thefederalregister.com

Daily Rules, Proposed Rules, and Notices of the Federal Government

COMMODITY FUTURES TRADING COMMISSION

17 CFR Parts 1, 5, 7, 8, 15, 18, 21, 36, 41, 140, 145, 155, and 166

RIN Number 3038-AD53

Adaptation of Regulations to Incorporate Swaps

AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rulemaking.
SUMMARY: The Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act" or "DFA") established a comprehensive new statutory framework for swaps and security-based swaps. The Dodd-Frank Act repeals some sections of the Commodity Exchange Act ("CEA" or "Act"), amends others, and adds a number of new provisions. The DFA also requires the Commodity Futures Trading Commission ("CFTC" or "Commission") to promulgate a number of rules to implement the new framework. The Commission has proposed numerous rules to satisfy its obligations under the DFA. Because the Dodd-Frank Act makes so many changes to the existing statutory and regulatory frameworks, the proposed rules would make a number of conforming changes to the CFTC's regulations to integrate them more fully with the new statutory and regulatory framework ("Proposal").
DATES: Comments must be received on or before August 8, 2011.
ADDRESSES: *The agency's Web site, at: http://comments.cftc.gov.Follow the instructions for submitting comments through the Web site.

*Mail:David A. Stawick, 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.

*Federal eRulemaking Portal: http://www.regulations.gov.Follow the instructions for submitting comments.

Please submit your comments using only one method.

All comments must be submitted in English, or if not, accompanied by an English translation. Comments will be posted as received to http://www.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, a petition for confidential treatment of the exempt information may be submitted according to the procedures established in SS 145.9 of the Commission's regulations.1

117 CFR 145.9. Commission regulations referred to herein are found on the Commission's website.

The Commission reserves the right, but shall have no obligation, to review, pre-screen, filter, redact, refuse or remove any or all of your submission fromhttp://www.cftc.govthat 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 the Freedom of Information Act.

FOR FURTHER INFORMATION CONTACT: Peter A. Kals, Attorney-Advisor, 202-418-5466,pkals@cftc.gov,or Elizabeth Miller, Attorney-Advisor, 202-418-5450,emiller@cftc.gov,Division of Clearing and Intermediary Oversight; David E. Aron, Counsel, at 202-418-6621,daron@cftc.gov,Office of General Counsel; Nadia Zakir, Attorney-Advisor, 202-418-5720,nzakir@cftc.gov,Division of Market Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1151 21st Street, NW., Washington, DC 20581.
SUPPLEMENTARY INFORMATION: Table of Contents I. Background II. Proposed Regulations A. Part 1 1. Regulation 1.3: Definitions a. General Changes b. Amended and New Definitions c. Regulation 1.3(ll): Physical d. Regulation 1.3(yy): Commodity Interest 2. Regulation 1.4: Use of Electronic Signatures 3. Regulation 1.31: Books and Records; Keeping and Inspection 4. Regulation 1.33: Monthly and Confirmation Statements 5. Regulation 1.35: Records of Cash Commodity, Futures and Option Transactions 6. Regulation 1.37: Customer's or Option Customer's Name, Address, and Occupation Recorded; Record of Guarantor or Controller of Account 7. Regulation 1.39: Simultaneous Buying and Selling Orders of Different Principals; Execution of, for and Between Principals 8. Regulation 1.40: Crop, Market Information Letters, Reports; Copies Required 9. Regulation 1.59: Activities of Self-Regulatory Employees, Governing Board Members, Committee Members and Consultants 10. Regulation 1.63: Service on Self-Regulatory Organization Governing Boards or Committees by Persons With Disciplinary Histories 11. Regulation 1.67: Notification of Final Disciplinary Action Involving Financial Harm to a Customer 12. Regulation 1.68: Customer Election Not To Have Funds, Carried by a Futures Commission Merchant for Trading on a Registered Derivatives Trading Execution Facility, Separately Accounted for and Segregated 13. Regulations 1.44, 1.53, and 1.62—Deletion of Regulations Inapplicable to Designated Contract Markets 14. Appendix C to Part 1: Bunched Orders and Account Identification B. Part 7 C. Part 8 D. Parts 15, 18, 21, and 36 E. Parts 41, 140 and 145 F. Part 155 G. Other General Changes to CFTC Regulations 1. Removal of References to DTEFs 2. Other Conforming Changes III. Request for Comment IV. Administrative Compliance A. Paperwork Reduction Act B. Regulatory Flexibility Act C. Cost-Benefit Analysis I. Background

On July 21, 2010, President Obama signed the Dodd-Frank Act into law.2 Title VII of the Dodd-Frank Act3 (“Title VII”) amended the CEA4 to establish a comprehensive new regulatory framework for swaps and security-based swaps. The legislation was enacted, among other reasons, to reduce risk, increase transparency, and promote market integrity within the financial system, including by: (1) Providing for the registration and comprehensive regulation of swap dealers (“SDs”), security-based swap dealers, major swap participants (“MSPs”), and major security-based swap participants; (2) imposing clearing and trade execution requirements on swaps and security-based swaps, subject to certain exceptions; (3) creating rigorous recordkeeping and real-time reporting regimes; and (4) enhancing the rulemaking and enforcement authorities of the Commissions with respect to, among others, all registered entities and intermediaries subject to the Commission's oversight.

2See Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010). The text of the Dodd-Frank Act is available athttp://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.

3Pursuant to section 701 of the Dodd-Frank Act, Title VII may be cited as the “Wall Street Transparency and Accountability Act of 2010.”

47 U.S.C. 1et seq.(2006).

Title VII added to the CEA two new categories of Commission registrant (i.e.,SDs5 and MSPs6 ) and provided a definition for associated persons of the foregoing.7 Title VII also added to the CEA compliance obligations for SDs and MSPs and revised the definitional scope of each existing intermediary registrant category,8 with the exception of retail foreign exchange dealers (“RFEDs”), to include intermediation activity involving swaps.

5DFA section 721(a)(21), adding CEA section 1a(49), codified at 7 U.S.C. 1a(49).

6DFA section 721(a)(16), adding CEA section 1a(33), codified at 7 U.S.C. 1a(33).

7DFA section 721(a)(15), adding CEA section 1a(4), codified at 7 U.S.C. 1a(4).

