Provisions Common to Registered Entities

<RULE> COMMODITY FUTURES TRADING COMMISSION <CFR>17 CFR Parts 37, 38, and 40</CFR> <RIN>RIN 3038-AF28</RIN> <SUBJECT>Provisions Common to Registered Entities</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Commodity Futures Trading Commission. <HD SOURCE="HED">ACTION:</HD> Final rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> The Commodity Futures Trading Commission (“Commission”) is adopting amendments to the Commission's regulations under the Commodity Exchange Act (“CEA” or “Act”) that govern how registered entities submit self-certifications, and requests for approval, of their rules, rule amendments, and new products for trading and clearing, as well as the Commission's review and processing of such submissions. The amendments are intended to clarify, simplify and enhance the utility of those regulations for registered entities, market participants and the Commission. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> The effective date for this final rule is December 9, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Rachel Kaplan, Senior Special Counsel, <E T="03">rkaplan@cftc.gov,</E> 202-418-6233, Steven Benton, Industry Economist, <E T="03">sbenton@cftc.gov,</E> 202-418-5617, and Nancy Markowitz, Deputy Director, <E T="03">nmarkowitz@cftc.gov,</E> 202-418-5453, Division of Market Oversight, and Eileen Chotiner, Senior Compliance Analyst, <E T="03">echotiner@cftc.gov,</E> 202-418-5467, Division of Clearing and Risk, Commodity Futures Trading Commission, Three Lafayette Centre, 1151 21st Street NW, Washington, DC 20581. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Table of Contents</HD> <EXTRACT> <FP SOURCE="FP-2">I. Background</FP> <FP SOURCE="FP-2">II. Amendments</FP> <FP SOURCE="FP-2">III. Related Matters</FP> <FP SOURCE="FP1-2">A. Regulatory Flexibility Act</FP> <FP SOURCE="FP1-2">B. Paperwork Reduction Act</FP> <FP SOURCE="FP1-2">C. Cost Benefit Considerations</FP> <FP SOURCE="FP1-2">D. Antitrust Considerations</FP> </EXTRACT> <HD SOURCE="HD1">I. Background</HD> Part 40 of the Commission's regulations  <SU>1</SU> <FTREF/> implements section 5c(c) of the CEA and sets forth provisions that are common to registered entities, including designated contract markets (“DCMs”), derivatives clearing organizations (“DCOs”), swap execution facilities (“SEFs”) and swap data repositories (“SDRs”). <SU>2</SU> <FTREF/> Part 40 establishes requirements and procedures for registered entities to submit their rules and products to the Commission prior to implementing rules, listing products for trading, or accepting products for clearing. Part 40 generally provides two means for registered entities to submit products, rules, and rule amendments (which include product amendments) to the Commission. Typically, a registered entity elects to use the self-certification process through which the registered entity certifies that the product, rule or rule amendment complies with the CEA and the Commission regulations. <SU>3</SU> <FTREF/> Alternatively, a registered entity may seek Commission approval of the product, rule or rule amendment. <SU>4</SU> <FTREF/> <FTNT> <SU>1</SU>  Commission regulations referred to in this release are found at 17 CFR chapter I (2024), and are accessible on the Commission's website at <E T="03">https://www.cftc.gov/LawRegulation/CommodityExchangeAct/index.htm.</E> </FTNT> <FTNT> <SU>2</SU>  Section 1a(40) of the CEA defines the term registered entity to include DCMs, DCOs, SEFs and SDRs. </FTNT> <FTNT> <SU>3</SU>   <E T="03">See</E> CEA section 5c(c)(1), §§ 40.2 and 40.6. <E T="03">But see, e.g.,</E> § 40.4 (requiring that a DCM submit for Commission approval any rule that would materially change a term or condition of a contract for future delivery in an agricultural commodity enumerated in CEA Section 1a(9) or of an option on such contract or commodity). </FTNT> <FTNT> <SU>4</SU>   <E T="03">See</E> CEA section 5c(c)(4), §§ 40.3 and 40.5. </FTNT> The part 40 regulations also set forth the Commission's procedures for review (including approval or non-approval) of product and rule submissions. The part 40 regulations set forth certain information that must be made publicly available in connection with an application to become designated as a DCM, or registered as a SEF, DCO or SDR and when registered entities file new products, new rules and rule amendments. <SU>5</SU> <FTREF/> Additionally, the regulations include special certification provisions for certain rules submitted by systemically important DCOs (“SIDCOs”). <SU>6</SU> <FTREF/> <FTNT> <SU>5</SU>   <E T="03">See</E> § 40.8. Regulation § 40.8 is not the subject of this rulemaking. Regulations 40.11 and 40.12 (which relate to the Commission's review of certain event contracts and the staying of certification and tolling of review period pending jurisdictional determination, respectively) are