[Federal Register Volume 77, Number 124 (Wednesday, June 27, 2012)]
[Proposed Rules]
[Pages 38229-38236]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-15481]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 43

RIN 3038-AD84


Rules Prohibiting the Aggregation of Orders To Satisfy Minimum 
Block Sizes or Cap Size Requirements, and Establishing Eligibility 
Requirements for Parties to Block Trades

AGENCY: Commodity Futures Trading Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'') is 
issuing a notice of proposed rulemaking to add certain provisions to 
part 43 of the Commission's regulations pertaining to block trades in 
swap contracts. The provisions would: (i) Prohibit the aggregation of 
orders for different trading accounts in order to satisfy the minimum 
block size or cap size requirements, except for orders aggregated by 
certain commodity trading advisors (``CTAs''), investment advisers and 
foreign persons (as described in this release), if such person has more 
than $25,000,000 in total assets under management (``AUM''); (ii) 
provide that parties to a block trade must individually qualify as 
eligible contract participants (``ECPs''), except where a designated 
contract market allows certain CTAs, investment advisers and foreign 
persons (as described in this release), to transact block trades for 
customers who are not ECPs, if such CTA, investment adviser or foreign 
person has more than $25,000,000 in total AUM; and (iii) require that 
persons transacting block trades on behalf of customers must receive 
prior written instruction or consent from the customer to do so.

DATES: Comments must be received on or before July 27, 2012.

ADDRESSES: You may submit comments, identified by RIN number [TBD], by 
any of the following methods:
     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 
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 
Sec.  145.9 of the Commission's regulations.\1\
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    \1\ See 17 CFR 145.9.
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    Commenters to this notice of proposed rulemaking are requested to 
refrain from providing comments with respect to the provisions in part 
43 of the Commission's regulations that are beyond the scope of this 
notice of proposed rulemaking. The Commission only plans to address 
those comments that are responsive to the policies, merits and 
substance of the proposed provisions set forth in this notice of 
proposed rulemaking.
    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 from www.cftc.gov that 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: Nancy Markowitz, Deputy Director, 
Division of Market Oversight, 202-418-5453, nmarkowitz@cftc.gov; Nadia 
Zakir, Special Counsel, Division of Market Oversight, 202-418-5720, 
nzakir@cftc.gov; Laurie Gussow, Attorney-Advisor, 202-418-7623, 
lgussow@cftc.gov; George Pullen, Economist, Division of Market 
Oversight, 202-418-6709, gpullen@cftc.gov; Esen Onur, Economist, Office 
of the Chief Economist, 202-418-6146, eonur@cftc.gov; or Herminio 
Castro,

[[Page 38230]]

Counsel, Office of General Counsel, 202-418-6705, hcastro@cftc.gov, 
Commodity Futures Trading Commission, Three Lafayette Center, 1155 21st 
Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

A. The Dodd-Frank Act

    On July 21, 2010, President Obama signed the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (``Dodd-Frank Act'').\2\ Title VII 
of the Dodd-Frank Act \3\ amended the Commodity Exchange Act (``CEA'' 
or ``Act'') \4\ to establish a comprehensive, new regulatory framework 
for swaps and security-based swaps. This legislation was enacted to 
reduce risk, increase transparency and promote market integrity within 
the financial system by, inter alia: (1) Providing for the registration 
and comprehensive regulation of swap dealers (``SDs'') and major swap 
participants (``MSPs''); (2) imposing mandatory clearing and trade 
execution requirements on standardized derivative products; (3) 
creating robust recordkeeping and real-time reporting regimes; and (4) 
enhancing the Commission's rulemaking and enforcement authorities with 
respect to, among others, all registered entities and intermediaries 
subject to the Commission's oversight.
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    \2\ See Public Law 111-203, 124 Stat. 1376 (2010).
    \3\ The short title of Title VII of the Dodd-Frank Act is the 
``Wall Street Transparency and Accountability Act of 2010.''
    \4\ See 7 U.S.C. 1 et seq.
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    Section 727 of the Dodd-Frank Act enacted section 2(a)(13) of the 
CEA, which authorizes and requires the Commission to promulgate 
regulations for the real-time public reporting of swap transaction and 
pricing data.\5\ Among other things, sections 2(a)(13)(E)(ii) and (iii) 
of the CEA respectively require the Commission to prescribe regulations 
specifying ``the criteria for determining what constitutes a large 
notional swap transaction (block trade) for particular markets and 
contracts'' and ``the appropriate time delay for reporting large 
notional swap transactions (block trades) to the public.'' \6\
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    \5\ See generally CEA section 2(a)(13), 7 U.S.C. 2(a)(13).
    \6\ See CEA sections 2(a)(13)(E)(ii) and (iii).
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B. The Initial Proposal

