Appendix to Part 48 - Form FBOT
17:2.0.1.1.7.0.1.12.10 :
Appendix to Part 48 - Form FBOT COMMODITY FUTURES TRADING
COMMISSION FORM FBOT FOREIGN BOARD OF TRADE APPLICATION FOR
REGISTRATION (IN ORDER TO PERMIT DIRECT ACCESS TO MEMBERS AND OTHER
PARTICIPANTS) APPLICATION INSTRUCTIONS DEFINITIONS
1. Unless the context requires otherwise, all terms used in this
application have the same meaning as in the Commodity Exchange Act,
as amended (CEA or Act), 1 and in the regulations of the Commodity
Futures Trading Commission (Commission or CFTC). 2
1 7 U.S.C. 1 et seq.
2 17 CFR chapter I.
2. For the purposes of this Form FBOT, the term “applicant”
refers to the foreign board of trade applying for registration
pursuant to CEA section 4(b) and part 48 of the Commission's
regulations. The term “clearing organization” refers to the
clearing organization that will be clearing trades executed on the
trading system of such foreign board of trade.
GENERAL INSTRUCTIONS
1. A Form FBOT (including exhibits) shall be completed by any
foreign board of trade applying for registration with the
Commission pursuant to CEA section 4(b) and part 48 of the
Commission's regulations.
2. Form FBOT (including exhibits and any supplement thereto)
(collectively, the “application” or “application for registration”)
must be filed electronically with the Secretary of the Commission
at [email protected]. Applicants may prepare their
own Form FBOT, but must follow the format prescribed herein.
3. The name of any individual listed in Form FBOT shall be
provided in full (Last Name, First Name and Middle Name or
Initial).
4. Form FBOT must be signed by the Chief Executive Officer (or
the functional equivalent) of the foreign board of trade who must
possess the authority to bind the foreign board of trade.
5. If this Form FBOT is being filed as a new application for
registration, all applicable items on the Form FBOT must be
answered in full. Non-applicable items should be indicated by
marking “none” or “N/A.”
6. Submission of a complete Form FBOT (including all
information, documentation and exhibits requested therein, and any
required supplement) is mandatory and must be received by the
Commission before it will begin to process a foreign board of
trade's application for registration. The information provided with
a Form FBOT (including exhibits and any supplement thereto) will be
used to determine whether the Commission should approve or deny
registration to an applicant. Pursuant to its regulations, the
Commission may determine that information and/or documentation in
addition to that requested in the Form FBOT is required from the
applicant in order to process the application for registration or
to determine whether registration is appropriate.
7. Pursuant to Commission regulations, an applicant or its
clearing organization must identify with particularity any
information in the application (including, but not limited to, any
information contained in this Form FBOT) that will be the subject
of a request for confidential treatment and must provide support
for any request for confidential treatment pursuant to the
procedures set forth in Commission regulation 145.9. 3 Except in
cases where confidential treatment is granted by the Commission
pursuant to the Freedom of Information Act and Commission
regulations, information supplied in the Form FBOT (including
exhibits and any supplement thereto) will be included routinely in
the public files of the Commission and will be available for
inspection and comment by any interested person.
3 17 CFR 145.9.
8. A Form FBOT that is not prepared and executed in compliance
with applicable requirements and instructions may be returned as
not acceptable for filing. 4 Acceptance of a Form FBOT by the
Commission, however, shall not constitute a finding that the Form
FBOT has been filed as required or that the information submitted
is verified to be true, current, or complete. The Commission may
revoke a foreign board of trade's registration, after appropriate
notice and an opportunity to respond, if the Commission determines
that a representation made in this Form FBOT is found to be untrue
or materially misleading or if the foreign board of trade failed to
include information in this Form FBOT that would have been material
to the Commission's determination as to whether to issue an Order
of Registration.
4 Applicants and their clearing organizations are encouraged to
correspond with the Commission's Division of Market Oversight
regarding any content, procedural, or formatting questions
encountered in connection with the preparation of a Form FBOT, or
any exhibits or supplements thereto, prior to formally submitting
those documents to the Commission. When appropriate, potential
applicants and clearing organizations, as applicable, may provide a
complete draft Form FBOT (including exhibits and any required
supplement) to the Division of Market Oversight for early review to
minimize the risk of having a submission returned or otherwise
denied as not acceptable for filing. Review of draft submissions by
any division of the Commission and any comments provided by a
division of the Commission are for consultation purposes only and
do not bind the Commission. To obtain instructions for submitting
drafts, please contact the Division of Market Oversight.
9. In addition to this Form FBOT, the clearing organization
associated with the foreign board of trade must complete and submit
Supplement S-1 to this Form FBOT in accordance with the
instructions thereto. To the extent a single document or
description is responsive to more than one request for the same
information in either the Form FBOT or the Supplement S-1, the
document or description need only be provided once and may be
cross-referenced elsewhere.
10. All documents submitted as part of this Form FBOT (or
exhibits thereto) must be written in English or accompanied by a
certified English translation.
UPDATING INFORMATION ON THE FORM FBOT
Pursuant to the Commission's regulations, if any information or
documentation contained in this Form FBOT (including exhibits or
any supplement or amendment thereto) is or becomes inaccurate for
any reason prior to the issuance of an Order of Registration, an
amendment correcting such information must be filed promptly with
the Commission. A registered foreign board of trade also may submit
an amendment to this Form FBOT to correct information that has
become inaccurate subsequent to the receipt of an Order of
Registration.