8Existing intermediary registrant categories include futures commission merchants (“FCMs”), commodity pool operators (“CPOs”), commodity trading advisors (“CTAs”), introducing brokers (“IBs”), floor brokers (“FBs”) and floor traders (“FTs”).

To apply its regulatory regime to the swap activity of intermediaries, the Commission must make a number of changes to its regulations to conform them to the Dodd-Frank Act. These changes primarily affect part 1 of the Commission's rules, but also affect parts 5, 7, 8, 15, 18, 21, 36, 41, 140, 145, 155, and 166. To the extent the DFA required the Commission to promulgate rules to address certain specific DFA sections, the Commission has proposed or is in the process of proposing such rules separately.

Today's Proposal contains amendments of three different types: ministerial, accommodating, and substantive. Many of the proposed amendments are purely ministerial—for instance, several proposed changes would update definitions to conform them to the CEA as amended by the Dodd-Frank Act; add to the Commission's regulations new terms created by the Dodd-Frank Act; remove all regulations and references pertaining to derivatives transaction execution facilities (“DTEFs”), a category of exchange which was eliminated by the DFA; correct various statutory cross-references to the CEA in the regulations; and remove regulations in whole or in part that were rendered moot by the Commodity Futures Modernization Act of 2000 (“CFMA”).

The proposed accommodating amendments are essential to the implementation of the DFA in that they propose to add swaps, swap markets, and swap entities to numerous definitions and regulations, but are more than ministerial because they require some judgment in drafting. Accommodating amendments would include, among other things, amending numerous definitions in regulation 1.3 to reference or include swaps; creating new definitions as necessary in regulation 1.3; amending recordkeeping requirements to include information on swap transactions; adding references to swaps, swap execution facilities (“SEFs”) and derivatives clearing organizations (“DCOs”) to various part 1 regulations; and amending parts 15, 18, 21, and 36 to implement the DFA's grandfathering and phase-out of exempt boards of trade and exempt commercial markets.

The remaining proposed substantive amendments are changes that would align requirements or procedures across futures and swap markets. They consist of proposed amendments to regulations 1.31 and 1.35 that would harmonize current part 1 recordkeeping requirements with those applicable to SDs and MSPs under proposed part 23 regulations and harmonize certain procedures applicable to swaps with those applicable to futures.

To aid the public in understanding the numerous changes to different parts of the CFTC's regulations explained in the Proposal, the Commission will also publish on its Web site a “redline” of the affected regulations which will clearly reflect the proposed amendments and deletions.9

9Furthermore, while there are many outstanding Notices of Proposed Rulemaking (“NPRMs”) published by the CFTC, today's Proposal does not reflect those separately proposed amendments, most of which are not yet final. For example, the Proposal amends regulation 1.3(z) (definition of “bona fide hedging transactions and positions”) to remove certain cross-references, but the Proposal does not also show other amendments to that definition proposed earlier this year in a separate release.SeePosition Limits for Derivatives, 76 FR 4752, Jan. 26, 2011. All NPRMs are available on the Commission's Web site for the public to review and provide comment. For a list of all rulemaking proposals related to the Dodd-Frank Act, please visithttp://www.cftc.gov/LawRegulation/DoddFrankAct/Dodd-FrankProposedRules/index.htm.

II. Proposed Regulations A. Part 1 1. Regulation 1.3: Definitions a. General Changes

The Commission proposes to revise regulation 1.3 so that its definitions, which are used throughout the regulations, incorporate relevant provisions of the DFA. For instance, proposed regulation 1.3 updates current definitions to conform them to the Dodd-Frank Act's amendments of the same terms in the CEA's definitions section,10 and also includes definitions specifically added by the Dodd-Frank Act to the CEA. This is the case for many of the definitions in proposed regulation 1.3, including “associated person of a swap dealer or major swap participant,” “commodity pool operator,” “commodity trading advisor,” “futures commission merchant,” “floor broker,” “floor trader,” “swap data repository,” and “swap execution facility.”11 Additionally, the Commission is proposing to revise the definition of “self-regulatory organization” (“SRO”) to include SEFs, a new category of regulated markets under the DFA, and to make clear that DCOs are SROs.12

10CEA section 1a, 7 U.S.C. 1a.

11The DFA amended the definition of “commodity pool operator” in CEA section 1a to add swaps to those contracts for which a CPO solicits investment. DFA section 721(a)(5). In addition to amending the definition of “commodity pool operator” in proposed regulation 1.3 to accommodate that revision, the Commission proposes to add equivalent language to the definition of “commodity trading advisor” in regulation 1.3.

12Currently, some individual rules specifically include DCO in the definition of SRO, but they are not included in the general definition of SRO in regulation 1.3.

b. Amended and New Definitions

The Commission also proposes (1) to simplify or clarify certain existing regulation 1.3 definitions, and (2) to add several new definitions to regulation 1.3, pursuant to amendments to the CEA by the Dodd-Frank Act, existing regulations, and other amendments in the Proposal.13

13The Commission realizes that several earlier published releases have also proposed to add definitions to regulation 1.3, and that these amendments may overlap,e.g.,more than one definition was proposed for regulation 1.3(zz).SeeAgricultural Commodity Definition, 75 FR 65586, Oct. 26, 2010; Requirements for Derivatives Clearing Organizations, Designated Contract Markets, and Swap Execution Facilities Regarding the Mitigation of Conflicts of Interest, 75 FR 63732, Oct. 18, 2010. However, as each rule proposal is published as a final rulemaking, the Commission will ensure that the lettering of paragraphs within regulation 1.3 for newly added definitions is correct. Therefore, the Commission requests that the public review the new definitions proposed today for their content only and ignore any inconsistencies in lettering between the Proposal and prior NPRMs.

The term “contract market,” for instance, is not defined under the CEA, and is currently defined under regulation 1.3(h) as “a board of trade designated by the Commission as a contract market under the Commodity Exchange Act or in accordance with the provisions of part 33 of this chapter.” In certain provisions throughout the Commission's regulations, contract markets are also referred to as “designated contract markets.” Because both terms are used interchangeably within the regulations, the Commission is proposing to revise the definition to mean contract market and designated contract market (“DCM”). Proposedregulation 1.3(h) will contain one definition identified by the title “Contract market; designated contract market.” The current definition also erroneously cross-references part 33 as the DCM provisions of the Commission's regulations. The proposed definition would change that cross-reference to part 38 of the Commission's regulations.

