberate today on the proposed rule to amend Part 17, it
is crucial to remember that we should periodically update our
reporting rules as needed to reflect developments in the derivatives
markets, while ensuring such updates do not cause disruption to the
CFTC's weekly COT Report or our market oversight. And in the
rulemaking process, the Commission must give fair consideration to
every alternative to ensure that our efforts to enhance market
transparency do not unnecessarily increase the regulatory burden and
costs for market participants, particularly end-users who are
already dealing with inflation, rising interest rates, and increased
costs for inputs. I often say that we are not regulating in a
vacuum, and the Commission must take into account real-world
considerations and the realities of implementing significant changes
to systems, operations, and processes.
To that end, I'm pleased that the proposed implementation period
is one year from publication of the final rule, and encourage
commenters to note if this is not enough time.
The COT Report is an invaluable tool in the derivatives market,
providing transparency and aiding in price discovery and risk
management for market participants and end-users, and enabling the
CFTC's market surveillance and oversight mission. I'd like to
recognize and thank the following CFTC staff members: Owen Kopon and
Paul Chaffin in the Division of Market Oversight, James Fay in the
Division of Data, and Daniel Prager in the Office of Chief
Economist, for their critical work on these important requirements.
[FR Doc. 2023-13459 Filed 6-26-23; 8:45 am]
BILLING CODE 6351-01-P