Code of Federal Regulations: Containing a Codification of Documents of ...

[41 FR 3194, Jan. 21, 1976, as amended at 46 FR 63035, Dec. 30, 1981; 47 FR 57008, Dec. 22, 1982]

MISCELLANEOUS

§ 1.40 Crop, market information letters, reports; copies required.

Each futures commission merchant and each member of a contract market shall, upon request, furnish or cause to be furnished to the Commission a true copy of any letter, circular, telegram, or report published or given general circulation by such futures commission merchant or member which concerns crop or market information or conditions that affect or tend to affect the price of any commodity, and the true source of or authority for the information contained therein.

(Approved by the Office of Management and Budget under control number 30380015)

[41 FR 3194, Jan. 21, 1976, as amended at 46 FR 63035, Dec. 30, 1981]

§ 1.41 Contract market rules; submission of rules to the Commission; exemption of certain rules.

(a) Definitions. For purposes of this section:

(1) The term "rule" of a contract market means any constitutional provision, article of incorporation, bylaw, rule, regulation, resolution, interpretation, stated policy, or instrument corresponding thereto, in whatever form adopted, and any amendment or addition thereto or repeal thereof, made or issued by a contract market, or by the governing board thereof or any committee thereof.

(2) The words "terms and conditions" mean any definition of the trading unit or the specific commodity underlying a contract for the future delivery of a commodity or commodity option contract, specification of settlement or delivery standards and procedures, and establishment of buyers' and sellers' rights and obligations under the contract. Terms and conditions shall be deemed to include provisions relating to the following:

(i) Quality or quantity standards for a commodity and any applicable exemptions or discounts;

(ii) Trading hours, trading months and the listing of contracts;

(iii) Minimum and maximum price limits and the establishment of settlement prices;

(iv) Position limits and position reporting requirements;

(v) Delivery points and locational price differentials;

(vi) Delivery standards and procedures, including alternatives to delivery and applicable penalties or sanctions for failure to perform;

(vii) Settlement of the contract; and (viii) Payment or collection of commodity option premiums or margins.

(3) The term "contract market" includes a clearing organization that clears trades for the contract market. (4) The term "emergency" means:

(i) Any occurrence or circumstance specifically defined as an “emergency” by the rules of a contract market which have been submitted to the Commission pursuant to section 5a(12) of the Act; and

(ii) Any other occurrence or circumstance which, in the opinion of the governing board of the contract market, requires immediate action and threatens or may threaten such things as the fair and orderly trading in, or the liquidation of or delivery pursuant to, any contract for the future delivery of a commodity or any commodity option on such contract market. Occurrences and circumstances which a governing board of a contract market may deem emergencies include, but are not limited to:

(A) Any manipulative activity or attempted manipulative activity;

(B) Any actual, attempted, or threatened corner, squeeze, congestion, or undue concentration of positions;

(C) Any circumstances which may materially affect the performance of contracts or commodity options traded on the contract market;

(D) Any action taken by the United States or any foreign government or any state or local governmental body, any other contract market, board of trade, or any other exchange or trade association (foreign or domestic), which may have a direct impact on trading on the contract market;

(E) Any circumstance which may have a severe, adverse effect upon the

physical functions of a contract market including, for example, fire or other casualty, bomb threats, substantial inclement weather, power failures, communications breakdowns, and transportation breakdowns;

(F) The bankruptcy or insolvency of any member or member firm of the contract market or the imposition of any injunction or other restraint by any government agency, court or arbitrator upon a member of the contract market which may affect the ability of that member to perform on its contracts;

(G) Any circumstance in which it appears that a member or any other person has failed to perform contracts of sale for future delivery or commodity option contracts, is insolvent, or is in such financial or operational condition or is conducting business in such a manner that such person cannot be permitted to continue in business without jeopardizing the safety of customer funds, members of the contract market, or the contract market; and

(H) Any other unusual, unforeseeable and adverse circumstance with respect to which it is impracticable for the contract market to submit, in a timely fashion, a rule to the Commission for prior review under section 5a(12) of the Act.

(5) The term "governing board" of a contract market means the board of directors, the board of governors, the board of managers or any other similar body of the contract market or any committee duly authorized, pursuant to a rule of the contract market that has been approved by the Commission or has become effective pursuant to section 5a(12) of the Act to take action for and on behalf of the contract market with respect to an emergency.

(6) The term "two-thirds vote" of a governing board of a contract market means the affirmative vote of two or

of the members is physically in attendance as permitted by applicable state corporation law.