The Commission proposes a similar clarification regarding the definition of “customer.” The Proposal simplifies the definition of “customer” by combining two existing definitions, “Customer; commodity customer” in regulation 1.3(k) and “Option customer” in regulation 1.3(jj), and adding swaps.14 Therefore, the “customer” definition proposed herein would include swap customers, commodity customers, and option customers, and refer to them all with the single term, “customer.” Furthermore, the Commission proposes to revise all references to “commodity customer” and “option customer” throughout the Commission's regulations, but particularly in part 1, to simply refer to “customer.”15 These revisions have retained references to requirements specific to certain contracts.16

14The “General Regulations and Derivatives Clearing Organizations”Federal Registerrelease proposed to amend regulation 1.3(k) by adding “swap customer,” but there is nothing unique about that term requiring it to be separately defined. General Regulations and Derivatives Clearing Organizations, 75 FR 77576, Dec. 13, 2010.

15The Commission proposes to remove references to commodity customers and option customers, replacing them with references to simply “customer,” in the following regulations: 17 CFR 1.3, 1.20-1.24, 1.26, 1.27, 1.30, 1.32-1.34, 1.35-1.37, 1.46, 1.57, 1.59, 155.3, 155.4, and 166.5.

16For example, proposed regulation 1.33 (Monthly and confirmation statements) requires an FCM to document a customer's positions in futures contracts differently from its option or swap positions. Proposed regulation 1.33 preserves these distinctions, even though it refers only to “customers” as opposed to “commodity customers,” “option customers,” and “swap customers.”

The Commission proposes to define the term “confirmation” to reflect its differing use in various regulations depending on whether a transaction is executed by an FCM, IB or CTA on the one hand, or by a SD or MSP on the other hand. In the first case, the registrant is acting as an agent. In the second it is acting as a principal.17

17A single entity could be registered in more than one capacity, for example, as both a SD and a CTA. Which rules were applicable would depend on the capacity in which it was performing a particular function.

The Commission also proposes to revise the “Member of a contract market” definition currently found at regulation 1.3(q) and to add to regulation 1.3 a definition of the term “Registered entity,” currently provided in CEA section 1a(40), as revised by the Dodd-Frank Act. The definition of “registered entity” proposed in regulation 1.3 is identical to its CEA counterpart and would include DCOs, DCMs, SEFs, swap data repositories (“SDRs”) and certain electronic trading facilities. To correspond with this new definition, the Commission also proposes to replace the current “Member of a contract market” definition with a new definition of “Member,” which would be nearly identical to the “Member of a registered entity” definition provided in CEA section 1a(34), also as revised by the Dodd-Frank Act.18 Therefore, the proposed “Member” definition would be broadened to accommodate newly established SEFs, and it would include those “owning or holding membership in, or admitted to membership representation on, the registered entity; or having trading privileges on the registered entity.”

18In accordance with the removal of DTEF references from many other Commission regulations, the proposed “Member” definition would not include DTEF references currently in the definition of “Member of a registered entity” found in CEA section 1a(34).See7 U.S.C. 1a(34).

The Commission proposes to add a definition of the term “order.” This term has not previously been defined, although it is used in several of the regulations,e.g.,1.35, 155.3, and 155.4. In light of this and with the addition of new categories of registrants (SDs and MSPs) who act as principals rather than agents, clarification of this term is appropriate. The definition would provide that an order is “an instruction or authorization provided by a customer to a futures commission merchant, introducing broker, or commodity trading advisor regarding trading in a commodity interest on behalf of the customer.”

Because amendments to regulation 1.31 also proposed herein incorporate the term “prudential regulator,” as added to the CEA by the Dodd-Frank Act, the Commission proposes to add it to regulation 1.3.19 Pursuant to proposed regulation 1.31, records of swap transactions must be presented, upon request, to “any applicable prudential regulator as that term is defined in section 1a(39) of the Act.” The proposed definition of “prudential regulator” in regulation 1.3 is coextensive with the definition in section 1a(39) of the Act and lists the various prudential regulators. Pursuant to the definition in section 1a(39) of the Act, determining the “applicable” prudential regulator depends upon what type of entity the SD or MSP is and which regulator oversees that SD or MSP.20 For example, if a SD is a national bank, it is overseen by the Office of the Comptroller of the Currency, and that agency would be the “applicable prudential regulator” for the purposes of proposed regulation 1.31.

19 See infraPart II.A.3.

207 U.S.C. 1a(39), as amended by DFA section 721(a)(17).

The Commission proposes to add the term “registrant” to regulation 1.3 so that certain regulations in part 1 can refer to various intermediaries (e.g.,FCMs, IBs, CPOs), their employees (associated persons), and other registrants (MSPs). As discussed above, the Commission also has proposed to add the definition of “registered entity” from CEA section 1a, which refers to DCOs, DCMs, SEFs, SDRs, and other entities, to regulation 1.3. Because the DFA created a definition of and several proposed part 1 regulations refer to “associated persons of swap dealers or major swap participants,” the Commission proposes to add that term to regulation 1.3 as well.

The Commission also proposes adding the term “retail forex customer” to regulation 1.3 because it appears in several regulations in part 1 and currently is only defined in part 5. The proposed definition is identical in all material respects to the definition of this term as it currently appears in regulation 5.1(k).21

2117 CFR 5.1(k) currently defines “retail forex customer” as “a person, other than an eligible contract participant as defined in section 1a(12) of the Act, acting on its own behalf and trading in any account, agreement, contract or transaction described in section 2(c)(2)(B) or 2(c)(2)(C) of the Act.” The Proposal would amend this definition in part 5 only to reflect the renumbering of section 1a of the Act by the DFA, and add an identically amended definition to regulation 1.3.See infraPart II.G.2.

