[Federal Register: May 14, 1997 (Volume 62, Number 93)] [Rules and Regulations] [Page 26384-26386] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr14my97-5] ======================================================================= ----------------------------------------------------------------------- COMMODITY FUTURES TRADING COMMISSION 17 CFR Parts 1, 5 and 31 Fees for Applications for Contract Market Designation, Leverage Commodity Registration and Registered Futures Association and Exchange Rule Enforcement and Financial Reviews AGENCY: Commodity Futures Trading Commission ACTION: Final schedule of fees. ----------------------------------------------------------------------- SUMMARY: The Commission periodically adjusts fees charged for certain program services to assure that they accurately reflect current Commission costs. In this regard, the staff recently reviewed the Commission's actual costs of processing applications for contract market designation (17 CFR part 5, appendix B), audits of leverage transaction merchants (17 CFR part 31, appendix B) and registered futures association and exchange rule enforcement and financial reviews (17 CFR part 1, appendix B). The following fee schedule for fiscal year 1997 reflects the average annual actual costs to the Commission of providing those services during fiscal years 1994, 1995 and 1996. Accordingly, the Commission will charge the following fees: Applications for contract market designation for a futures contract will be maintained at $8,300; contract market designation for an option contract will be reduced from $1,800 to $1,700; contract markets that simultaneously submit designation applications for a futures and an option on that futures contract will be reduced from a combined fee of $9,200 for both to $9,000 for both; and leverage commodity registration will be maintained at $4,500. In addition, the Commission is publishing the schedule of fees for registered futures association and exchange rule enforcement and financial reviews. [[Page 26385]] DATES: Effective: Contract Market Designation and Leverage Commodity Registration May 14, 1997. Registered Futures Association and Exchange Rule Enforcement and Financial Reviews are due July 14, 1997. FOR FURTHER INFORMATION CONTACT: Gerald P. Smith, SpecialAssistant to the Executive Director, Office of the ExecutiveDirector, Commodity Futures Trading Commission, Three LafayetteCentre, 1155 21st Street, NW., Washington, DC 20581, telephone number 202-418-5160. SUPPLEMENTARY INFORMATION: The Commission periodically reviews the actual costs of providing services for which fees are charged and adjusts these fees accordingly. In connection with its most recent review, the Commission has determined that fees for contract market designations should be adjusted. Also, this release announces the fiscal year 1997 schedule of fees for registered futures association and exchange rule enforcement and financial reviews and maintains leverage commodity registration fees. Background Information I. Computation of Fees The Commission has established fees for certain activities and functions performed by the Commission.\1\ In calculating the actual cost of processing applications for contract market designation, registering leverage commodities, and performing registered futures association and exchange rule enforcement and financial reviews, the Commission takes into account personnel costs (direct costs), and benefits and administrative costs (overhead costs). --------------------------------------------------------------------------- \1\ See section 237 of the Futures Trading Act of 1982 (7 U.S.C. 16a) and 31 U.S.C. 9701. For a broader discussion of the history of Commission fees, see 52 FR 46070 (Dec. 4, 1987). --------------------------------------------------------------------------- The Commission first determines personnel costs by extracting data from the agency's Management Accounting Structured Code (MASC) system. Employees of the Commission record the time spent on each project under the MASC system. The Commission then adds an overhead factor that is made up of two components--benefits and general and administrative costs. Benefits, which include retirement, insurance and leave, are based on a government-wide standard established by the Office of Management and Budget in Circular A-76. General and administrative costs include the Commission's costs for space, equipment, utilities, etc. These general and administrative costs are derived by computing the percentage of Commission appropriations spent on these non- personnel items. The overhead calculations fluctuate slightly due to changes in government-wide benefits and the percentage of Commission appropriations applied to non-personnel costs from year to year. The actual overhead factor for prior fiscal years were 95% in 1994, 92% in 1995 and 98% in 1996. Once the total personnel costs for each fee item (contract market designation, rule enforcement review, etc.) have been determined for each year the overhead factor is applied and the costs for fiscal years 1994, 1995 and 1996 are averaged. This results in a calculation of the average annual cost over the three-year period. II. Applications for Contract Market Designation On August 23, 1983 the Commission established a fee for Contract Market Designation. 48 FR 38214. This fee was based upon a three-year moving average of the actual costs expended and the number of contracts reviewed during that period of time. The fee charged was reviewed again in fiscal year 1985 and every year thereafter to determine the fee for the current year. In fiscal year 1985 the overwhelming majority of designation applications was for futures contracts as opposed to option contracts. Therefore, the proposed fee covered both futures and option designation applications. In fiscal 1992 the Commission reviewed its data on the actual costs for reviewing designation applications for both futures and option contracts and determined that the cost of reviewing a futures contract designation application was much higher than the cost of reviewing an option contract. It also determined that, when designation applications for both a futures contract and an option on that futures contract are submitted simultaneously, the cost for review of the option contract designation application was even lower than the individual cost of reviewing the futures contract plus the option contract. The Commission staff reviewed the actual costs of processing applications for contract market designation for a futures contract for fiscal years 1994, 1995 and 1996 and found that the average cost over the three year period was $8,368. The review of actual cost of processing applications for contract market designation for an option contract for fiscal years 1994, 1995 and 1996 revealed that the average costs over the same three year period was $1,795. Accordingly, the Commission has determined that the fee for applications for contract market designation for a futures contract will be maintained at $8,300 and the fee for applications for contract market designation as an option contract will be reduced to $1,700 in accordance with the Commission's regulations (17 CFR part 5, appendix B). In addition, the combined fee for contract markets