INSTRUCTIONS FOR
EXHIBITS TO FORM FBOT
1. The following exhibits must be filed with the Commission by
any foreign board of trade (1) seeking registration for purposes of
granting direct access to its members and other participants or (2)
amending a previously submitted application, pursuant to CEA
section 4(b) and part 48 of the Commission's regulations. The
information and documentation requested relates to the activities
of the foreign board of trade, unless otherwise stated.
2. The exhibits should be filed in accordance with the General
Instructions to this Form FBOT and labeled as specified herein. If
any exhibit is not applicable, please specify the exhibit letter
and number and indicate by marking “none” or “N/A.” If any exhibit
may be satisfied by documentation or information submitted in a
different exhibit, the documentation or information need not be
submitted more than once - please use internal cross-references
where appropriate.
GENERAL REQUIREMENTS
A foreign board of trade applying for registration must submit
sufficient information and documentation to successfully
demonstrate to Commission staff that the foreign board of trade and
its clearing organization satisfy all of the requirements of
Commission regulation 48.7. With respect to its review of the
foreign board of trade, the Commission anticipates that such
information and documentation would necessarily include, but not be
limited to, the following:
EXHIBIT A - GENERAL INFORMATION AND DOCUMENTATION
Attach, as Exhibit A-1, a description of the following for the
foreign board of trade: Location, history, size, ownership and
corporate structure, governance and committee structure, current or
anticipated presence of offices or staff in the United States, and
anticipated volume of business emanating from members and other
participants that will be provided direct access to the foreign
board of trade's trading system.
Attach, as Exhibit A-2, the following:
Articles of association, constitution, or other similar
organizational documents.
Attach, as Exhibit A-3, the following:
(1) Membership and trading participant agreements.
(2) Clearing agreements.
Attach, as Exhibit A-4, the following:
Terms and conditions of contracts to be available through direct
access (as specified in Exhibit E).
Attach, as Exhibit A-5, the following:
The national statutes, laws and regulations governing the
activities of the foreign board of trade and its respective
participants.
Attach, as Exhibit A-6, the following:
The current rules, regulations, guidelines and bylaws of the
foreign board of trade.
Attach, as Exhibit A-7, the following:
Evidence of the authorization, licensure or registration of the
foreign board of trade pursuant to the regulatory regime in its
home country jurisdiction and a representation by its regulator(s)
that it is in good regulatory standing in the capacity in which it
is authorized, licensed or registered.
Attach, as Exhibit A-8, the following document:
A summary of any disciplinary or enforcement actions or
proceedings that have been brought against the foreign board of
trade, or any of the senior officers thereof, in the past five
years and the resolution of those actions or proceedings.
Attach, as Exhibit A-9, the following document:
An undertaking by the chief executive officer(s) (or functional
equivalent[s]) of the foreign board of trade to notify Commission
staff promptly if any of the representations made in connection
with or related to the foreign board of trade's application for
registration cease to be true or correct, or become incomplete or
misleading.
EXHIBIT B - MEMBERSHIP CRITERIA
Attach, as Exhibit B, the following, separately labeling each
description:
(1) A description of the categories of membership and
participation in the foreign board of trade and the access and
trading privileges provided by the foreign board of trade. The
description should include any restrictions applicable to members
and other participants to which the foreign board of trade intends
to grant direct access to its trading system.
(2) A description of all requirements for each category of
membership and participation on the trading system and the manner
in which members and other participants are required to demonstrate
their compliance with these requirements. The description should
include, but not be limited to, the following:
(i) Professional Qualification. A description of the specific
professional requirements, qualifications, and/or competencies
required of members or other participants and/or their staff and a
description of the process by which the foreign board of trade
confirms compliance with such requirements.
(ii) Authorization, Licensure and Registration. A description of
any regulatory and self-regulatory authorization, licensure or
registration requirements that the foreign board of trade imposes
upon, or enforces against, its members and other participants
including, but not limited to any authorization, licensure or
registration requirements imposed by the regulatory
regime/authority in the home country jurisdiction(s) of the foreign
board of trade. Please also include a description of the process by
which the foreign board of trade confirms compliance with such
requirements.
(iii) Financial Integrity. A description of the following:
(A) The financial resource requirements, standards, guides or
thresholds required of members and other participants.
(B) The manner in which the foreign board of trade evaluates the
financial resources/holdings of its members or participants.
(C) The process by which applicants demonstrate compliance with
financial requirements for membership or participation including,
as applicable:
(i) Working capital and collateral requirements, and
(ii) Risk management mechanisms for members allowing
customers to place orders.
(iv) Fit and Proper Standards. A description of how the foreign
board of trade ensures that potential members/other participants
meet fit and proper standards.
EXHIBIT C - BOARD AND/OR COMMITTEE MEMBERSHIP
Attach, as Exhibit C, the following:
(1) A description of the requirements applicable to membership
on the governing board and significant committees of the foreign
board of trade.
(2) A description of the process by which the foreign board of
trade ensures that potential governing board and committee
members/other participants meet these standards.
(3) A description of the provisions to minimize and resolve
conflicts of interest with respect to membership on the governing
board and significant committees of the foreign board of trade.