Proposed regulation 1.3 also changes certain definitions so that the Commission's regulations properly refer to both futures and swaps. Additionally, for ease of reference, proposed regulation 1.3 would simply adopt several terms defined under the CEA, including “electronic trading facility,” “organized exchange,” and “trading facility.”

c. Regulation 1.3(ll): Physical

Regulation 1.3(ll) defines the term “physical” as “any good, article, service, right or interest upon which a commodity option may be traded in accordance with the Act and these regulations,”22 which is similar to the “commodity” definition in regulation 1.3(e).23 Regulation 1.3(e) defines theterm “commodity,” in relevant part, as “all * * * goods and articles * * * and all services, rights and interests in which contracts for future delivery are presently or in the future dealt in.”24 The word “physical” is used in 45 Commission regulations other than regulation 1.3(ll).25 The introductory text of regulation 1.3 states that “[t]he following terms, as used in the Commodity Exchange Act, or in the rules and regulations in this chapter, shall have the meanings hereby assigned to them,unless the context otherwise requires.” 26

2217 CFR 1.3(ll).

2317 CFR 1.3(e).

24Regulation 1.3(e) tracks 7 U.S.C. 1a(9), as renumbered and amended by Dodd-Frank Sections 721(a)(1) and (4), respectively.

25 See17 CFR 1.3(z)(1), 1.3(kk), 1.17(c)(iii), 1.17(c)(5)(ii)(A), 1.17(c)(5)(xi), 1.17(j)(1), 1.31(b)(3)(iii)(B), 1.33(a)(2)(i), 1.33(a)(2)(ii), 1.33(b)(2)(iv), 1.33(b)(3), 1.34(b), 1.35(b)(2)(iii), 1.35(b)(3)(iii), 1.35(d)(1), 1.35(e), 1.39(a), 1.39(a)(3), 1.44, 1.44(b), 1.46(a)(iii), 1.46(a)(iv), 4.23(a)(1), 4.23(b)(1), 4.33(b)(1), 5.13(b)(3), 10.68(b)(1)(i), 15.00(p)(1)(ii), 16.00(a), 16.01(a), 16.01(b), 18.04(b)(3), 18.04(b)(3)(ii), 18.04(b)(6), 18.04(b)(6)(ii), 31.8(a)(1), 31.8(a)(2)(iii), 31.8(a)(2)(iv), 31.9(a), 31.9(a)(1), 32.12(a), 32.13(a), 32.13(e)(2), 33.4, 33.4(a)(4), 33.4(a)(5)(iv), 33.4(a)(5)(iv)(A), 33.4(a)(5)(iv)(B), 33.4(a)(5)(iv)(C), 33.4(a)(5)(iv), 33.4(b)(1)(iii), 33.4(d)(3), 33.7(b), 33.7(b)(1), 33.7(b)(2)(i), 33.7(b)(5), 33.7(b)(6), 33.7(b)(7)(ii), 33.7(b)(7)(iii), 33.7(b)(7)(iv), 33.7(b)(7)(v), and 33.7(b)(7)(x); 17 CFR pt. 36 app. A (paragraph 3 under PRICE LINKAGE, (c)(3)(ii) under CORE PRINCIPLE IV OF SECTION 2(h)(7)(C)—POSITION LIMITATIONS OR ACCOUNTABILITY, (c) under TRADING PROCEDURES, (c) under FAIR AND EQUITABLE TRADING, (b)(4) under POSITION LIMITATIONS OR ACCOUNTABILITY); 17 CFR 40.3(a)(4)(ii); 17 CFR pt. 40 app. A Guideline No. 1(a),(c)(2)(ii), and (c)(2)(ii)(B); 17 CFR 41.25(c), 41.25(g)(6), 145.7(j), 147.3(b)(7)(vi), 149.103, 149.150(b)(2), 149.150(d)(1), 150.3(a)(4)(i)(A), 150.5(b)(1), 150.5(c)(1), and 160.30; 17 CFR pt. 160 app. B Sample Clause A-7; 17 CFR 190.01(x)(1), 190.01(x)(2), 190.01(kk)(3), 190.01(kk)(4), 190.01(kk)(5), 190.01(ll), 190.02(f)(1), 190.05(a)(1), 190.05(b)(1), 190.05(b)(1)(iii), 190.05(c)(3), 190.07(e)(2)(i), 190.07(e)(2)(ii), 190.07(e)(2)(ii)(A), and 190.07(e)(2)(ii)(B); 17 CFR pt. 190 app. A, Form 1, paragraph 4 and Form 4 (Proof of Claim), paragraphs (c), (d) and (e).

2617 CFR 1.3 (emphasis added).

The “physical” definition was first added to regulation 1.3 in 1983 to enable trading, on DCMs, in options to buy or sell an underlying commodity and has not been substantively amended.27 In theFederal Registerrelease proposing the addition of regulation 1.3(ll), the Commission stated that “[t]he proposed definition is intended to be coextensive with the Commission's jurisdiction with respect to commodity options.”28 At the time of that proposal in 1982, cash-settled futures on non-physical commodities had just been introduced in the form of the Chicago Mercantile Exchange's Eurodollar futures. In that context, in proposing rules to permit exchange-traded options on underlying commodities, it made sense to name such options based on physical commodities, which constituted the vast majority of commodities covered by then-existing futures contracts.

27 SeeDomestic Exchange-Traded Commodity Options; Expansion of Pilot Program To Include Options on Physicals, 47 FR 56996, Dec. 22, 1982 and 48 FR 12519, Mar. 25, 1983.

28Domestic Exchange-Traded Commodity Options; Expansion of Pilot Program Provisions, 47 FR 28401, June 30, 1982.

At present, however, options may be traded on both physically deliverable and non-physically deliverable commodities, such as interest rates and temperatures. Using the term “physical” to refer to an option on both physically deliverable commodities and non-physically deliverable commodities may be confusing on its face.29 Also, the requirement in the forward exclusion from the “swap” definition contained in CEA section 1a(47)(B)(ii), as amended by Dodd-Frank section 721(a)(21), that a sale of a non-financial commodity or security for deferred shipment or delivery “is intended to be physically settled” would be meaningless if “physical” included non-physical. As noted above, the introductory text of regulation 1.3 states that its defined terms have the meanings assigned to them in regulation 1.3, unless the context otherwise requires.

29Moreover, the Commission has recently proposed a rewrite of its options regulations in parts 32 and 33. References to options on a physical would be removed from part 33, which will apply only to DCM-traded options on futures. Options on physicals would be permitted to transact under revised part 32, which permits all options that are swaps under the Dodd-Frank swap definition to transact subject to the same rules applicable to any other swap.SeeCommodity Options and Agricultural Swaps, 76 FR 6095, Feb. 3, 2011.