    In order to implement the various statutory requirements imposed 
under section 2(a)(13) of the CEA, the Commission published an initial 
notice of proposed rulemaking on December 7, 2010 (the ``Initial 
Proposal'').\7\ As relevant to this notice of proposed rulemaking, the 
Initial Proposal proposed: (1) Definitions for the terms ``large 
notional off-facility swap'' and ``block trade''; \8\ (2) a method for 
determining the appropriate minimum block sizes for large notional off-
facility swaps and block trades; \9\ and (3) a framework for timely 
reporting of such transactions and trades.\10\
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    \7\ See Real-Time Public Reporting of Swap Transaction Data, 75 
FR 76,139 (Dec. 7, 2010), as corrected in Real-Time Public Reporting 
of Swap Transaction Data Correction, 75 FR 76,930 (Dec. 10, 2010) 
(``Initial Proposal'').
    \8\ The Initial Proposal defined the term ``large notional 
swap''. See proposed Sec.  43.2(l), 75 FR 76,171. The Adopting 
Release finalized the term as ``large notional off-facility swap'', 
to denote, in relevant part, that the swap is not executed pursuant 
to SEF or DCM rules and procedures. See Sec.  43.2, 77 FR 1182, 1244 
(Jan. 9, 2012) (``Adopting Release''). Specifically, the Adopting 
Release defined the term as an ``off-facility swap that has a 
notional or principal amount at or above the appropriate minimum 
block size applicable to such publicly reportable swap transaction 
and is not a block trade as defined in Sec.  43.2 of the 
Commission's regulations.'' Id.
    The final definition of ``block trade'' in the Adopting Release 
is similar to how that term was defined in the Initial Proposal. See 
proposed Sec.  43.2(f), 75 FR 76,171. The Adopting Release defines 
the term ``block trade'' as a publicly reportable swap transaction 
that: ``(1) [i]nvolves a swap that is listed on a [SEF or DCM]; (2) 
[o]ccurs away from the [SEF's or DCM's] trading system or platform 
and is executed pursuant to the [SEF's or DCM's] rules and 
procedures; (3) has a notional or principal amount at or above the 
appropriate minimum block size applicable to such swap; and (4) [i]s 
reported subject to the rules and procedures of the [SEF or DCM] and 
the rules described in [part 43], including the appropriate time 
delay requirements set forth in Sec.  43.5.'' See Sec.  43.2, 77 FR 
1,243.
    \9\ See proposed Sec.  43.5, 75 FR 76174-76.
    \10\ Proposed Sec.  43.5(k)(1) in the Initial Proposal provided 
that the time delay for the public dissemination of data for a block 
trade or large notional off-facility swap shall commence at the time 
of execution of such trade or swap. See 75 FR 76,176. Proposed Sec.  
43.5(k)(2) provided that the time delay for standardized block 
trades and large notional off-facility swaps (i.e., swaps that fall 
under CEA Section 2(a)(13)(C)(i) and (iv)) would be 15 minutes from 
the time of execution. Id. The Initial Proposal did not provide 
specific time delays for large notional off-facility swaps (i.e., 
swaps that fall under Section 2(a)(13)(C)(ii) and (iii)). Instead, 
proposed Sec.  43.5(k)(3) provided that such swaps shall be reported 
subject to a time delay that may be prescribed by the Commission. 
Id.
    The Adopting Release established time delays for the public 
dissemination of block trades and large notional off-facility swaps 
in Sec.  43.5. See 77 FR 1247-49.
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    Among other requirements contained in the Initial Proposal, 
proposed Sec.  43.5(b)(1) provided that eligible parties to a block 
trade (or large notional swap) must be ECPs,\11\ except that a 
designated contract market (``DCM'') may allow a CTA acting in an asset 
managerial capacity and registered pursuant to Section 4n of the Act, 
or a principal thereof, including any investment adviser who satisfies 
the criteria of Sec.  4.7(a)(2)(v), or a foreign person performing a 
similar role or function and subject as such to foreign regulation, to 
transact block trades for customers who are not eligible contract 
participants (``non-ECPS''), if such CTA, investment adviser or foreign 
person has more than $25,000,000 in total AUM. The proposed rule 
further required that a person transacting a block trade on behalf of a 
customer must receive written instruction or prior consent from the 
customer to do so.
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    \11\ See CEA Section 1a(18).
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    Furthermore, proposed Sec.  43.5(m) of the Initial Proposal 
prohibited the aggregation of orders for different trading accounts in 
order to satisfy the minimum block size requirement, except if done on 
a DCM by a CTA acting in an asset managerial capacity and registered 
pursuant to Section 4n of the Act, or a principal thereof, including 
any investment adviser who satisfies the criteria of Sec.  
4.7(a)(2)(v), or a foreign person performing a similar role or function 
and subject as such to foreign regulation, if such CTA, investment 
adviser or foreign person has more than $25,000,000 in total AUM.
    The Commission issued the Initial Proposal for public comment for a 
period of 60 days, but later reopened the comment period for an 
additional 45 days.\12\
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    \12\ The initial comment period for the Initial Proposal closed 
on February 7, 2011. The comment periods for most proposed 
rulemakings implementing the Dodd-Frank Act--including the proposed 
part 43 rules--subsequently were reopened for the period of April 27 
through June 2, 2011.
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1. Comments in Response to the Initial Proposal
    The Commission received four comment letters in response to the 
proposed aggregation rule. The American Benefits Council and the 
Committee on the Investment of Employee Benefit Assets stated that 
qualified investment advisers who are not CTAs should be able to 
aggregate block trade orders for different trading accounts.\13\ 
Tradeweb commented that the CTAs that trade on SEFs should also be 
permitted to aggregate trades of behalf of their customers for purposes 
of block trades.\14\ J.P. Morgan commented that the proposed rule 
appears to reflect a concern that private negotiation offers less 
protection to unsophisticated

[[Page 38231]]

investors than trading through the central market, and that since all 
entities that transact in the OTC market already must be ECPs, the 
analogous concern about customer protection in the swaps market is 
already addressed.\15\ In related comments, the Wholesale Market 
Brokers Association (Americas) (``WMBA'') commented that ``work-up'' or 
``join-the-trade'' periods be permitted and recognized to satisfy the 
block trade requirement.\16\
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    \13\ The American Benefits Council and the Committee on the 
Investment of Employee Benefit Assets comment letter at 3 (Feb. 7, 
2011). The comment letter specifically requested that the rule be 
revised such that the words ``including any'' from the second 
sentence are deleted and replaced with the word ``an.''
    \14\ Tradeweb comment letter at 5 (Feb. 7, 2011).
    \15\ J.P. Morgan comment letter at 9, n. 13 (Jan. 12, 2011).
    \16\ WMBA comment letter at 4-5 (Feb. 7, 2011) (commenting that 
``the public dissemination of incremental activity that would 
otherwise constitute a block trade could jeopardize identification 
of counterparties and materially reduce market liquidity.'')
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C. The Adopting Release and Further Proposal