(7) The term "temporary emergency rule" means a rule adopted by a "twothirds vote" of the governing board of a contract market to meet an emergenсу.

(b) Submission of rules for prior Commission approval. Except as provided herein and in paragraph (f) of this section, all proposed contract market rules that relate to terms and conditions and any other rules that the Commission has determined pursuant to paragraph (c) of this section require prior approval must, and any other rule may, be submitted to the Commission for approval pursuant to section 5a(12) of the Act prior to their proposed effective dates. Three copies of each such rule shall be furnished to the Commission at its Washington, D.C. headquarters, and one copy shall be furnished to the regional office of the Commission having local jurisdiction over the contract market. Each such submission shall, in the following order:

(1) Label the submission as being submitted pursuant to § 1.41(b);

(2) Set forth the text of the proposed rule (in the case of any change in, addition to, or deletion from any current rule of the contract market, the current rule shall be fully set forth, with brackets used to indicate words to be deleted and underscoring used to indicate words to be added);

(3) Describe the proposed effective date of the proposed rule and any action taken or anticipated to be taken to adopt the proposed rule by the contract market, or by the governing board thereof or any committee thereof, and cite the rules of the contract market which authorize the adoption of the proposed rule;

(4) Explain the operation, purpose, and effect of the proposed rule, including, as applicable, a description of the anticipated benefits to market participants or others, any potential anticompetitive effects on market participants or others, how the rule fits into the contract market's scheme of selfregulation, information which demonstrates that the proposed rule is not inconsistent with the policies and pur

poses of the Act, and any other information which may be beneficial to the Commission in analyzing the proposed rule. If a proposed rule affects, directly or indirectly, the application of any other rule of the contract market, set forth the pertinent text of any such rule and describe the anticipated effect; and

(5) Note and briefly describe any substantive opposing views expressed by the members of the contract market or others with respect to the proposed rule which were not incorporated into the proposed rule prior to its submission to the Commission.

The Commission may remit to the contract market, with an appropriate explanation where practicable, and not accept for review any rule submission that does not comply with the form and content requirements of paragraphs (b) (1)–(5) of this section.

(c) Rules that do not relate to terms and conditions. (1) Except as provided in paragraphs (d) and (f) of this section (exempt or temporary emergency rules), three copies of any rule which does not relate to terms and conditions or which a contract market proposes to place into effect without submission to the Commission for approval under section 5a(12) of the Act and paragraph (b) of this section shall be furnished to the Commission at its Washington, D.C. headquarters at least ten days prior to its proposed effective date. One copy shall also be transmitted by the contract market to the regional office of the Commission having local jurisdiction over the contract market. Each such submission shall be labeled as being submitted pursuant to § 1.41(c) and include the information required by paragraphs (b) (2)–(5) of this section.

(2) The Commission may remit to the contract market, with an appropriate explanation where practicable, and not accept pursuant to this paragraph (c) any submission that does not comply with the form and content requirements of this paragraph. Rules submitted pursuant to this paragraph (c) otherwise may become effective ten days after receipt (or at such earlier time as may be determined by the Commission) unless the Commission notifies the contract market in writing

of its determination to review such rules for prior approval under section 5a(12) of the Act and paragraph (b) of this section.

(d) Rules that are exempt from the requirements of section 5a(12) of the Act. (1) Except as otherwise provided in this paragraph (d), contract market rules that do not relate to terms and conditions are exempt from the requirements of section 5a(12) of the Act and this section where such rules address:

(i) Standards of decorum or attire or similar provisions relating to admission to the floor, badges, visitors, but not the establishment of penalties for violations of such rules;

(ii) Requirements relating to gratuity and similar funds, but not guaranty, reserves, or similar funds;

(iii) Correction of typographical errors, renumbering, or other such non-substantive revisions of rules;

(iv) Procedures and forms for the purchase, sale or transfer of membership, but not including qualifications for membership, any right or obligation of membership, or dues or assessments;

(v) The organization and administrative procedures of a contract market's governing bodies such as a Board of Directors, Officers and Committees, but not voting requirements and procedures or requirements or procedures relating to conflicts of interest;

(vi) The declaration of holidays; (vii) Facilities housing the contract market or physical changes in the trading floor or trading area; or

(viii) The routine, daily administration, direction and control of contract market employees.