(4) A description of the rules with respect to the disclosure of
material non-public information obtained as a result of a member's
or other participant's performance on the governing board or
significant committee.
EXHIBIT D - THE AUTOMATED TRADING SYSTEM
Attach, as Exhibit D-1, a description of (or where appropriate,
documentation addressing) the following, separately labeling each
description:
(1) The order matching/trade execution system, including a
complete description of all permitted ways in which members or
other participants (or their customers) may connect to the trade
matching/execution system and the related requirements (for
example, authorization agreements).
(2) The architecture of the systems, including hardware and
distribution network, as well as any pre- and post-trade
risk-management controls that are made available to system
users.
(3) The security features of the systems.
(4) The length of time such systems have been operating.
(5) Any significant system failures or interruptions.
(6) The nature of any technical review of the order
matching/trade execution system performed by the foreign board of
trade, the home country regulator, or a third party.
(7) Trading hours.
(8) Types and duration of orders accepted.
(9) Information that must be included on orders.
(10) Trade confirmation and error trade procedures.
(11) Anonymity of participants.
(12) Trading system connectivity with clearing system.
(13) Response time.
(14) Ability to determine depth of market.
(15) Market continuity provisions.
(16) Reporting and recordkeeping requirements.
Attach, as Exhibit D-2, a description of the manner in which the
foreign board of trade assures the following with respect to the
trading system, separately labeling each description:
(1) Algorithm. The trade matching algorithm matches trades
fairly and timely.
(2) IOSCO Principles. The trading system complies with the
Principles for the Oversight of Screen-Based Trading Systems for
Derivative Products developed by the Technical Committee of the
International Organization of Securities Commissions (IOSCO
Principles). Provide a copy of any independent certification
received or self-certification performed and identify any system
deficiencies with respect to the IOSCO Principles.
(3) Audit Trail.
(i) The audit trail timely captures all relevant data, including
changes to orders.
(ii) Audit trail data is securely maintained and available for
an adequate time period.
(4) Public Data. Adequate and appropriate trade data is
available to users and the public.
(5) Reliability. The trading system has demonstrated
reliability.
(6) Secure Access. Access to the trading system is secure and
protected.
(7) Emergency Provisions. There are adequate provisions for
emergency operations and disaster recovery.
(8) Data Loss Prevention. Trading data is backed up to prevent
loss of data.
(9) Contracts Available. Mechanisms are available to ensure that
only those futures, option or swap contracts that have been
identified to the Commission as part of the application or
permitted to be made available for trading by direct access
pursuant to the procedures set forth in § 48.10 are made available
for trading by direct access.
(10) Predominance of the Centralized Market. Mechanisms are
available that ensure a competitive, open, and efficient market and
mechanism for executing transactions.
EXHIBIT E - THE TERMS AND CONDITIONS OF CONTRACTS PROPOSED TO BE
MADE AVAILABLE IN THE UNITED STATES
Attach, as Exhibit E-1, a description of the terms and
conditions of futures, option or swap contracts intended to be made
available for direct access. With respect to each contract,
indicate whether the contract is regulated or otherwise treated as
a futures, option or swap contract in the regulatory regime(s) of
the foreign board of trade's home country.
As Exhibit E-2, demonstrate that the contracts are not
prohibited from being traded by United States persons, i.e.,
the contracts are not prohibited security futures or single stock
contracts or narrow-based index contracts. For non-narrow based
stock index futures contracts, demonstrate that the contracts have
received Commission certification pursuant to the procedures set
forth in § 30.13 and appendix D to part 30 of this chapter.
As Exhibit E-3, demonstrate that the contracts are required to
be cleared.
As Exhibit E-4, identify any contracts that are linked to a
contract listed for trading on a United States-registered entity,
as defined in section 1a(40) of the Act. A linked contract is a
contract that settles against any price (including the daily or
final settlement price) of one or more contracts listed for trading
on such registered entity.
As Exhibit E-5, identify any contracts that have any other
relationship with a contract listed for trading on a registered
entity, i.e., both the foreign board of trade's and the
registered entity's contract settle to the price of the same third
party-constructed index.
As Exhibit E-6, demonstrate that the contracts are not readily
susceptible to manipulation. In addition, for each contract to be
listed, describe each investigation, action, proceeding or case
involving manipulation and involving such contract in the three
years preceding the application date, whether initiated by the
foreign board of trade, a regulatory or self-regulatory authority
or agency or other government or prosecutorial agency. For each
such action, proceeding or case, describe the alleged manipulative
activity and the current status or resolution thereof.
EXHIBIT F - THE REGULATORY REGIME GOVERNING THE FOREIGN BOARD OF
TRADE IN ITS HOME COUNTRY 5 OR COUNTRIES
With respect to each relevant regulatory regime or authority
governing the foreign board of trade, attach, as Exhibit F, the
following (including, where appropriate, an indication as to
whether the applicable regulatory regime is dependent on the home
country's classification of the product being traded on the foreign
board of trade as a future, option, swap, or otherwise, and a
description of any difference between the applicable regulatory
regime for each product classification type):
5 Where multiple foreign boards of trade subject to the same
regulatory regime/authority and are similarly regulated are
applying for registration at the same time, a single Exhibit
E-1 may be submitted as part of the application for all such
foreign boards of trade either by one of the applicant foreign
boards of trade or by the regulatory regime/authority with
responsibility to oversee each of the multiple foreign boards of
trade applying for registration. Where an FBOT applying for
registration is located in the same jurisdiction and subject to the
same regulatory regime as a registered FBOT, the FBOT applying for
registration may include by reference, as part of its application,
information about the regulatory regime that is posted on the
Commission's Web site. The FBOT applying for registration must
certify that the information thus included in the application is
directly applicable to it and remains current and valid.