    On January 9, 2012, the Commission issued a notice of final 
rulemaking \17\ (``Adopting Release'') that finalized several 
provisions that were proposed in the Initial Proposal pertaining to, 
among other things, the reporting, public dissemination and 
recordkeeping requirements applicable to certain swap transactions.\18\
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    \17\ Real-Time Public Reporting of Swap Transaction Data, 77 FR 
1,182 (Jan. 9, 2012).
    \18\ Commenters are directed to the Adopting Release for a 
discussion of the issues addressed therein. See id.
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    Based on the public comments received in response to the Initial 
Proposal, in the Adopting Release the Commission agreed that additional 
analysis was necessary prior to issuance of final rules for appropriate 
minimum block sizes, and accordingly determined not to make final its 
proposed Sec.  43.5 rules specifying the criteria for determining block 
trade sizes. Instead, the Commission intended to issue a separate 
notice of proposed rulemaking that would specifically address the 
appropriate criteria for determining appropriate minimum block trade 
sizes in light of data and comments received.\19\ On March 15, 2012, 
the Commission decided to further propose (``Further Proposal'') 
certain other block trade provisions that were included with the 
Initial Proposal.\20\
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    \19\ See id. at 1,185.
    \20\ Commenters are directed to the Further Proposal for a 
discussion of the issues addressed therein. See ``Procedures to 
Establish Appropriate Minimum Block Sizes for Large Notional Off-
Facility Swaps and Block Trades,'' 77 FR 15,460 (Mar. 15, 2012). The 
comment period for the Further Proposal ended on May 14, 2012.
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    After it issued the Further Proposal, the Commission determined 
that the aggregation provision and the provision that specified the 
eligible parties to a block trade, including the proposed requirement 
that persons transacting block trades on behalf of customers must 
receive prior written instruction or consent from the customer to do 
so, were inadvertently omitted from the Further Proposal. These 
provisions are the subject of this notice of proposed rulemaking.

II. Notice of Proposed Rulemaking

A. Proposed Sec.  43.6(h)(6)--Aggregation

    Proposed Sec.  43.6(h)(6) would prohibit the aggregation of orders 
for different trading accounts in order to satisfy the minimum block 
size or cap size requirements, except that aggregation is permissible 
if done on a DCM or SEF by a person who: (i)(A) is a CTA registered 
pursuant to Section 4n of the Act or exempt from such registration 
under the Act, or a principal thereof, and who has discretionary 
trading authority or directs client accounts, (B) is an investment 
adviser who has discretionary trading authority or directs client 
accounts and satisfies the criteria of Sec.  4.7(a)(2)(v) of this 
chapter, or (C) is a foreign person who performs a similar role or 
function as the persons described in (A) or (B) and is subject as such 
to foreign regulation, and (ii) has more than $25,000,000 in total AUM.
    The prohibition of aggregation of orders for different trading 
accounts in order to meet the minimum block size or cap size 
requirements is an integral element in ensuring the integrity of block 
trading principles, and in preserving the basis for the anonymity 
associated with cap sizes. As defined in the Adopting Release, a block 
trade is a publicly reportable transaction that: (1) Involves a swap 
that is listed on a registered SEF or DCM; (2) occurs away from the 
registered SEF's or DCM's trading system or platform (and is executed 
pursuant to the rules of such SEF or DCM); (3) has a notional or 
principal amount at or above the appropriate minimum block size 
applicable to such swap; and (4) is reported subject to the rules and 
procedures of the SEF or DCM and Commission regulations, including the 
appropriate time delay requirements.\21\ While block transactions are 
conducted pursuant to the rules of a SEF or DCM, by definition these 
transactions occur away from the SEF's or DCM's trading system or 
platform, where there is no pre-trade transparency. If too many trades 
were permitted to be aggregated and thus executable as blocks, the CEA 
objectives of increased transparency and price discovery for swaps 
trading could be undermined.\22\ By prohibiting aggregation of orders 
for different accounts to meet the minimum block size requirement, the 
proposed rule would protect the principles of block trading, and would 
help to prevent potential circumvention of exchange-trading and of the 
real-time reporting obligations associated with non-block transactions. 
By presumption, the aggregation of orders for different accounts to 
meet the minimum block size threshold would be prohibited.
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    \21\ See 77 FR 1,243.
    \22\ J.P. Morgan Comment letter at 5 (Jan. 12, 2011).
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    Indeed, in the futures market, all block trade rules approved by 
the Commission have included an aggregation prohibition (with the 
discrete exception of block trades done through certain CTAs). 
Accordingly, in the futures market, where market participants have 
engaged in block transactions for years, DCMs that permit block trading 
have rules that prohibit the aggregation of orders for different 
trading accounts to meet the minimum block size requirement.\23\
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    \23\ The following DCMs have rules permitting block trading: 
Cantor Futures Exchange, L.P. (rule IV-16); CBOE Futures Exchange 
LLC (rule 415); Chicago Board of Trade (rule 526); CME (rule 526); 
ELX Futures, L.P. (rule IV-16); Eris Exchange, LLC (rule 601); Green 
Exchange, LLC (rule 602); ICE Futures (rule 4.31); Nasdaq OMX 
Futures Exchange, Inc. (rule E23); New York Mercantile Exchange, 
Inc. (rule 526); NYSE Liffe US, LLC (rule 423); and OneChicago LLC 
Futures Exchange (rule 417). Each of the aforementioned DCMs also 
have rules prohibiting aggregation of orders to meet minimum block 
transaction size: Cantor Futures Exchange, L.P. (rule IV-16(K)); 
CBOE Futures Exchange LLC (rule 415(a)(i)); Chicago Board of Trade 
(rule 526A); CME (rule 526A); ELX Futures, L.P. (rule IV-16(a)); 
Eris Exchange, LLC (rule 601(b)(1)); Green Exchange, LLC (rule 
602(a)); ICE Futures (rule 4.31(a)(ii)(B)); Nasdaq OMX Futures 
Exchange, Inc. (rule E23(d)); New York Mercantile Exchange, Inc. 
(rule 526A); NYSE Liffe US, LLC (rule 423(a)(1)); and OneChicago LLC 
Futures Exchange (rule 418(a)(i)).
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    As proposed in this release, the rule also would prohibit 
aggregation in order to meet the cap size requirements. A cap size is 
defined in the Further Proposal as the maximum notional or principal 
amount of a publicly reportable swap transaction that is publicly 
disseminated.\24\ A transaction that meets the cap size requirement 
would be eligible to mask the total size of the transaction if it 
equals or exceeds the cap size for a given swap category.\25\ The 
Commission adopted cap sizes in order to help to protect the anonymity 
of counterparties' market positions and business transactions, and to 
mitigate the potential impact that real-time public reporting of 
extraordinarily large positions could have in reducing market