simultaneously submitting designation applications for a futures contract and an option contract on that futures contract will be reduced to $9,000. On March 7, 1997, the Commission published final rules in the Federal Register, 62 FR 10434, which revised the procedures for review and approval of applications for Contract Market Designation. The effect of these rules on the assessment of fees for designation will be realized in future years. III. Leverage Commodity Registration No new applications for leverage commodity registration were received by the Commission in fiscal years 1994, 1995 or 1996. Accordingly, the Commission will maintain the present fee of $4,500 for leverage commodity registration. IV. Registered Futures Association and Exchange Rule Enforcement and Financial Reviews Under the formula adopted in 1993 (58 FR 42643, August 11, 1993, which appears in 17 CFR part 1, appendix B), the Commission calculates the rule enforcement and financial review fees based on its actual costs, as well as actual exchange trading volume. The formula for calculating the rule enforcement and financial review fee is 0.5a+0.5vt = current fee. In the formula, ``a'' equals the average annual costs, ``v'' equals the percentage of total volume across exchanges over the last three years and ``t'' equals the average annual cost for all exchanges. To determine the fee, first the staff calculates actual costs for the last three fiscal years. The average annual costs for that time period for rule enforcement reviews and financial reviews for each exchange are as follows: ------------------------------------------------------------------------ FY 1994-1996 average annual Exchange costs for review services ------------------------------------------------------------------------ Chicago Board of Trade................................ $264,818.49 Chicago Mercantile Exchange........................... 230,131.08 New York Mercantile/COMEX Exchange.................... 216,924.81 Coffee, Sugar and Cocoa Exchange...................... 91,248.09 New York Cotton/New York Futures Exchange............. 86,629.94 Kansas City Board of Trade............................ 17,754.39 [[Page 26386]] Minneapolis Grain Exchange............................ 29,728.52 Philadelphia Board of Trade........................... 2,893.69 ------------------------------------------------------------------------ Total............................................. 940,159.01 ------------------------------------------------------------------------ Second, the staff calculates the trading volume for the past three fiscal years to determine the cumulative volume for each exchange and its percentage of total volume across all exchanges during that same period. The trading volume figures for that period are as follows: ------------------------------------------------------------------------ Percentage FY 1994-1996 of total Exchange cumulative volume volume (of across all contracts) exchanges ------------------------------------------------------------------------ Chicago Board of Trade...................... 657,641,820 43.5642 Chicago Mercantile Exchange................. 561,261,279 37.1797 New York Mercantile/COMEX Exchange.......... 228,952,651 15.1665 Coffee, Sugar and Cocoa Exchange............ 35,326,602 2.3401 New York Cotton/New York Futures Exchange... 17,810,325 1.1798 Kansas City Board of Trade.................. 5,665,084 0.3753 Minneapolis Grain Exchange.................. 2,810,771 0.1862 Philadelphia Board of Trade................. 123,281 0.0082 --------------------------- Total................................... 1,509,591,813 100.00 ------------------------------------------------------------------------ Finally, the staff calculates the current fees by applying the appropriate exchange data to the formula. The following is an example of how the rule enforcement and financial review fees for exchanges are calculated. Example: The Minneapolis Grain Exchange (MGE) average annual cost is $29,728.52 and its percentage of total volume over the last three years is 0.1862. The annual average total cost for all exchanges during that same time period is $940,159.01. As a result, the MGE fee for fiscal 1997 is: (.5)($29,728.52)+(.5) (.001862)($940,159.01) = current fee or $14,864.26+$856.85=$15,721.11 As stated in 1993 when the formula was adopted, if the calculated fee using this formula is higher than actual costs, the exchange pays actual costs. If the calculated fee using the formula is less than actual costs then the exchange pays the calculated fee. No exchange will pay more than actual costs. Also, if an exchange has no volume over the three-year period it pays a flat 50% of actual costs. The National Futures Association (NFA) is a registered futures association which is responsible for regulating the practices of its members. In its oversight role, the Commission performs rule enforcement and financial reviews of the NFA. The Commission's average annual cost for reviewing the National Futures Association during fiscal years 1994 through 1996 is $308,107.27. The National Futures Association will continue to be charged 100% of its actual costs. Based upon this formula the fees for all of the exchanges and the NFA for fiscal 1997 are as follows: ------------------------------------------------------------------------ Exchange FY 1997 fee ------------------------------------------------------------------------ Chicago Board of Trade................................ $264,818.49 Chicago Mercantile Exchange........................... 230,161.08 New York Mercantile/COMEX Exchange.................... 178,257.22 Coffee Sugar and Cocoa Exchange....................... 56,393.14 New York Cotton/New York Futures Exchange............. 48,744.34 Kansas City Board of Trade............................ 10,604.16 Minneapolis Grain Exchange............................ 15,721.11 Philadelphia Board of Trade........................... 1,484.42 NFA................................................... 308,107.27 ----------------- Total............................................. 1,114,291.23 ------------------------------------------------------------------------ V. Regulatory Flexibility Act The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq., requires agencies to consider the impact of rules on small businesses. The fees implemented in this release affect contract markets (also referred to as ``exchanges'') and registered futures associations. The Commission has previously determined that contract markets are not ``small entities'' for purposes of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq., 47 FR 18618 (April 30, 1982). Registered futures associations also are not considered ``small entities'' by the Commission. Therefore, the requirements of the Regulatory Flexibility Act do not apply to contract markets or registered futures associations. Accordingly, the Chairperson, on behalf of the Commission, certifies that the fees implemented herein do not have a significant economic impact on a substantial number of small entities. * * * * * Issued in Washington, DC on May 8, 1997, by the Commission. Jean A. Webb, Secretary of the Commission. [FR Doc. 97-12687 Filed 5-13-97; 8:45 am] BILLING CODE 6351-01-P
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