(1) A description of the regulatory regime/authority's
structure, resources, staff, and scope of authority; the regulatory
regime/authority's authorizing statutes, including the source of
its authority to supervise the foreign board of trade; the rules
and policy statements issued by the regulator with respect to the
authorization and continuing oversight of markets, electronic
trading systems, and clearing organizations; and the financial
protections afforded customer funds.
(2) A description of and, where applicable, copies of the laws,
rules, regulations and policies applicable to: 6
6 To the extent that any such laws, rules, regulations or
policies were provided as part of Exhibit A-5, they need not be
duplicated. They may be cross-referenced.
(i) The authorization, licensure or registration of the foreign
board of trade.
(ii) The regulatory regime/authority's program for the ongoing
supervision and oversight of the foreign board of trade and the
enforcement of its trading rules.
(iii) The financial resource requirements applicable to the
authorization, licensure or registration of the foreign board of
trade and the continued operations thereof.
(iv) The extent to which the IOSCO Principles are used or
applied by the regulatory regime/authority in its supervision and
oversight of the foreign board of trade or are incorporated into
its rules and regulations and the extent to which the regulatory
regime/authority reviews the applicable trading systems for
compliance therewith.
(v) The extent to which the regulatory regime/authority reviews
and/or approves the trading rules of the foreign board of trade
prior to their implementation.
(vi) The extent to which the regulatory regime/authority reviews
and/or approves futures, option or swap contracts prior to their
being listed for trading.
(vii) The regulatory regime/authority's approach to the
detection and deterrence of abusive trading practices, market
manipulation, and other unfair trading practices or disruptions of
the market.
(3) A description of the laws, rules, regulations and policies
that govern the authorization and ongoing supervision and oversight
of market intermediaries who may deal with members and other
participants located in the United States participants,
including:
(i) Recordkeeping requirements.
(ii) The protection of customer funds.
(iii) Procedures for dealing with the failure of a market
intermediary in order to minimize damage and loss to investors and
to contain systemic risk.
(4) A description of the regulatory regime/authority's
inspection, investigation and surveillance powers; and the program
pursuant to which the regulatory regime/authority uses those powers
to inspect, investigate, and enforce rules applicable to the
foreign board of trade.
(5) For both the foreign board of trade and the clearing
organization (unless addressed in Supplement S-1), a report
confirming that the foreign board of trade and clearing
organization are in regulatory good standing, which report should
be prepared subsequent to consulting with the regulatory
regime/authority governing the activities of the foreign board of
trade and any associated clearing organization. The report should
include:
(i) Confirmation of regulatory status (including proper
authorization, licensure and registration) of the foreign board of
trade and clearing organization.
(ii) Any recent oversight reports generated by the regulatory
regime/authority that are, in the judgment of the regulatory
regime/authority, relevant to the foreign board of trade's status
as a registered foreign board of trade.
(iii) Disclosure of any significant regulatory concerns,
inquiries or investigations by the regulatory regime/authority,
including any concerns, inquiries or investigations with regard to
the foreign board of trade's arrangements to monitor trading by
members or other participants located in the United States or the
adequacy of the risk management controls of the trading or of the
clearing system.
(iv) A description of any investigations (formal or informal) or
disciplinary actions initiated by the regulatory regime/authority
or any other self-regulatory, regulatory or governmental entity
against the foreign board of trade, the clearing organization or
any of their respective senior officers during the past year.
(6) For both the foreign board of trade and the clearing
organization (unless addressed in Supplement S-1), a confirmation
that the regulatory regime/authority governing the activities of
the foreign board of trade and the clearing organization agree to
cooperate with a Commission staff visit subsequent to submission of
the application on an “as needed basis,” the objectives of which
will be to, among other things, familiarize Commission staff with
supervisory staff of the regulatory regime/authority; discuss the
laws, rules and regulations that formed the basis of the
application and any changes thereto; discuss the cooperation and
coordination between the authorities, including, without
limitation, information sharing arrangements; and discuss issues of
concern as they may develop from time to time (for example, linked
contracts or unusual trading that may be of concern to Commission
surveillance staff).
EXHIBIT G - THE RULES OF THE FOREIGN BOARD OF TRADE AND ENFORCEMENT
THEREOF
Attach, as Exhibit G-1, the following:
A description of the foreign board of trade's regulatory or
compliance department, including its size, experience level,
competencies, duties and responsibilities.
Attach, as Exhibit G-2, the following:
A description of the foreign board of trade's trade practice
rules, including but not limited to rules that address the
following -
(1) Capacity of the foreign board of trade to detect,
investigate, and sanction persons who violate foreign board of
trade rules.
(2) Prohibition of fraud and abuse, as well as abusive trading
practices including, but not limited to, wash sales and trading
ahead, and other market abuses.