[[Page 38232]]

liquidity.\26\ By preventing aggregation of orders to meet the cap size 
requirement, the proposed rule will help to ensure that cap sizes are 
used for the specific purpose for which they are intended 
(extraordinarily large positions), and will help to prevent potential 
circumvention of the real-time reporting obligations.
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    \24\ 77 FR 15,516.
    \25\ 77 FR 15,489-90.
    \26\ Id.
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    The proposed rule further provides that aggregation of orders for 
different trading accounts for purposes of the block size or cap size 
requirements may be permitted on a DCM or SEF if done by a person who: 
(i)(A) Is a CTA who is registered pursuant to Section 4n of the Act or 
is exempt from registration under the Act, or a principal thereof, and 
has discretionary trading authority or directs client accounts, (B) is 
an investment adviser who has discretionary trading authority or 
directs client accounts and satisfies the criteria of Sec.  
4.7(a)(2)(v) of the Commission's regulations, or (C) is a foreign 
person who performs a similar role or function to the persons described 
in (A) or (B) and is subject as such to foreign regulation, and (ii) 
has more than $25,000,000 in total AUM. As noted above, DCMs that 
permit block trading in connection with futures contracts currently 
prohibit aggregation of orders to meet the block size requirement, and 
a majority of these DCMs have substantially similar rules that allow 
aggregation in such context if done by certain CTAs, investment 
advisers and foreign persons.\27\
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    \27\ A majority of DCMs currently maintain similar rules 
permitting certain CTAs, investment advisors and foreign persons to 
aggregate. See, e.g., CME Rulebook, rule 526 (providing an exception 
for block transactions by permitting aggregation if done by a CTA 
registered or exempt from registration under the Act, including 
without limitation, any investment adviser registered or exempt from 
registration under the Investment Adviser's Act of 1940 * * * 
provided that such advisers have total AUM exceeding $25 million and 
the block trade is suitable for the customers of such advisors. See 
also, CBOE Futures Exchange LLC (rule 415(a(i)); Chicago Board of 
Trade (rule 526I); CME (rule 526I); ELX Futures, L.P. (rule IV-
16(a)); Eris Exchange, LLC (rule 601(b)(10)); Green Exchange, LLC 
(rule 602(j)); ICE Futures ((rule 4.31(a)(ii)(B)); Nasdaq OMX 
Futures Exchange, Inc., (rule E23); New York Mercantile Exchange, 
Inc. (rule 526I); NYSE Liffe US, LLC (rule 423(a)(i)); and 
OneChicago LLC Futures Exchange (rule 417(a)(i)).
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    The Commission is seeking comments on whether this exception to the 
prohibition of aggregation of orders is appropriate in the context of 
the swaps market. The Commission seeks comments on whether such an 
exception should be available to other categories of Commission 
registrants, and if so, why? Additionally, the Commission seeks 
comments on whether the $25 million AUM requirement for the specified 
account controllers is appropriate in the context of block transactions 
for swaps? Further, the Commission seeks comments on whether the $25 
million AUM requirement should include only swaps assets, or be based 
per asset class, or be different for the five asset classes of swaps? 
In addition to these specific questions, the Commission requests 
comments on all aspects of this notice of proposed rulemaking.

B. Proposed Sec.  43.6(i)--Eligible Block Trade Parties

    The Commission is also proposing under new Sec.  43.6(i)(1) a 
provision that describes the eligible parties to a block trade. The 
proposed provision provides that parties to a block trade must be 
``eligible contract participants,'' as that term is defined under 
Section 1a(18) of the CEA and the Commission's regulations. The 
proposed rule includes an exception to the ECP requirement by providing 
that a DCM may allow: (i) A CTA registered pursuant to Section 4n of 
the Act, or exempt from registration under the Act, or a principal 
thereof, who has discretionary trading authority or directs client 
accounts, (ii) an investment adviser who has discretionary trading 
authority or directs client accounts and satisfies the criteria of 
Sec.  4.7(a)(2)(v) of the Commission's regulations, or (iii) a foreign 
person who performs a similar role or function to the persons described 
in (i) or (ii) and is subject as such to foreign regulation, to 
transact block trades for customers who are not ECPs, if such CTA, 
investment adviser or foreign person has more than $25,000,000 in total 
AUM.\28\
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    \28\ Parties that are non-ECPs may not enter into any swap 
transactions, including blocks, except on or subject to the rules of 
a DCM. Specifically, section 2(e) of the CEA provides that ``[i]t 
shall be unlawful for any person, other than an eligible contract 
participant, to enter into a swap unless the swap is entered into 
on, or subject to the rules of, a board of trade designated as a 
contract market under section 5.'' 7 U.S.C. 2(e).
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    In the current futures market, all DCMs require that parties to 
block trades must be ECPs. A majority of these DCMs permit certain 
CTAs, investment advisers and foreign persons to transact a block trade 
on behalf of their non-ECP customers. The proposed rule, including the 
limited exception, is currently reflected in the rulebooks of numerous 
DCMs that permit block trading in the futures market.\29\
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    \29\ Most DCMs that permit block trading require that parties to 
the block trade must be ECPs with a limited exception for CTAs. The 
following DCMs have rules excepting CTAs from the requirement that 
parties to a block trade must be ECPs: CBOE Futures Exchange LLC 
(rule 415(a)(ii)); Chicago Board of Trade (rule 526I); CME (rule 
526I); ELX Futures, L.P. (rule IV-16(c)); Eris Exchange, LLC (rule 
601(b)(10)); Green Exchange, LLC (rule 602(a) and (j)); ICE Futures 
(rule 4.31(a)(i)); Nasdaq OMX Futures Exchange, Inc., (rule E23(d)); 
New York Mercantile Exchange, Inc. (rule 526I); NYSE Liffe US, LLC 
(rule 423(a)(ii)); and OneChicago LLC Futures Exchange (rule 
417(a)(ii)).
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    Proposed Sec.  43.6(i)(2) further provides that a person 
transacting a block trade on behalf of a customer must receive prior 
written instruction or consent from the customer to do so. Such 
instruction or consent may be provided in a power of attorney or 
similar document by which the customer provides the person with 
discretionary trading authority or the authority to direct the trading 
in its account. This rule also is substantially similar to the block 
trading rules maintained by existing DCMs.