The Commission requests comment on whether any changes to the “physical” definition are necessary or warranted. Should the Commission revise the definition of “physical” to limit it to its common sense meaning? Should the Commission remove it on the theory that the meaning of “physical” is self-evident? Should the Commission address such issues, if at all, in other rulemakings where they arise more directly, such as with respect to emission-related commodities as they relate to the forward exclusion from the swap definition?30 If so, should the Commission replace the term “physical” with some other more suitable term in the relevant regulations referencing current regulation 1.3(ll)? If so, what should the new term be? Should the Commission take no action, in reliance on the ability of interested parties to interpret the “unless the context otherwise requires” language of regulation 1.3, or on some other basis?31

30The Commission received several comment letters regarding environmental commodity issues in response to the advance notice of proposed rulemaking regarding Definitions Contained in Title VII of Dodd-Frank Wall Street Reform and Consumer Protection Act, 75 FR 51429, Aug. 20, 2010.SeeLetter from Kyle Danish, Van Ness Feldman, P.C., Counsel to the Coalition for Emission Reduction Projects (available at http://comments.cftc.gov/PublicComments/ViewComment.aspx?id=26164& SearchText=emission%20reduction); Letter from Thomas Huetteman, Chairman, Jeffery C. Fort, Chair, Market Oversight Committee, and Jeremy D. Weinstein, Member, Environmental Markets Association (available at http://comments.cftc.gov/PublicComments/ViewComment.aspx?id=26166&SearchText=ema); Letter from R. Michael Sweeney, Jr., Mark W. Menezes, and David T. McIndoe, Hunton & Williams, LLP, on behalf of the Working Group of Commercial Energy Firms (available at http://comments.cftc.gov/PublicComments/ViewComment.aspx?id=26219&SearchText=working%20group).

31In a number of cases (e.g.,the reference to “physical safeguards” in Regulation 160.30 (Procedures to safeguard customer records and information); and the reference to “provide physical access to handicapped persons” in Regulation 149.150 (Program accessibility: Existing facilities)), the context will make it obvious that the term “physical” is meant to have its plain meaning.

d. Regulation 1.3(yy): Commodity Interest

The Commission proposes to add swaps on all commodities within the CFTC's jurisdiction to the definition of “commodity interest” in regulation 1.3(yy).32 Commodity interest currently is defined as: “(1) Any contract for the purchase or sale of a commodity for future delivery; (2) Any contract, agreement or transaction subject to Commission regulation under section 4c or 19 of the Act; and (3) Any contract, agreement or transaction subject to Commission jurisdiction under section 2(c)(2) of the Act.” The term “commodity interest” is cross-referenced by 33 other Commission regulations and appendices to parts of Commission regulations.33 Generally, the term is meant to encompass all agreements, contracts and transactions within the Commission's jurisdiction, though not all such agreements, contracts and transactions are expressly set forth therein.34

3217 CFR 1.3(yy).

33 See17 CFR 1.12, 1.56, 1.59, 3.10, 3.12, 3.21, 4.6, 4.7, 4.10, 4.12- 4.14, 4.22-4.25, 4.30-4.34, 4.36, 4.41, 30.3, 160.3-160.5, and 166.1-166.3; 17 CFR pt. 3 app. B, 17 CFR pt. 4 app. A, and 17 CFR pt. 190 app. B.

34For example, the term “contract for the purchase or sale of a commodity for future delivery” in current regulation 1.3(yy)(1) encompasses options on futures and security futures products. Similarly, the term “swaps” if added to proposed regulation 1.3(yy) would include mixed swaps. Of course, the impact of the scope of proposed regulation 1.3(yy) is only as extensive as the other regulations referencing it.

The Dodd-Frank Act adds a definition of “swap” to the CEA.35 DFA section 712(d) requires the Commission to further define the term “swap” jointly with the Securities and Exchange Commission.36 The Commission is proposing to add “swap” to the “commodity interest” definition so that the regulations cross-referencing it will apply to swaps.

35DFA section 721(a)(47); codified at 7 U.S.C. 1a(47).

36The Commissions have not yet proposed a further definition of the term “swap.”

2. Regulation 1.4: Use of Electronic Signatures

The Commission proposes to revise regulation 1.437 to extend the benefit of electronic signatures and other electronic actions to SDs and MSPs. Section 731 of the Dodd-Frank Act amends the CEA by adding new sections 4s(i)(1), requiring SDs and MSPs to “conform with such standards as may be prescribed by the Commission by rule or regulation that relate to timely and accurate confirmation, processing, netting, documentation, and valuation of all swaps,”38 and 4s(i)(2), requiring the Commission to adopt rules “governing documentation standards for swap dealers and major swap participants.”39

3717 CFR 1.4.

387 U.S.C. 6s(i)(1).

397 U.S.C. 6s(i)(2).

Pursuant to the foregoing authority, the Commission previously proposed new regulation 23.501(a)(1), which would require “[e]ach swap dealer and major swap participant entering into a swap transaction with a counterparty that is a swap dealer or major swap participant [to] execute a confirmation for the swap transaction,” according to a specified schedule.40 Also pursuant to the foregoing authority, the Commission has proposed new regulation 23.501(a)(2), which would require “[e]ach swap dealer and major swap participant entering into a swap transaction with a counterparty that is not a swap dealer or a major swap participant [to] send an acknowledgment of such swap transaction,” according to a specified schedule.41 Proposed regulation 23.500(a) would define such an “acknowledgment” as “a written or electronic record of all of the terms of a swap signed and sent by one counterparty to the other.”42 In issuing the proposed confirmation and acknowledgment rules cited above, the Commission explained that “[w]hen one party acknowledges the terms of a swap and its counterparty verifies it, the result is the issuance of a confirmation.”43

40Confirmation, Portfolio Reconciliation, and Portfolio Compression Requirements for Swap Dealers and Major Swap Participants, 75 FR 81519, Dec. 28, 2010.