(3) A trade surveillance system appropriate to the foreign board
of trade and capable of detecting and investigating potential trade
practice violations.
(4) An audit trail that captures and retains sufficient order
and trade-related data to allow the compliance staff to detect
trading and market abuses and to reconstruct all transactions
within a reasonable period of time.
(5) Appropriate resources to conduct real-time supervision of
trading.
(6) Sufficient compliance staff and resources, including those
outsourced or delegated to third parties, to fulfill regulatory
responsibilities.
(7) Rules that authorize compliance staff to obtain, from market
participants, information and cooperation necessary to conduct
effective rule enforcement and investigations.
(8) Staff investigations and investigation reports demonstrating
that the compliance staff investigates suspected rule violations
and prepares reports of their finding and recommendations.
(9) Rules determining access requirements with respect to the
persons that may trade on the foreign board of trade, and the means
by which they connect to it.
(10) The requirement that market participants submit to the
foreign board of trade's jurisdiction as a condition of access to
the market.
Attach, as Exhibit G-3, the following:
A description of the foreign board of trade's disciplinary
rules, including but not limited to rules that address the
following -
(1) Disciplinary authority and procedures that empower staff to
recommend and prosecute disciplinary actions for suspected rule
violations and that provide the authority to fine, suspend, or
expel any market participant pursuant to fair and clear
standards.
(2) The issuance of warning letters and/or summary fines for
specified rule violations.
(3) The review of investigation reports by a disciplinary panel
or other authority for issuance of charges or instructions to
investigate further, or findings that an insufficient basis exists
to issue charges.
(4) Disciplinary committees of the foreign board of trade that
take disciplinary action via formal disciplinary processes.
(5) Whether and how the foreign board of trade articulates its
rationale for disciplinary decisions.
(6) The sanctions for particular violations and a discussion of
the adequacy of sanctions with respect to the violations committed
and their effectiveness as a deterrent to future violations.
Attach, as Exhibit G-4, the following:
A description of the market surveillance program (and any
related rules), addressing the following -
The dedicated market surveillance department or the delegation
or outsourcing of that function, including a general description of
the staff; the data collected on traders' market activity; data
collected to determine whether prices are responding to supply and
demand; data on the size and ownership of deliverable supplies; a
description of the manner in which the foreign board of trade
detects and deters market manipulation; for cash-settled contracts,
methods of monitoring the settlement price or value; and any
foreign board of trade position limit, position management, large
trader or other position reporting system.
EXHIBIT H - INFORMATION SHARING AGREEMENTS AMONG THE COMMISSION,
THE FOREIGN BOARD OF TRADE, THE CLEARING ORGANIZATION, AND RELEVANT
REGULATORY AUTHORITIES
Attach, as Exhibit H, the following:
(1) A description of the arrangements among the Commission, the
foreign board of trade, the clearing organization, and the relevant
foreign regulatory authorities that govern the sharing of
information regarding the transactions that will be executed
pursuant to the foreign board of trade's registration with the
Commission and the clearing and settlement of those transactions.
This description should address or identify whether and how the
foreign board of trade, clearing organization, and the regulatory
authorities governing the activities of the foreign board of trade
and clearing organization agree to provide directly to the
Commission information and documentation requested by Commission
staff that Commission staff determines is needed:
(i) To evaluate the continued eligibility of the foreign board
of trade for registration.
(ii) To enforce compliance with the specified conditions of the
registration.
(iii) To enable the CFTC to carry out its duties under the Act
and Commission regulations and to provide adequate protection to
the public or registered entities.
(iv) To respond to potential market abuse associated with
trading by direct access on the registered foreign board of
trade.
(v) To enable Commission staff to effectively accomplish its
surveillance responsibilities with respect to a registered entity
where Commission staff, in its discretion, determines that a
contract traded on a registered foreign board of trade may affect
such ability.
(2) A statement as to whether and how the foreign board of trade
has executed the International Information Sharing Memorandum of
Understanding and Agreement.
(3) A statement as to whether the regulatory authorities
governing the activities of the foreign board of trade and clearing
organization are signatories to the International Organization of
Securities Commissions Multilateral Memorandum of Understanding. If
not, describe any substitute information-sharing arrangements that
are in place.
(4) A statement as to whether the regulatory authorities
governing the activities of the foreign board of trade and clearing
organization are signatories to the Declaration on Cooperation and
Supervision of International Futures Exchanges and Clearing
Organizations. If not, a statement as to whether and how they have
committed to share the types of information contemplated by the
International Information Sharing Memorandum of Understanding and
Agreement with the Commission, whether pursuant to an existing
memorandum of understanding or some other arrangement.
EXHIBIT I - ADDITIONAL INFORMATION AND DOCUMENTATION
Attach, as Exhibit I, any additional information or
documentation necessary to demonstrate that the requirements for
registration applicable to the foreign board of trade set forth in
Commission regulation 48.7 are satisfied.
Continuation of Appendix to Part 48 - Supplement S-1 to Form FBOT
COMMODITY FUTURES TRADING COMMISSION SUPPLEMENT S-1 to FORM FBOT
CLEARING ORGANIZATION SUPPLEMENT TO FOREIGN BOARD OF TRADE
APPLICATION FOR REGISTRATION SUPPLEMENT INSTRUCTIONS DEFINITIONS
1. Unless the context requires otherwise, all terms used in this
supplement have the same meaning as in the Commodity Exchange Act,
as amended (CEA or Act), 7 and in the regulations of the Commodity
Futures Trading Commission (Commission or CFTC). 8
7 7 U.S.C. 1 et seq.