III. Related Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires that agencies 
consider whether the rules they propose will have a significant 
economic impact on a substantial number of small entities and, if so, 
provide a regulatory flexibility analysis respecting the impact.\30\ 
The RFA focuses on direct impact to small businesses and not on 
indirect impacts on these businesses, which may be tenuous and 
difficult to discern.\31\ The CFTC believes that this proposal would 
not have a significant economic impact on a substantial number of small 
entities.
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    \30\ See 5 U.S.C. 601 et seq.
    \31\ See Whitman v. Am. Trucking Ass'ns, 531 U.S. 457 (2001); 
Am. Trucking Assns. v. EPA, 175 F.3d 1027, 1043 (D.C. Cir. 1985); 
Mid-Tex Elec. Coop., Inc. v. FERC, 773 F.2d 327, 340 (DC Cir. 1985).
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1. Effect of the Proposed Rulemaking
    This release proposes a rule that would prohibit the aggregation of 
orders for different trading accounts in order to satisfy the minimum 
block size, or cap size requirement. The proposed rule further provides 
that aggregation is permissible if done on a DCM or SEF by a person 
who: (i)(A) Is a CTA who is registered pursuant to Section 4n of the 
Act, or is exempt from registration under the Act, or a principal 
thereof, and has discretionary trading authority or directs client 
accounts, (B) is an investment adviser who has discretionary trading 
authority or directs client accounts and satisfies the criteria of 
Sec.  4.7(a)(2)(v) of the Commission's regulations, or (C) is a foreign 
person who performs a similar role or function to the persons described 
in (A) or (B) and is subject as such to foreign regulation, and (ii) 
has more than $ 25,000,000 in total AUM.

[[Page 38233]]

    This release also proposes under new Sec.  43.6(i)(1) a provision 
that describes the eligible parties to a block trade. The proposed rule 
provides that parties to a block trade must be ``eligible contract 
participants,'' as that term is defined under Section 1a(18) of the CEA 
and the Commission's regulations. The proposed rule further provides 
that a DCM may allow: (i) A CTA who is registered pursuant to Section 
4n of the Act, or exempt from registration under the Act, or a 
principal thereof, who has discretionary trading authority or directs 
client accounts, (ii) an investment adviser who has discretionary 
trading authority or directs client accounts and satisfies the criteria 
of Sec.  4.7(a)(2)(v) of the Commission's regulations, or (iii) a 
foreign person who performs a similar role or function to the persons 
described in (i) or (ii) and is subject as such to foreign regulation, 
to transact block trades on behalf of their customers who are not 
eligible contract participants, if such CTA, investment adviser or 
foreign person has more than $25,000,000 in total AUM.
    The CFTC is of the view that this proposal may affect primarily the 
following entities: DCMs, futures commission merchants (``FCMs''), 
ECPs, swap dealers, major swap participants, certain CTAs, SEFs and 
certain investment advisers. The majority of entities impacted by this 
proposed rulemaking have been determined by the Commission not to be 
small entities. To the extent that a small number of small entities may 
be affected by the proposed rules, the Commission believes, as 
described below, that the proposed rules would not have a significant 
economic impact on a substantial number of such entities.
2. Specific Entities That May Be Small Entities
    As noted above, the Commission has previously determined that DCMs, 
FCMs, and ECPs are not small entities for purposes of the Regulatory 
Flexibility Act.\32\ Certain other entities that may be affected by 
this rulemaking, including SDs, MSPs and SEFs, have been certified by 
the Commission not to be small entities in other recent rulemakings 
implementing the requirements of the Dodd-Frank Act.\33\
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    \32\ See, respectively and as indicated, 47 FR 18618, 18619, 
Apr. 30, 1982 (DCMs, CPOs, FCMs, and large traders); and, 66 FR 
20740, 20743, Apr. 25, 2001 (ECPs).
    \33\ See respectively, Registration of Swap Dealers and Major 
Swap Participants, 77 FR 2613, 2620 (Jan. 19, 2012) (swap dealers 
and major swap participants); Requirements for Derivatives Clearing 
Organizations, Designated Contract Markets, and Swap Execution 
Facilities Regarding the Mitigation of Conflicts of Interest, 75 FR 
63732, 63746 (Oct. 18, 2010) (SEFs); Further Definition of ``Swap,'' 
``Security-Based Swap,'' and ``Security-Based Swap Agreement''; 
Mixed Swaps; Security-Based Swap Agreement Recordkeeping, 76 FR 
29818, 29868 (May 23, 2011) (Products).
---------------------------------------------------------------------------

    a. Entities affected under Sec.  43.6(h)(6): FCMs, CTAs, and 
investment advisers.
    As noted above, the CFTC previously has determined that registered 
FCMs are not small entities for purposes of the RFA based upon, among 
other things, the registration requirements that FCMs must meet, 
including certain minimum financial requirements that enhance the 
protection of customers' segregated funds and protect the financial 
condition of FCMs generally.\34\ With respect to certain CTAs \35\ and 
investment advisers who would not be permitted to aggregate under the 
proposed rule, the Commission notes that the same provisions embodied 
in the proposed rule are currently required by DCM rules (under rules 
accepted by the Commission) and thus, such entities currently must 
comply with the same aggregation prohibition. Thus, all DCMs that 
permit aggregation for purposes of the block size requirement, only 
permit aggregation by CTAs, investment advisers and foreign persons 
that have more than $25,000,000 in total AUM. Accordingly, the 
Commission believes that this rule does not impact entities that 
heretofore have not been able to aggregate. To the extent that certain 
CTAs and investment advisers with less than $25,000,000 AUM are not 
currently permitted to aggregate, the Commission's codification of 
these rules would not have any significant economic impact on a 
substantial number of small entities.
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    \34\ See supra note 32.
    \35\ The Commission may determine on a case-by-case basis 
whether CTAs are not small entities for the purpose of the RFA based 
upon a case by case determination. See 47 FR 18618, 18620 (Apr. 30, 
1982).
---------------------------------------------------------------------------

    b. Entities affected under Sec.  43.6(i)(1): Certain non-ECP 
participants on DCMs, certain investment advisors, and FCMs.
    New Sec.  43.6(i)(1) provides that parties to a block trade must be 
``eligible contract participants,'' \36\ as that term is defined under 
Section 1a(18) of the CEA and Sec.  1.3 of the Commission's 
regulations, except for certain CTAs, investment advisers or foreign 
persons performing a similar role or function having more than 
$25,000,000 in total AUM, which may transact block trades for customers 
who are not ECPs. As indicated above, certain CTAs and investment 
advisers that have less than $25,000,000 in AUM would not be covered 
under the proposed rule because the provision embodied in the proposed 
rule is substantially the same as is currently required by DCM rules 
(under rules accepted by the Commission). Similarly, any non-ECP 
participants who trade on DCMs also would be prohibited under current 
DCM rules from directly entering into a block transaction unless their 
qualifying CTA, investment adviser, or foreign person acts on their 
behalf. To the extent that these entities are not currently permitted 
to aggregate, the Commission's codification of these rules would not 
have any significant economic impact on a substantial number of small 
entities. Accordingly, the Chairman, on behalf of the Commission, 
hereby certifies pursuant to 5 U.S.C. 605(b) that the proposed rules 
will not have a significant economic impact on a substantial number of 
small businesses. Nonetheless, the Commission specifically requests 
comment on the economic impact that this notice of proposed rulemaking 
may have on small entities.
---------------------------------------------------------------------------