41 Id.

42 Id.

4375 FR at 81522.

Regulation 1.4 currently provides that an FCM, IB, CPO and CTA receiving an electronically signed document is in compliance with Commission regulations requiring signed documents, provided that such entity generally accepts electronic signatures.44 The rationale for allowing the existing entities listed in regulation 1.4 to use electronic signatures (i.e.,“[a]s part of [the Commission's] ongoing efforts to facilitate the use of electronic technology and media”)45 applies equally to SDs and MSPs. Therefore, the Commission proposes to add SDs and MSPs to the list of entities covered by regulation 1.4 and to amend its structure to account for the provisions of the Commission's proposed confirmation and acknowledgement obligations discussed above.46

4417 CFR 1.4. The regulation also requires that the signatures in question comply with applicable Federal laws and Commission regulations, and requires the relevant entity to employ reasonable safeguards regarding the use of electronic signatures, including safeguards against alteration of the record of the electronic signature.Id.

45Use of Electronic Signatures by Customers, Participants and Clients of Registrants, 64 FR 47151, Aug. 30, 1999.

46This includes proposing a change to the title of regulation 1.4 to reflect these changes. Proposed regulation 1.4 is entitled “Use of electronic signatures, acknowledgments and verifications.”

3. Regulation 1.31: Books and Records; Keeping and Inspection

In recent years, the phrase “books and records” has evolved with respect to the varying formats used to communicate and store information.47 The Federal Rules of Civil Procedure have been revised to reflect this evolution by requiring producing parties to produce electronically stored information as specified in the request, but if not so specified, then as they are kept in the normal course of business or in a reasonably usable form.48 Similarly, the Commission's own data delivery standards, which accompany the Commission's requests for production, indicate a preference for requested electronic information to be produced in native file format. The Commission's delivery standards provide technical instructions to producers designed to enable the Commission to receive such information in a machine-readable format that is compatible with the technology used by the Commission.

47U.S. Commodity Futures Trading Commission, Division of Market Oversight, Advisory for Futures Commission Merchants, Introducing Brokers, and Members of a Contract Market over Compliance with Recordkeeping Requirements, Feb. 5, 2009 (http://www.cftc.gov/ucm/groups/public/@industryoversight/documents/file/recordkeepingdmoadvisory0209.pdf) [hereinafter Recordkeeping Advisory].

48Fed. R. Civ. P. 34(b)(2)(E); Fed. R. Civ. P. 34, advisory committee note, 2006 amendment (“Rule 34(b) provides that a party must produce documents as they are kept in the usual course of business or must organize and label them to correspond with the categories in the discovery request. The production of electronically stored information should be subject to comparable requirements to protect against deliberate or inadvertent production in ways that raise unnecessary obstacles for the requesting party”).

Recognizing that storage formats vary across different types of electronically stored information and to be consistent with current Commission practice and the Federal Rules of Civil Procedure, the proposed changes to regulations 1.31(a)(1), (a)(2), and (b) would require that: (1) All books and records required to be kept by the Act or by the Commission's regulations be kept in their original (for paper records) or native file format (for electronic records); and (2) production of such records be made in a form specified by the Commission. In addition, as provided in the existing regulation, books and records may continue to be stored on electronic storage media, provided, however, that for electronic records, the storage media must preserve the native file format of the electronic records.

Keeping electronic records in their native file format and producing them in a format designated by the Commission should not create any unreasonable burdens on persons required to maintain records under the Act and Commission regulations in light of Federal Rule of Civil Procedure 34(b), which would apply to such persons—and all other persons in possession of investigatory information—upon the filing of an enforcement action in Federal district court. Rule 34(b) permits the requesting party to designate the form or forms in which it wants electronically stored information produced in order to facilitate its usability. This is recognition that “the form of production is more important to the exchange of electronically stored information than of hard-copy materials.”49

49Fed. R. Civ. P. 34, advisory committee note, 2006 amendment.

The Commission also proposes amendments to regulation 1.31 to incorporate two books and records obligations that proposed regulation 23.203(b) applies to SDs and MSPs. Proposed regulation 23.203(b) would require SDs and MSPs to (1) keeprecords of swap or related cash or forward transactions until the termination, maturity, expiration, transfer, assignment, or novation date of the transaction and for a period of five years after such date; and (2) make such records available for inspection not only by the Commission and the United States Department of Justice, but also to any applicable prudential regulator, as that term is defined in section 1a(39) of the Act, or, in connection with security-based swap agreements described in section 1a(47)(A)(v) of the Act, the United States Securities and Exchange Commission. By contrast, existing regulation 1.31, which pertains to “allbooks and records required to be kept by the Act,” requires that records be kept for five years and that they be made available only to the Commission and the Department of Justice.50 The Proposal would add to regulation 1.31 the special requirements for swaps and cash related transactions in proposed regulation 23.203(b).

5017 CFR 1.31(a) (emphasis added).

The Commission solicits comments on the potential costs and effects of the proposed new requirement that all books and records be maintained in their original form (for paper) and their native file format (for electronic records) as provided in the proposed rule. Comment also is requested regarding whether the retention period for any communication medium (e.g.,oral communications) should be shorter than the retention period applicable to other required records. In this regard, the Commission requests that commenters specify what the proposed retention period should be and why.

4. Regulation 1.33: Monthly and Confirmation Statements

Regulation 1.33 requires FCMs to maintain certain records and to regularly furnish monthly and confirmation statements to customers regarding commodity futures and option transactions they have entered into on behalf of customers. The DFA amended the definition of FCM in section 1a of the CEA to authorize an FCM to solicit or accept orders for swaps in addition to commodity futures and option transactions.51 Therefore, the Commission proposes adding requirements for monthly and confirmation statements applicable to swaps.

51DFA section 721(a)(13).

Proposed regulation 1.33(a)(3) describes what information on swap positions an FCM must provide in monthly statements to its customers. Proposed regulation 1.33(b)(2) would extend the requirement that an FCM furnish confirmation statements to customers to swaps executed on a customer's behalf and describes what information such a confirmation statement must contain. In addition, the Commission proposes to amend regulation 1.33 to reflect proposed changes to the definitions of the terms “commodity interest,” “customer,” and “open contract” in regulation 1.3.

