Designated contract markets (“DCMs”), registered swap execution facilities (“SEFs”), registered derivatives clearing organizations (“DCOs”), and registered swap data repositories (“SDRs”) generally may implement new rules or rule amendments by filing with the Commission a certification that the new rule or rule amendment complies with the Commodity Exchange Act (“Act”) and the Commission’s regulations or by requesting CFTC approval of such rules and amendments. For rules and amendments adopted under self-certification procedures, registered entities are expected to assume primary responsibility for ensuring that the rules and rule amendments meet, on a continuing basis, the applicable statutory and regulatory requirements.
Submission of Registered Entity Rules and Rule Amendments to the Commission by Certification
Part 40 of the Commission's regulations sets forth procedures for submission of rules and rule amendments.
Rule Submission Review Period: New rules and rule amendments, including amendments to the terms and conditions of an existing product, become effective, pursuant to the certification of the registered entity and notice of such certification to the entity’s members and market participants, on the date that is 10 business days after the date on which the Commission receives the certification unless the Commission extends the submission review period. In implementing an extension, the Commission would notify the registered entity, prior to the expiration of the 10 business days, that it is staying the certification because there exist novel or complex issues that require additional time to analyze, the certification does not include an adequate explanation of the rule or rule amendment by the submitting registered entity, or the rule or rule amendment is potentially inconsistent with the Act or the Commission’s regulations thereunder.
Extended Submission Review Period: The Commission may notify a registered entity that it is staying a certified rule or rule amendment for as many as 90 calendar days from the date of the notification. A rule or rule amendment subject to a stay becomes effective, pursuant to the certification of the registered entity, at the expiration of the additional 90-day period unless the Commission withdraws the stay prior to that time or the Commission notifies the registered entity during the additional 90-day period that it objects to the proposed certification on the grounds that it is inconsistent with the Act or the Commission’s regulations thereunder.
For a rule submission under extended review, the Commission will provide not less than a 30-day public comment period within the 90-day period in which the stay is in effect. Details regarding such public comment period will be posted on the Commission’s website.
Rules and Amendments Not Required to be Certified
Registered entities may place certain rules or rule amendments into effect without a self-certification. A registered entity need only provide a weekly notification of rule changes involving:
- non-substantive revisions (e.g., renumbering);
- delivery standards set by third parties;
- routine changes in index products (e.g., composition or computation) made by independent third parties;
- changes to option contract terms relating to strike prices (e.g., strike price intervals);
- fees not associated with incentive programs that are $1.00 or more and are established by an independent third party;
- survey lists;
- approved brands;
- delivery facilities and delivery service providers;
- trading months; or
- minimum tick size.
Certain other rules may be implemented without either self-certification or notice to the CFTC, provided only that the registered entity maintain documentation of all rule changes. Rules subject to this procedure include those that govern:
- transfer of ownership or membership;
- administrative procedures (e.g., organization of boards and committees);
- administration (e.g., direction of employees, declaration of holidays);
- standards of decorum;
- fees not associated with an incentive program that are under $1.00 or relate to certain administrative matters;
- routine changes in securities indexes (e.g., composition or computation) made by independent third parties;
- certain changes to option contract rules regarding strike prices; or
- trading months.
Rules and Rule Amendments That Must Obtain Prior CFTC Approval
The only rules and rule amendments not eligible for self-certification are those that materially change a term or condition of a contract for future delivery of an enumerated agricultural commodity as listed in Section 1a(9) of the Act, or an option on such a contract or commodity, in a delivery month having open interest. Under CFTC Regulation 40.4, such rules or rule amendments must be submitted to the CFTC for prior approval under the procedures of CFTC Regulation 40.5. A registered entity may elect to submit any such new rule or rule amendment to the CFTC under the ten-day review procedure of CFTC Regulation 40.4 for a determination as to whether such rule must be submitted for prior approval.
However, CFTC Regulation 40.4 specifies that certain categories of new rules and rule amendments affecting a term or condition of a futures contract on an enumerated agricultural commodity are deemed not to be material and thus do not require prior CFTC approval. DCMs, therefore, may implement any new rule or rule change falling within these categories pursuant to self-certification provisions or notification procedures, as applicable.
The categories of new rules and rule amendments deemed to be not material for this purpose are:
- changes that are enumerated in CFTC Regulation 40.6(d)(2);
- changes that are enumerated in CFTC Regulation 40.6(d)(3)(ii);
- changes in no cancellation ranges and trading hours; or
- changes required to comply with a binding court order or a CFTC or other federal regulatory authority regulation or order.
Rules and Rule Amendments Voluntarily Submitted for CFTC Approval
Registered entities may request that the Commission approve new rules or rule amendments by submitting such rules under CFTC Regulation 40.5. The Commission must approve a new rule or rule amendment of a registered entity unless the Commission finds that the new rule or rule amendment is inconsistent with the Act or the Commission’s regulations thereunder.