also not the subject of this rulemaking. A private citizen suggested changes to §§ 40.11 and 40.12. <E T="03">See</E> Ravnitzky at 2-3. The Commission cannot consider herein changes to §§ 40.11 and 40.12 as §§ 40.11 and 40.12 are not the subject of this rulemaking and no changes were proposed to §§ 40.11 or 40.12 in the NPRM for notice and public comment. </FTNT> <FTNT> <SU>6</SU>   <E T="03">See</E> § 40.10. </FTNT> With two exceptions, the Commission last amended the part 40 regulations in 2011, <SU>7</SU> <FTREF/> in connection with implementing various amendments made to the CEA by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). In September 2023, based on the Commission's experience applying the part 40 regulations over the ensuing years, the Commission issued a notice of proposed rulemaking (the “NPRM”) in which it proposed amendments to the part 40 regulations. <SU>8</SU> <FTREF/> The Commission proposed the amendments to the part 40 regulations in the NPRM to clarify, simplify and enhance the utility of the part 40 regulations for registered entities, market participants and the Commission. <SU>9</SU> <FTREF/> <FTNT> <SU>7</SU>  Provisions Common to Registered Entities, 76 FR 44776 (July 27, 2011) (the “2011 Final Rule”). In 2021, the Commission made targeted, conforming amendments to § 40.1(j)(1)(vii) and (j)(2)(vii) (the portion of the definition of “terms and conditions” that relates to position limits) to conform this text to reflect the position limits amendments adopted by the Commission at that time. <E T="03">See</E> Position Limits for Derivatives, 86 FR 3236 (January 14, 2021). Additionally, in 2015, the Commission removed from § 40.8 and appendix D to part 40 all references to electronic trading facilities on which significant price discovery contracts are traded or executed to reflect the fact that the Dodd-Frank Act eliminated these facilities from the CEA. <E T="03">See</E> Repeal of the Exempt Commercial Market and Exempt Board of Trade Exemptions, 80 FR 59575 (October 2, 2015). </FTNT> <FTNT> <SU>8</SU>  Provisions Common to Registered Entities, 88 FR 61432 (September 6, 2023). </FTNT> <FTNT> <SU>9</SU>  As discussed below in note 19, the Commission is also making two conforming, non-substantive changes to update the citations referencing the § 40.1 definition of emergency mentioned in appendix B to part 37 and appendix B to part 38. </FTNT> The comment period for the NPRM ended on November 6, 2023. <SU>10</SU> <FTREF/> In response to the NPRM, the Commission received nine comment letters that expressed a wide range of views on the proposed revisions to part 40. The letters collectively represented eight DCMs;  and one venture capital firm. <SU>18</SU> <FTREF/> <FTNT> <SU>10</SU>  The comment file for responses to the NPRM is available at <E T="03">https://comments.cftc.gov/PublicComments/CommentList.aspx?id=7430.</E> </FTNT> <FTNT> <SU>11</SU>  Cboe Global Markets, Inc. (“Cboe”) commented on behalf of its two DCMs—Cboe Futures Exchange, LLC and Cboe Digital Exchange, LLC. CME Group Inc. (“CME Group”) commented on behalf of its four DCMs—Chicago Mercantile Exchange Inc. (“CME”), Board of Trade of the City of Chicago, Inc., New York Mercantile Exchange, Inc. and Commodity Exchange, Inc. (collectively, the “CME Group Exchanges”). The Intercontinental Exchange Inc. (“ICE”) commented on behalf of its DCM—ICE Futures U.S. LMX Labs, LLC, which does business as Coinbase Derivatives (“Coinbase”) commented as a DCM. </FTNT> <FTNT> <SU>12</SU>  Cboe commented on behalf of its SEF—Cboe SEF, LLC. ICE commented on behalf of its SEF—Ice Swap Trade. </FTNT> <FTNT> <SU>13</SU>  ICE commented on behalf of its SDR—Ice Trade Vault. </FTNT> <FTNT> <SU>14</SU>  Cboe commented on behalf of its DCO—Cboe Clear Digital, LLC. CME Group commented on behalf of CME in its capacity as a DCO (also known as “CME Clearing”). Eurex Clearing AG (“Eurex”) commented as a DCO. ICE commented on behalf of its four DCOs—ICE Clear Credit, ICE Clear U.S., ICE Clear Europe, and ICE NGX. </FTNT> <FTNT> <SU>15</SU>  Better Markets. </FTNT> <FTNT> <SU>16</SU>  The Futures Industry Association (“FIA”) and the International Swap Derivatives Association (“ISDA”) submitted a joint letter. </FTNT> <FTNT> <SU>17</SU>  Mr. Michael Ravnitzky. </FTNT> <FTNT> <SU>18</SU>  Andreessen Horowitz (“a16z”). </FTNT> The Commission is making revisions and additions to §§ 40.1 through 40.7, 40.10 and appendices D and E to part 40 to clarify, simplify and enhance the utility of the part 40 regulations for registered entities, market participants and the Commission. This release will address the comments received on each of the relevant regulations and appendices below. <HD SOURCE="HD1">II. Amendments</HD> <HD SOURCE="H ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 295k characters. 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