5. Regulation 1.35: Records of Cash Commodity, Futures and Option Transactions

The Commission proposes to amend regulation 1.35 in several respects. First, the Commission proposes to revise paragraph (a) such that this regulation's recordkeeping obligations would extend to trades executed by FCMs and IBs on SEFs. Those obligations currently apply only to trades executed on DCMs. Similarly, the proposed amendments would extend all of the regulation 1.35 recordkeeping obligations currently applicable to members of DCMs to include “members,” as that term is proposed to be defined in proposed regulation 1.3, of SEFs.

Second, the proposed revisions replace the terms “commodity futures transactions,” “retail forex exchange transactions,” and “commodity option transactions” with the term “commodity interests.” According to the Commission's proposed definition of “commodity interest” in regulation 1.3, “commodity interest” includes all of the aforementioned transactions as well as swaps. Thus, the Commission proposes that regulation 1.35's recordkeeping obligations for transactions in futures, commodity options, and retail forex exchange transactions also apply to swaps.52 Pursuant to the Dodd-Frank Act, DCMs are permitted to list swaps, and FCMs and IBs are permitted to execute swaps on behalf of customers.53

52Accordingly, the Commission also proposes to amend the title of regulation 1.35 to reflect such a change. Therefore, proposed regulation 1.35 is entitled “Records of commodity interest and cash commodity transactions.”

53 See7 U.S.C. 1a(28) and 1a(31), as amended by DFA sections 721(a)(13) and (a)(15), respectively.

In relevant part, existing regulation 1.35 requires FCMs, IBs, and DCM members to “keep full, complete, and systematic records, together with all pertinent data and memoranda, of all transactions relating to [their] business of dealing in commodity futures, commodity options and cash commodities,” subject to the requirements of regulation 1.31. Specifically included among the records to be retained under regulation 1.35 are “all orders (filled, unfilled, or canceled), trading cards, signature cards, street books, journals, ledgers, canceled checks, copies of confirmations, copies of statements of purchase and sale, and all other records, data and memoranda” that have been prepared in the course of an FCM's, an IB's, or a DCM member's business of dealing in commodity futures, commodity options, and cash commodities.

On February 5, 2009, the Commission's Division of Market Oversight (“DMO”) issued an advisory stating that “[t]he Commission's recordkeeping regulations, by their terms, do not distinguish between whatever medium is used to record the information covered by the regulations, including emails, instant messages, and any other form of communication created or transmitted electronically.”54 Thus, the advisory made clear that the existing language of regulation 1.35 “appl[ies] to records that are created or retained in an electronic format, including email, instant messages, and other forms of communication created or transmitted electronically for all trading.”55 Accordingly, under the Commission's existing regulations, FCMs, IBs, and DCM members are required to retain and produce for inspection any such electronic records, subject to the retention and accessibility requirements set forth in regulation 1.31.

54 SeeRecordkeeping Advisory,supranote 47, at 3.

55 Id.at 4.

Notwithstanding the DMO advisory relating to certain electronic records, the Commission's existing recordkeeping requirements, as they relate to FCMs, IBs and DCM members, remain limited by a 1996 Commission decision,Gilbertv.Lind-Waldock & Co.,wherein audio tapes of telephone conversations with customers were found to be beyond the definition of “records” covered by regulation 1.35.56

56[1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,720 at 43,992 n.23 (CFTC June 17, 1996).

Consequently, where Commission-regulated persons use oral communications, the Commission has encountered greater difficulties in effectively exercising its enforcement responsibilities, thereby increasing the potential for market abuses. Such difficulties have been particularly acute in cases where the Commission is required to establish a threshold level of knowledge and/or intent on the part of the actor, such as cases involving market manipulation and false reporting. The Commission's enforcement success in such cases often has correlated directly with theexistence of high-quality recordings of voice communications between the persons involved. Conversely, the Commission's enforcement capabilities have been limited in cases where such voice recordings were not available.

Significant technological advancements in recent years, particularly with respect to the cost of capturing and retaining copies of electronic material, including telephone communications, have made the prospect of enhancing the Commission's recordkeeping requirements for oral communications more economically feasible and systemically prudent. Evidence of these trends was examined in March 2008 by the United Kingdom's Financial Services Authority (“FSA”), which studied the issue of mandating the recording and retention of voice conversations and electronic communications. The FSA issued a Policy Statement detailing its findings and ultimately implemented rules relating to the recording and retention of such communications, including a rule requiring all financial service firms to record any relevant communication by employees on their firm-issued or firm-sanctioned cell phones that will take effect on November 14, 2011.57 Similar rules that mandate recording of certain voice and/or telephone conversations have been promulgated by the Hong Kong Securities and Futures Commission58 and by the Autorité des Marchés Financiers in France,59 and have been recommended by the International Organization of Securities Commissions (“IOSCO”).60

57Financial Services Authority, “Policy Statement: Telephone Recording: recording of voice conversations and electronic communications” (Mar. 2008); Financial Services Authority, “Taping: Removing the mobile phone exemption,” (Mar. 2010); Financial Services Authority, “Policy Statement: Taping of Mobile Phones: Feedback on CP 10/7 and Final Rules,” (Nov. 2010).

58Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission para. 3.9 (2010) (H.K.).

59General Regulation of the Autorité des Marchés Financiers art. 313-51 (2010) (Fr.).

60Press Release, International Organization of Securities Commissions, “IOSCO Publishes Recommendations to Enhance Commodity Futures Markets Oversight,” (Mar. 5, 2009),http://www.iosco.org/news/pdf/IOSCONEWS137.pdf.The IOSCO members on the committee formulating the recommendations included Brazil, Canada (Ontario and Quebec), Dubai, France, Germany, Hong Kong, Italy, Japan, Norway, Switzerland, the United Kingdom, and the United States.

Under the FSA rules, firms (identified generally as those entities conducting any of the following activities: receiving, executing, arranging for execution of customer orders or transactions carried out on behalf of the firm) must take reasonable steps to record relevant (relevant means conversations or communications between the firm and the client or when the firm is acting on behalf of a client with another person) telephone conversations (including mobile telephones) and keep a copy of relevant electronic communications that enable the referenced activities to be carried out. Firms are required to keep recordings of certain telephone lines for a period of at least six months in a medium that is readily accessible.