    \36\ ECPs have been determined not to be small entities. See 66 
FR 20740, 20743 (Apr. 25, 2001).
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B. Paperwork Reduction Act

    The purposes of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 
et seq. (``PRA'') are, among other things, to minimize the paperwork 
burden to the private sector, ensure that any collection of information 
by a government agency is put to the greatest possible uses, and 
minimize duplicative information collections across the government.\37\ 
The PRA applies to all information, ``regardless of form or format,'' 
that a government is ``obtaining, causing to be obtained, [or] 
soliciting'' and requires ``disclosure to third parties or the public, 
of facts or opinions,'' when the information collection calls for 
``answers to identical reporting or recordkeeping requirements imposed, 
on ten or more persons[.]'' \38\ The PRA requirements have been 
determined to include not only mandatory but also voluntary information 
collections, and include both written and oral communications.\39\
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    \37\ See 44 U.S.C. 3501.
    \38\ 44 U.S.C. 3502.3(A)(i).
    \39\ See 5 CFR 1320.3(c)(1).
---------------------------------------------------------------------------

    The proposed rules would not impose any new recordkeeping or 
information collection requirements, or other collections of 
information that require approval of the Office of Management and 
Budget (``OMB'') under the PRA. The proposed rules are covered by 
existing collection requirements and would not change existing 
collection

[[Page 38234]]

requirements.\40\ The Commission invites public comment on the accuracy 
of its estimate that no additional recordkeeping or information 
collection requirements or changes to existing collection requirements 
would result from the rules proposed herein.
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    \40\ See 77 FR 1182 (Jan. 9, 2012), as amended by the Further 
Proposal. OMB has assigned control number 3038-0070 to the existing 
collection of information, which is titled ``Part 43--Real-Time 
Public Reporting.''
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 C. Cost-Benefit Considerations

    Section 15(a) of the CEA \41\ requires the Commission to consider 
the costs and benefits of its actions before promulgating a regulation 
or issuing an order under the CEA. Section 15(a) further specifies that 
the costs and benefits shall be evaluated in light of the following 
five broad areas of market and public concern: (1) Protection of market 
participants and the public; (2) efficiency, competitiveness, and 
financial integrity of futures markets; (3) price discovery; (4) sound 
risk management practices; and (5) other public interest 
considerations. The Commission considers the costs and benefits 
resulting from its discretionary determinations with respect to the 
Section 15(a) factors.
---------------------------------------------------------------------------

    \41\ 7 U.S.C. 19(a).
---------------------------------------------------------------------------

    The baseline for the Commission's assessment of costs and benefits 
attributable to its discretionary actions in this rulemaking is the 
costs and benefits that would otherwise exist today (i.e., post-Dodd-
Frank Act enactment) absent this Commission action. The Commission 
recognizes that before the Dodd-Frank Act, swap transactions were 
executed over-the-counter and were not publicly reported. One of the 
implications of the Dodd-Frank Act is that most swap transactions are 
required to be publicly disseminated by SDRs as soon as technologically 
practicable, unless the notional value of the swap transaction meets 
the minimum block trade threshold.\42\ That is the baseline for the 
Commission's proposed assessment of costs and benefits in this release. 
The Commission proposes that costs and benefits with respect to block 
trade thresholds are already accounted for in the Further Proposal and 
that this rule only considers the additional costs and benefits 
relevant to proposed Sec.  43.6(h)(6) and proposed Sec.  43.6(i).
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    \42\ The Commission notes that for an initial interim period, as 
outlined in Sec.  43.5 of the Adopting Release, all transactions 
will be treated as block trades and will enjoy delayed reporting 
temporarily.
---------------------------------------------------------------------------

1. Costs and Benefits Relevant to Proposed Sec.  43.6(h)(6)--
Aggregation
    The Commission is proposing Sec.  43.6(h)(6) to specify that, 
except as otherwise provided, it is impermissible to aggregate orders 
for different accounts in order to satisfy minimum block trade or cap 
size requirements. The proposed rule further provides that aggregation 
may be permitted on a DCM or SEF if done by a person who: (i)(A) Is a 
CTA who is registered pursuant to Section 4n of the Act or is exempt 
from registration under the Act, or a principal thereof, and has 
discretionary trading authority or directs client accounts, (B) is an 
investment adviser who has discretionary trading authority or directs 
client accounts and satisfies the criteria of Sec.  4.7(a)(2)(v) of the 
Commission's regulations, or (C) is a foreign person who performs a 
role or function similar to the persons described in (A) or (B) and is 
subject as such to foreign regulation, and (ii) has more than 
$25,000,000 in total AUM.
Costs
    The Commission expects that there will be some incremental cost 
attendant to compliance with proposed Sec.  43.6(h)(6), and seeks data 
from the public in order to quantify the same. The Commission believes 
that the overall benefits to the market of allowing for the aggregation 
of orders under certain circumstances (i.e., if done on a designated 
contract market or a swap execution facility by certain CTAs, 
investment advisers or foreign persons) will mitigate costs of reduced 
market liquidity that could result from execution of such transactions 
away from the centralized marketplace. The Commission also expects 
there to be some advisors who will be prohibited from aggregating 
orders for different trading accounts in order to satisfy the minimum 
block size, or cap size requirements. The Commission also proposes that 
as a result of some advisors not being allowed to aggregate, there 
might be some minimal unquantifiable cost associated with a decrease in 
competition among such traders in the market. The Commission seeks 
comment on these and any other costs that may result from this 
proposal. In particular, and as noted above, the WMBA claimed in its 
comment letter that ``work-up'' or ``join-the-trade'' periods be 
permitted to satisfy the block trade requirements, and that ``the 
public dissemination of incremental activity that would otherwise 
constitute a block trade could jeopardize identification of 
counterparties and materially reduce market liquidity.'' \43\ The 
Commission seeks comment on the costs and benefits of the rules 
proposed in this release with respect to the specific implications 
claimed by WMBA.
---------------------------------------------------------------------------