8 17 CFR chapter I.
2. For the purposes of this Supplement S-1, the term “applicant”
refers to the foreign board of trade applying for registration
pursuant to CEA section 4(b) and part 48 of the Commission's
regulations. The term “clearing organization” refers to the
clearing organization that will be clearing trades executed on the
trading system of such foreign board of trade.
GENERAL INSTRUCTIONS
1. A Supplement S-1 (including exhibits) shall be completed by
each clearing organization that will be clearing trades executed on
the trading system of a foreign board of trade applying for
registration with the Commission pursuant to CEA section 4(b) and
part 48 of the Commission's regulations. Each clearing organization
shall submit a separate Supplement S-1.
2. In the event that the clearing functions of the foreign board
of trade applying for registration will be performed by the foreign
board of trade itself, the foreign board of trade shall complete
this Supplement S-1, but need not duplicate information provided on
its Form FBOT. Specific reference to or incorporation of
information or documentation (including exhibits) on the associated
Form FBOT, where appropriate, is acceptable. To the extent a
singular document or description is responsive to more than one
request for information in this Supplement S-1, the document or
description need only be provided once and may be cross-referenced
elsewhere.
3. Supplement S-1, including exhibits, should accompany the
foreign board of trade's Form FBOT and must be filed electronically
with the Secretary of the Commission at
[email protected]. Clearing organizations may
prepare their own Supplement S-1, but must follow the format
prescribed herein.
4. The name of any individual listed in Supplement S-1 shall be
provided in full (Last Name, First Name and Middle Name or
Initial).
5. Supplement S-1 must be signed by the Chief Executive Officer
(or the functional equivalent) of the clearing organization who
must possess the authority to bind the clearing organization.
6. If this Supplement S-1 is being filed in connection with a
new application for registration, all applicable items must be
answered in full. If any item is not applicable, indicate by
marking “none” or “N/A.”
7. Submission of a complete Form FBOT and Supplement S-1
(including all information, documentation and exhibits requested
therein) is mandatory and must be received by the Commission before
it will begin to process a foreign board of trade's application for
registration. The information provided with a Form FBOT and
Supplement S-1 will be used to determine whether the Commission
should approve or deny registration to an applicant. Pursuant to
its regulations, the Commission may determine that information
and/or documentation in addition to that requested in the Form FBOT
and Supplement S-1 is required from the applicant and/or its
clearing organization(s) in order to process the application for
registration or to determine whether registration is
appropriate.
8. Pursuant to Commission regulations, an applicant or its
clearing organization must identify with particularity any
information in the application (including, but not limited to, any
information contained in this Supplement S-1), that will be the
subject of a request for confidential treatment and must provide
support for any request for confidential treatment pursuant to the
procedures set forth in Commission regulation 145.9. 9 Except in
cases where confidential treatment is granted by the Commission,
pursuant to the Freedom of Information Act and Commission
regulations, information supplied in the Supplement S-1 will be
included routinely in the public files of the Commission and will
be available for inspection by any interested person.
9 17 CFR 145.9.
9. A Supplement S-1 that is not prepared and executed in
compliance with applicable requirements and instructions may be
returned as not acceptable for filing. 10 Acceptance of either a
Form FBOT or Supplement S-1 by the Commission, however, shall not
constitute a finding that the either have been filed as required or
that the information submitted is verified to be true, current, or
complete. The Commission may revoke a foreign board of trade's
registration, after appropriate notice and an opportunity to
respond, if the Commission determines that a representation made in
this Supplement S-1 is found to be untrue or materially misleading
or if the foreign board of trade and/or clearing organization
failed to include information in this Supplement S-1 that would
have been material to the Commission's determination as to whether
to issue an Order of Registration.
10 Applicants and their clearing organizations are encouraged to
correspond with the Commission's Division of Market Oversight
regarding any content, procedural, or formatting questions
encountered in connection with the preparation of a Form FBOT,
Supplement S-1, or exhibits thereto prior to formally submitting
those documents to the Commission. When appropriate, potential
applicants and clearing organizations, as applicable, may provide a
complete draft Form FBOT and Supplement S-1 to the Division of
Market Oversight for early review to minimize the risk of having a
submission returned or otherwise denied as not acceptable for
filing. Review of draft submissions by any division of the
Commission and any comments provided by a division of the
Commission are for consultation purposes only and do not bind the
Commission. To obtain instructions for submitting drafts, please
contact the Division of Market Oversight.
10. All documents submitted as part of this Supplement S-1 (or
exhibits thereto) must be written in English or accompanied by a
certified English translation.
UPDATING INFORMATION
Pursuant to the Commission's regulations, if any information or
documentation contained in this Supplement S-1 (including exhibits)
is or becomes inaccurate for any reason prior to the issuance of an
Order of Registration, an amendment correcting such information
must be filed promptly with the Commission. A clearing organization
also may submit an amendment to this Supplement S-1 to correct
information that has become inaccurate subsequent to the issuance
of an Order of Registration.