In promulgating this rule, the FSA issued guidance stating the following benefits: “i) recorded communication may increase the probability of successful enforcement; ii) this reduces the expected value to be gained from committing market abuse; and iii) this, in principle, leads to increased market confidence and greater price efficiency.” In determining its policy, the FSA conducted a cost-benefit analysis, including eight meetings with several trade associations including the Securities Industry and Financial Markets Association (“SIFMA”), the International Swaps and Derivatives Association (“ISDA”), and the Futures and Options Association (“FOA”). The FSA report estimated that 80% of telephone lines of its firms that would need to be recorded were already being recorded at the time of its study.61

61 SeeFinancial Services Authority, “Policy Statement: Telephone Recording: recording of voice conversations and electronic communications” (Mar. 2008); Financial Services Authority, “Taping: Removing the mobile phone exemption” (Mar. 2010); Financial Services Authority, “Policy Statement: Taping of Mobile Phones: Feedback on CP 10/7 and Final Rules” (Nov. 2010).

Indeed, the futures industry has imposed a requirement on certain of its member firms to tape telephone conversations with customers since 1997. Since then, the National Futures Association (“NFA”) has required member firms with more than a certain percentage of APs who have been disciplined to record all telephone conversations between the member's APs and both existing and potential customers for a period of two years. Those recordings must be retained for a period of five years from the date each tape is created, and the tapes shall be readily accessible during the first two years of the five year period.62 A similar rule exists in the securities industry.63

62 SeeInterpretative Notice to NFA Compliance Rule 2-9, Supervision of Telemarketing Activity, 9021 (Feb. 18, 1997).

63 SeeNASD Rule 3010, Supervision (the procedures required by this rule include tape-recording all telephone conversations between the member's registered persons and both existing and potential customers. All tape recordings made pursuant to the requirements of this paragraph shall be retained for a period of not less than three years from the date the tape was created, the first two years in an easily accessible place).

Consistent with these developments, the proposed change to regulation 1.35(a) would explicitly require FCMs, RFEDs, IBs and members of DCMs and SEFs to record all oral communications that lead to the execution of transactions in a commodity interest or cash commodity. In addition to increasing consistency across regulatory regimes, this proposal would harmonize regulation 1.35 with the recordkeeping requirements proposed for SDs and MSPs under the Dodd-Frank Act.64 The proposed amendments to regulation 1.35 would require that the recorded communications be identifiable by counterparty and transaction. As noted above, one of the proposed revisions to regulation 1.31 would require that each recorded communication be maintained in its native file format and produced in a form specified by any Commission representative. Records of these communications may continue to be stored on electronic storage media, provided, however, that for electronic records, the storage media must preserve the native file format of the electronic records. Records must be maintained for a period of five years and shall be readily accessible for the first two years of that five-year period.

64 SeeReporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants, 75 FR 7666, Dec. 9, 2010 (Proposed regulation 23.202(a)(1) would require “[e]ach swap dealer and major swap participant [to] make and keep pre-execution trade information, including, at a minimum, records of all oral and written communications provided or received concerning quotes, solicitations, bids, offers, instructions, trading, and prices, that lead to the execution of a swap, whether communicated by telephone, voicemail, facsimile, instant messaging, chat rooms, electronic mail, mobile device or other digital or electronic media”).

The Commission solicits comments on the potential costs and benefits of requiring registrants to record and maintain oral communications as provided in the proposed rule.65

65The Commission has received several comments on the costs and benefits associated with its proposed regulation 23.202 Daily Trading Records (Reporting, Recordkeeping, and Daily Trading Records Requirements for Swap Dealers and Major Swap Participants, 75 FR 76666, Dec. 9, 2010) and will consider those comments in connection with these proposed rules. The comments are available on the Commission's Web site athttp://www.cftc.gov.

As part of the ministerial amendments proposed in this release, the Commission is proposing to renumber portions of regulation 1.35 so that paragraphs currently numbered 1.35(a-1) and 1.35(a-2) will be renumbered 1.35(b) and 1.35(c), respectively. As a result, paragraphs currently numbered 1.35(b), (c), (d) and (e) will berenumbered 1.35(d), (e) (f) and (g), respectively.

Because proposed regulation 1.35 extends recordkeeping obligations to swaps, the Commission has proposed special language for swaps, where appropriate. In paragraph (b)(2) (proposed (d)(2)) (records of futures, commodity options, and retail forex exchange transactions for each account), the Commission has proposed adding provision (iv). Proposed regulation 1.35(d)(2)(iv) would require FCMs, IBs, and any clearing members clearing swaps executed on a DCM or SEF to maintain records describing the date, price, quantity, market, commodity, and, if cleared, DCO of each swap.

The Commission recognizes that money managers currently execute bunched swap orders on behalf of clients and allocate the trades to individual clients post-execution. The Commission believes that the bunched order procedures currently applicable to futures can be adapted for use in swap trading. Therefore, the Commission proposes to amend subsection (a-1)(5) (proposed (b)(5)), which addresses post-execution allocation of bunched orders. As discussed below, the Commission also is proposing to delete appendix C to part 1, which predated regulation 1.35(a-1)(5) (proposed (b)(5)) and also addresses bunched orders.

In order to have a single standard for all intermediaries that might have discretion over customer accounts, the Commission is proposing to include FCMs and IBs as eligible account managers in regulation 1.35(a-1)(5) (proposed (b)(5)). Unlike other account managers, however, FCMs and IBs are prohibited from including proprietary trades in a bunched order with customer trades. Accordingly, the Commission is proposing to add a cross-reference in regulation 1.35(a-1)(5) (proposed (b)(5)) to regulations 155.3 and 155.4, which impose that restriction on FCMs and IBs, respectively. The Commission requests comment on whether the proposal to add FCMs and IBs to the list of eligible account managers is appropriate.

The Commission further proposes to amend regulation 1.35(a-1) (proposed (b)) to provide that specific customer account identifiers need not be included in confirmations or acknowledgments provided pursuant to proposed regulation 23.501(a), if the requirements of regulation 1.35(a-1)(5) (proposed (b)(5)) are met. This would enable account managers to bunch orders for trades executed bilaterally with SDs or MSPs. The proposal would require that, similar to the current procedure for futures, the allocation be completed by the end of the day of execution and provided to the counterparty. The Commission requests comment on whether the proposed procedures for handling bunched swap orders would be effective. In particular, the Commission requests comment on whether allocation can be conducted by the end of the day of execution.

The Commission proposes deleting