(2) Rules that are exempt from the requirements of section 5a(12) of the Act in accordance with the provisions of this paragraph (d) shall nonetheless be submitted to the Commission pursuant to the provisions of section 5a(1) of the Act. Each such submission shall be labeled as being submitted pursuant to section 5a(1) of the Act and § 1.41(d). One copy of each such submission shall be furnished to the Commission at its Washington, D.C. headquarters and one copy shall also be transmitted by the contract market to the regional office of the Commission

physical functions of a contract market including, for example, fire or other casualty, bomb threats, substantial inclement weather, power failures, communications breakdowns, and transportation breakdowns;

(F) The bankruptcy or insolvency of any member or member firm of the contract market or the imposition of any injunction or other restraint by any government agency, court or arbitrator upon a member of the contract market which may affect the ability of that member to perform on its contracts;

(G) Any circumstance in which it appears that a member or any other person has failed to perform contracts of sale for future delivery or commodity option contracts, is insolvent, or is in such financial or operational condition or is conducting business in such a manner that such person cannot be permitted to continue in business without jeopardizing the safety of customer funds, members of the contract market, or the contract market; and

(H) Any other unusual, unforeseeable and adverse circumstance with respect to which it is impracticable for the contract market to submit, in a timely fashion, a rule to the Commission for prior review under section 5a(12) of the Act.

(5) The term "governing board" of a contract market means the board of directors, the board of governors, the board of managers or any other similar body of the contract market or any committee duly authorized, pursuant to a rule of the contract market that has been approved by the Commission or has become effective pursuant to section 5a(12) of the Act to take action for and on behalf of the contract market with respect to an emergency.

(6) The term "two-thirds vote" of a governing board of a contract market means the affirmative vote of two or more persons constituting not less than two-thirds of the members of such governing board either (i) physically present and voting at a meeting of such governing board at which a quorum of at least one-third of the members is physically in attendance or (ii) voting in any manner other than at a meeting of such board at which a quorum of at least one-third

of the members is physically in attendance as permitted by applicable state corporation law.

(7) The term "temporary emergency rule" means a rule adopted by a "twothirds vote" of the governing board of a contract market to meet an emergency.

(b) Submission of rules for prior Commission approval. Except as provided herein and in paragraph (f) of this section, all proposed contract market rules that relate to terms and conditions and any other rules that the Commission has determined pursuant to paragraph (c) of this section require prior approval must, and any other rule may, be submitted to the Commission for approval pursuant to section 5a(12) of the Act prior to their proposed effective dates. Three copies of each such rule shall be furnished to the Commission at its Washington, D.C. headquarters, and one copy shall be furnished to the regional office of the Commission having local jurisdiction over the contract market. Each such submission shall, in the following order:

(1) Label the submission as being submitted pursuant to § 1.41(b);

(2) Set forth the text of the proposed rule (in the case of any change in, addition to, or deletion from any current rule of the contract market, the current rule shall be fully set forth, with brackets used to indicate words to be deleted and underscoring used to indicate words to be added);

(3) Describe the proposed effective date of the proposed rule and any action taken or anticipated to be taken to adopt the proposed rule by the contract market, or by the governing board thereof or any committee thereof, and cite the rules of the contract market which authorize the adoption of the proposed rule;

(4) Explain the operation, purpose, and effect of the proposed rule, including, as applicable, a description of the anticipated benefits to market participants or others, any potential anticompetitive effects on market participants or others, how the rule fits into the contract market's scheme of selfregulation, information which demonstrates that the proposed rule is not inconsistent with the policies and pur

i poses of the Act, and any other information which may be beneficial to the Commission in analyzing the proposed rule. If a proposed rule affects, directly or indirectly, the application of any other rule of the contract market, set forth the pertinent text of any such rule and describe the anticipated effect; and

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(5) Note and briefly describe any substantive opposing views expressed by the members of the contract market or others with respect to the proposed rule which were not incorporated into the proposed rule prior to its submission to the Commission.

The Commission may remit to the contract market, with an appropriate explanation where practicable, and not accept for review any rule submission that does not comply with the form and content requirements of paragraphs (b) (1)–(5) of this section.

(c) Rules that do not relate to terms and conditions. (1) Except as provided in paragraphs (d) and (f) of this section (exempt or temporary emergency rules), three copies of any rule which does not relate to terms and conditions or which a contract market proposes to place into effect without submission to the Commission for approval under section 5a(12) of the Act and paragraph (b) of this section shall be furnished to the Commission at its Washington, D.C. headquarters at least ten days prior to its proposed effective date. One copy shall also be transmitted by the contract market to the regional office of the Commission having local jurisdiction over the contract market. Each such submission shall be labeled as being submitted pursuant to § 1.41(c) and include the information required by paragraphs (b) (2)-(5) of this section.