INSTRUCTIONS FOR
EXHIBITS TO SUPPLEMENT S-1
1. The following exhibits must be filed with the Commission by
the clearing organization(s) that will be clearing trades executed
on the trading system of a foreign board of trade applying for
registration with the Commission pursuant to CEA section 4(b) and
part 48 of Commission's regulations. The information and
documentation requested relates to the activities of the clearing
organization.
2. The exhibits should be filed in accordance with the General
Instructions to this Supplement S-1 and labeled as specified
herein. If any exhibit is not applicable, please specify the
exhibit letter and number and indicate by marking “none” or “N/A.”
If any exhibit may be satisfied by documentation or information
submitted in a different exhibit, the documentation or information
need not be submitted more than once - please use internal
cross-references where appropriate.
GENERAL REQUIREMENTS
A foreign board of trade applying for registration must submit
sufficient information and documentation to successfully
demonstrate to Commission staff that the foreign board of trade and
its clearing organization satisfy all of the requirements of
Commission regulation 48.7. With respect to its review of the
foreign board of trade's clearing organization, the Commission
anticipates that such information and documentation would
necessarily include, but not be limited to, the following:
EXHIBIT A - GENERAL INFORMATION AND DOCUMENTATION
Attach, as Exhibit A-1, a description of the following for the
clearing organization:
Location, history, size, ownership and corporate structure,
governance and committee structure, and current or anticipated
presence of staff in the United States.
Attach, as Exhibit A-2, the following:
Articles of association, constitution, or other similar
organizational documents.
Attach, as Exhibit A-3, the following:
(1) Membership and participation agreements.
(2) Clearing agreements.
Attach, as Exhibit A-4, the following:
The national statutes, laws and regulations governing the
activities of the clearing organization and its members.
Attach, as Exhibit A-5, the following:
The current rules, regulations, guidelines and bylaws of the
clearing organization.
Attach, as Exhibit A-6, the following:
Evidence of the authorization, licensure or registration of the
clearing organization pursuant to the regulatory regime in its home
country jurisdiction(s) and a representation by its regulator(s)
that it is in good regulatory standing in the capacity in which it
is authorized, licensed or registered.
Attach, as Exhibit A-7, the following document:
A summary of any disciplinary or enforcement actions or
proceedings that have been brought against the clearing
organization, or any of the senior officers thereof, in the past
five years and the resolution of those actions or proceedings.
Attach, as Exhibit A-8, the following document:
An undertaking by the chief executive officer(s) (or functional
equivalent[s]) of the clearing organization to notify Commission
staff promptly if any of the representations made in connection
with this supplement cease to be true or correct, or become
incomplete or misleading.
EXHIBIT B - MEMBERSHIP CRITERIA
Attach, as Exhibit B, the following, separately labeling each
description:
(1) A description of the categories of membership and
participation in the clearing organization and the access and
clearing privileges provided to each by the clearing
organization.
(2) A description of all requirements for each category of
membership and participation and the manner in which members and
other participants are required to demonstrate their compliance
with these requirements. The description should include, but not be
limited to, the following:
(i) Professional Qualification. A description of the specific
professional requirements, qualifications, and/or competencies
required of members or other participants and/or their staff and a
description of the process by which the clearing organization
confirms compliance with such requirements.
(ii) Authorization, Licensure and Registration. A description of
any regulatory or self-regulatory authorization, licensure or
registration requirements that the clearing organization imposes
upon, or enforces against, its members and other participants
including, but not limited to any authorization, licensure or
registration requirements imposed by the regulatory
regime/authority in the home country jurisdiction(s) of the
clearing organization, and a description of the process by which
the clearing organization confirms compliance with such
requirements.
(iii) Financial Integrity. A description of the following:
(A) The financial resource requirements, standards, guides or
thresholds required of members and other participants.
(B) The manner in which the clearing organization evaluates the
financial resources/holdings of its members or other
participants.
(C) The process by which applicants for clearing membership or
participation demonstrate compliance with financial requirements
including:
(1) Working capital and collateral requirements, and
(2) Risk management mechanisms.
(iv) Fit and Proper Standards. A description of any other ways
in which the clearing organization ensures that potential
members/other participants meet fit and proper standards.
EXHIBIT C - BOARD AND/OR COMMITTEE MEMBERSHIP
Attach, as Exhibit C, the following:
(1) A description of the requirements applicable to membership
on the governing board and significant committees of the clearing
organization.
(2) A description of how the clearing organization ensures that
potential governing board and committee members meet these
standards.
(3) A description of the clearing organization's provisions to
minimize and resolve conflicts of interest with respect to
membership on the governing board and significant committees of the
clearing organization.
(4) A description of the clearing organization's rules with
respect to the disclosure of material non-public information
obtained as a result of a member's performance on the governing
board or on a significant committee.
EXHIBIT D - SETTLEMENT AND CLEARING
Attach, as Exhibit D-1, the following:
A description of the clearing and settlement systems, including,
but not limited to, the manner in which such systems interface with
the foreign board of trade's trading system and its members and
other participants.