    \43\ WMBA comment letter at 4-5 (Feb. 7, 2011).
---------------------------------------------------------------------------

Benefits
    The proposed rule is designed, in large part, to prevent 
circumvention of the exchange trading requirements and of the real-time 
reporting obligations associated with non-block transactions. Absent 
this prohibition, the goals of the Commission's regulations regarding 
block trading, namely increased transaction transparency, better price 
discovery and improved competitiveness in the markets as well as better 
risk management, could be frustrated by those whose trades individually 
fail to meet the minimum block trade threshold (and cap size threshold 
as a result), but nevertheless achieve the benefits intended for 
extraordinarily large positions by aggregating those individual trades. 
In other words, such entities would be able to evade the exchange-
trading and reporting obligations that are integral to price 
transparency. The Commission seeks comment on these and any other 
benefits that may result from this proposal.
Section 15(a) Factors
    (1) Protection of market participants and the public.
    The Commission believes that the proposed rule would protect market 
participants from unfair practices by preventing trades that do not 
meet the minimum block trade threshold from enjoying extended reporting 
times. This requirement would mean that trades that are not 
extraordinarily large, and hence, that do not need extra reporting time 
would not qualify as block trades and would be made public as soon as 
technologically practicable. Hence, the proposed rule would increase 
transparency of non-block transactions, and thus, would protect market 
participants by informing their trading determinations through 
increased transparency and price discovery.
    (2) Efficiency, competitiveness, and financial integrity of the 
futures markets.
    The Commission expects the prohibition of aggregation of trades to 
improve efficiency and competitiveness in the markets by allowing more 
trades to be reported without the time delay that is applied to 
qualifying block trades. This requirement would mean that a higher 
number of trades would be eligible for real time reporting, and that

[[Page 38235]]

would increase market transparency as well as promote competition in 
the swap markets. The rule also would protect the integrity of the 
derivatives market by ensuring that smaller trades, which do not 
qualify as block transactions, are executed on the trading system where 
there is pre-trade and post-trade transparency.
    The Commission also recognizes that advisors who are prohibited 
from aggregating orders in order to satisfy the minimum block size or 
cap size requirements might not trade at the most favorable prices in 
the market, which might have a negative effect on the number of such 
traders in the market. While the Commission expects that competition in 
the market may be negatively affected as a result of prohibiting 
aggregation, the Commission anticipates that the positive effects of 
the proposed rule on competition outweigh its negative effects.
    (3) Price discovery.
    The Commission expects the proposed rule to improve price discovery 
in the swap markets by preventing aggregation of trades and as a result 
promoting more trades to be publicly reported as soon as 
technologically practicable. This would result in enhanced swap market 
price discovery, since market participants and the public would be able 
to observe real-time pricing information for a higher percentage of 
transactions in the market. In addition, the Commission expects that 
the rule would enhance price discovery by ensuring that smaller trades, 
which do not qualify as block transactions, are executed on the trading 
system where there is pre-trade and post-trade transparency and where 
buyers and sellers may make informed trading decisions based on the 
market's transparency.
    (4) Sound risk management practices.
    The Commission anticipates that the proposed criteria, if adopted, 
would likely result in enhanced price discovery as discussed above. 
With better and more accurate data, swap market participants would 
likely be better able to measure and manage risk. The Commission 
proposes that if the prohibition of aggregation of trades was not 
adopted, swap transactions may not be reported to an SDR ``as soon as 
technologically practicable.'' The Commission also proposes that by 
preventing this delay in the reporting period of a swap transaction to 
an SDR, the Commission will possess the information it needs to monitor 
the transfer and positions of risk among counterparties in the swaps 
market.
    (5) Other public interest considerations.
    The Commission has not identified any other public interest 
considerations regarding the proposed rule.
2. Costs and Benefits Relevant to Proposed Sec.  43.6(i)--Eligible 
Block Trade Parties
Costs
    Proposed Sec.  43.6(i)(1) requires that parties to a block trade 
must be eligible contract participants, as defined under the CEA and 
Commission regulations, except that a DCM may allow: (i) A CTA 
registered pursuant to Section 4n of the Act or exempt from 
registration under the Act, or a principal thereof, and who has 
discretionary trading authority or directs client accounts, (ii) an 
investment adviser who has discretionary trading authority or directs 
client accounts and satisfies the criteria of Sec.  4.7(a)(2)(v) of the 
Commission's regulations, or (iii) a foreign person who performs a 
similar role or function to the persons described in (i) or (ii) and is 
subject as such to foreign regulation, to transact block trades for 
customers who are not eligible contract participants, if such CTA, 
investment adviser or foreign person has more than $25,000,000 in total 
AUM. This proposed rule codifies, in part, the requirement under 
Section 2(e) of the CEA, which requires that ``[i]t shall be unlawful 
for any person, other than an eligible contract participant, to enter 
into a swap unless the swap is entered into on, or subject to the rules 
of * * * a designated contract market.'' In addition, the provisions 
allowing certain entities (as described in this release) to enter into 
block trades on behalf of their non-ECP customers on DCMs is 
substantially similar to the existing DCM rules that allow block 
trading in the futures market.
    Proposed Sec.  43.6(i)(2) further provides that no person may 
conduct a block trade on behalf of a customer unless the person 
receives prior written instruction or consent to do so. The proposed 
rule further provides that such instruction or consent may be provided 
in the power of attorney or similar document by which the customer 
provides the person with discretionary trading authority or the 
authority to direct the trading in its account. The Commission is of 
the view that the cost associated with the written instruction or 
consent is minimal. The Commission estimates that a prior written 
instruction or consent requirement would impose an initial non-
recurring burden of approximately 2 personnel hours at an approximate 
cost of $155.54 for each CTA, investment adviser or foreign person.\44\
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    \44\ Using wage rate estimates based on salary information for 
the securities industry compiled by the Securities Industry and 
Financial Markets Association (``SIFMA''), the estimate is 
calculated as follows: Compliance manager at 2 hours. A senior 
programmer's adjusted hourly wage is $77.77, estimated using the 
following calculations:
    (1) [(2009 salary + bonus) * (salary growth per professional 
type, 2009-2010)] = Estimated 2010 total annual compensation. The 
most recent data provided by the SIFMA report describe the 2009 
total compensation (salary + bonus) by professional type, the growth 
in base salary from 2009 to 2010 for each professional type, and the 
2010 base salary for each professional type; thus, the Commission 
estimated the 2010 total compensation for each professional type, 
but, in the absence of similarly granular data on salary growth or 
compensation from 2010 to 2011 and beyond, did not estimate dollar 
costs beyond 2010.
    (2) [(Estimated 2010 total annual compensation)/(1,800 annual 
work hours)] = Hourly wage per professional type.
    (3) [(Hourly wage) * (Adjustment factor for overhead and other 
benefits, which the Commission has estimated to be 1.3)] = Adjusted 
hourly wage per professional type.
    (4) [(Adjusted hourly wage) * (Estimated hour burden for 
compliance)] = Dollar cost of compliance for each hour burden 
estimate per professional type.
---------------------------------------------------------------------------

Benefits
    The Commission has determined that the benefits of proposed Sec.  
43.6(i) are significant. The proposed rule, if adopted, would allow 
customers who are not ECPs to engage in block trade transactions 
through certain entities as outlined in the rule. By permitting certain 
CTAs, investment advisers and foreign persons to transact swaps on 
behalf of non-ECP customers, the rule provides important safeguards for 
non-ECPs when entering into block transactions in swaps. The Commission 
believes that access to block trades would allow customers who are not 
ECPs to diversify their risk or improve their investment strategies. In 
addition, the Commission also anticipates the access to block trades 
for non-ECPs to increase their participation in swap markets, 
increasing liquidity in the markets for everyone.
Section 15(a) Factors
    (1) Protection of market participants and the public.
    The Commission does not anticipate the proposed rule to have any 
significant effect on the protection of market participants and the 
public.
    (2) Efficiency, competitiveness, and financial integrity of the 
futures markets.
    The Commission expects the proposed rule to improve competitiveness 
in the markets by allowing customers who are not ECPs to have access to 
block trades through certain CTAs, investment advisers and

[[Page 38236]]

foreign persons. The Commission anticipates an increase in 
competitiveness due to the fact that more customers would use the swap 
markets as a result of this rule. An increased participation in a 
market would also serve to increase liquidity, as well as competition, 
in that market.
    (3) Price discovery.
    The Commission does not anticipate the proposed rule to have any 
significant effect on price discovery in the market.
    (4) Sound risk management practices.
    The Commission does not anticipate the proposed rule to have any 
significant effect on risk management practices.
    (5) Other public interest considerations.
    The Commission has not identified any other public interest 
considerations regarding the proposed rule.
    The Commission requests comments on its cost and benefit 
considerations with respect to the proposed rule, and any alternatives. 
The Commission specifically requests that commenters provide data from 
which the Commission may quantify the costs or benefits of the proposed 
rule.

IV. Rule Text

List of Subjects in 17 CFR Part 43

    Large notional off-facility trades, Block trades, Appropriate 
minimum block sizes, Real-time public reporting, Public dissemination, 
Cap size, Anonymity, Swap category.

    For the reasons stated in the preamble, the Commodity Futures 
Trading Commission proposes to amend 17 CFR part 43 as set forth below:

PART 43--[AMENDED]

    1. The authority citation for part 43 shall continue to read as 
follows:

    Authority:  7 U.S.C. 2(a), 12a(5) and 24a, amended by Pub. L. 
111-203, 124 Stat. 1376 (2010).

    2. Add section 43.6(h)(6) to part 43 to read as follows:


Sec.  43.6(h)(6)  Aggregation.

    Except as otherwise stated in this paragraph, the aggregation of 
orders for different accounts in order to satisfy the minimum block 
trade size or the cap size requirement is prohibited. Aggregation is 
permissible on a designated contract market or swap execution facility 
if done by a person who:
    (i)(A) Is a commodity trading advisor registered pursuant to 
Section 4n of the Act, or exempt from registration under the Act, or a 
principal thereof, who has discretionary trading authority or directs 
client accounts,
    (B) Is an investment adviser who has discretionary trading 
authority or directs client accounts and satisfies the criteria of 
Sec.  4.7(a)(2)(v) of this chapter, or
    (C) Is a foreign person who performs a similar role or function as 
the persons described in subparagraphs (A) or (B) and is subject as 
such to foreign regulation; and,
    (ii) Has more than $25,000,000 in total assets under management.
    3. Add Section 43.6(i) to part 43 to read as follows:


Sec.  43.6(i)  Eligible Block Trade Parties.

    (1) Parties to a block trade must be ``eligible contract 
participants,'' as defined in Section 1a(18) of the Act and the 
Commission's regulations. However, a designated contract market may 
allow: (i) A commodity trading advisor registered pursuant to Section 
4n of the Act, or exempt from registration under the Act, or a 
principal thereof, who has discretionary trading authority or directs 
client accounts, (ii) an investment adviser who has discretionary 
trading authority or directs client accounts and satisfies the criteria 
of Sec.  4.7(a)(2)(v) of this chapter, or (iii) a foreign person who 
performs a similar role or function as the persons described in (i) or 
(ii) of this paragraph and is subject as such to foreign regulation, to 
transact block trades for customers who are not eligible contract 
participants if such commodity trading advisor, investment adviser or 
foreign person has more than $25,000,000 in total assets under 
management.
    (2) A person transacting a block trade on behalf of a customer must 
receive prior written instruction or consent from the customer to do 
so. Such instruction or consent may be provided in the power of 
attorney or similar document by which the customer provides the person 
with discretionary trading authority or the authority to direct the 
trading in its account.

    Issued in Washington, DC, on June 20, 2012, by the Commission.
David A. Stawick,
Secretary of the Commission.

Appendix to Rules Prohibiting the Aggregation of Orders To Satisfy 
Minimum Block Sizes or Cap Size Requirements, and Establishing 
Eligibility Requirements for Parties to Block Trades

Commission Voting Summary

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

    On this matter, Chairman Gensler and Commissioners Sommers, 
Chilton, O'Malia and Wetjen voted in the affirmative; no 
Commissioner voted in the negative.

[FR Doc. 2012-15481 Filed 6-26-12; 8:45 am]
BILLING CODE 6351-01-P