Attach, as Exhibit D-2, the following:
A certification, signed by the chief executive offer (or
functional equivalent) of the clearing organization, that the
clearing system observes (1) the current Recommendations for
Central Counterparties that have been issued jointly by the
Committee on Payment and Settlement Systems and the Technical
Committee of the International Organization of Securities
Commissions, as updated, revised or otherwise amended, or (2)
successor standards, principles and guidance for central
counterparties or financial market infrastructures adopted jointly
by the Committee on Payment and Settlement Systems or the
International Organization of Securities Commissions (RCCPs).
Attach, as Exhibit D-3, the following:
A detailed description of the manner in which the clearing
organization observes each of the RCCPs or successor standards and
documentation supporting the representations made, including any
relevant rules or written policies or procedures of the clearing
organization. Each RCCP should be addressed separately within the
exhibit.
EXHIBIT E - THE REGULATORY REGIME GOVERNING THE CLEARING
ORGANIZATION IN ITS HOME COUNTRY OR COUNTRIES
With respect to each relevant regulatory regime or authority
governing the clearing organization, attach, as Exhibit E, the
following:
(1) A description of the regulatory regime/authority's
structure, resources, staff and scope of authority.
(2) The regulatory regime/authority's authorizing statutes,
including the source of its authority to supervise the clearing
organization.
(3) A description of and, where applicable, copies of the laws,
rules, regulations and policies applicable to: 11
11 To the extent that any such laws, rules, regulations or
policies were provided as part of Exhibit A-4, they need not be
duplicated. They may be cross-referenced.
(i) The authorization, licensure or registration of the clearing
organization.
(ii) The financial resource requirements applicable to the
authorization, licensure or registration of the clearing
organization and the continued operations thereof.
(iii) The regulatory regime/authority's program for the ongoing
supervision and oversight of the clearing organization and the
enforcement of its clearing rules.
(iv) The extent to which the current RCCPs are used or applied
by the regulatory regime/authority in its supervision and oversight
of the clearing organization or are incorporated into its rules and
regulations and the extent to which the regulatory regime/authority
reviews the clearing systems for compliance therewith.
(v) The extent to which the regulatory regime/authority reviews
and/or approves the rules of the clearing organization prior to
their implementation.
(vi) The regulatory regime/authority's inspection, investigation
and surveillance powers; and the program pursuant to which the
regulatory regime/authority uses those powers to inspect,
investigate, sanction, and enforce rules applicable to the clearing
organization.
(vii) The financial protection afforded customer funds.
EXHIBIT F - THE RULES OF THE CLEARING ORGANIZATION AND ENFORCEMENT
THEREOF
Attach, as Exhibit F-1, the following:
A description of the clearing organization's regulatory or
compliance department, including its size, experience level,
competencies, duties and responsibilities of staff.
Attach, as Exhibit F-2, the following:
A description of the clearing organization's rules and how they
are enforced, with reference to any rules provided as part of
Exhibit A-5 that require the clearing organization to comply with
one or more of the RCCPs.
Attach, as Exhibit F-3, the following, to the extent not
included in Exhibit F-2:
A description of the clearing organization's disciplinary rules,
including but not limited to rules that address the following -
(1) Disciplinary authority and procedures that empower staff to
recommend and prosecute disciplinary actions for suspected rule
violations and that provide the authority to fine, suspend, or
expel any clearing participant pursuant to fair and clear
standards.
(2) The issuance of warning letters and/or summary fines for
specified rule violations.
(3) The review of investigation reports by a disciplinary panel
or other authority for issuance of charges or instructions to
investigate further, or findings that an insufficient basis exists
to issue charges.
(4) Disciplinary committees of the clearing organization that
take disciplinary action via formal disciplinary processes.
(5) Whether and how the clearing organization articulates its
rationale for disciplinary decisions.
(6) The sanctions for particular violations and a discussion of
the adequacy of sanctions with respect to the violations committed
and their effectiveness as deterrents to future violations.
Attach, as Exhibit F-4, the following, to the extent not
provided in Exhibit F-2:
A demonstration that the clearing organization is authorized by
rule or contractual agreement to obtain, from members and other
participants, any information and cooperation necessary to conduct
investigations, to effectively enforce its rules, and to ensure
compliance with the conditions of registration.
EXHIBIT G - INFORMATION SHARING AGREEMENTS AMONG THE COMMISSION,
THE FOREIGN BOARD OF TRADE, THE CLEARING ORGANIZATION, AND RELEVANT
REGULATORY AUTHORITIES
Attach, as Exhibit G, the following:
(1) A description of the arrangements among the Commission, the
foreign board of trade, the clearing organization, and the relevant
foreign regulatory authorities that govern the sharing of
information regarding the transactions that will be executed
pursuant to the foreign board of trade's registration with the
Commission and the clearing and settlement of those transactions.
This description should address or identify whether and how the
foreign board of trade, clearing organization, and the regulatory
authorities governing the activities of the foreign board of trade
and clearing organization agree to provide directly to the
Commission information and documentation requested by Commission
staff that Commission staff determines is needed:
(i) To evaluate the continued eligibility of the foreign board
of trade for registration.
(ii) To enforce compliance with the specified conditions of the
registration.
(iii) To enable the CFTC to carry out its duties under the Act
and Commission regulations and to provide adequate protection to
the public or registered entities.
(iv) To respond to potential market abuse associated with
trading by direct access on the registered foreign board of
trade.
(v) To enable Commission staff to effectively accomplish its
surveillance responsibilities with respect to a registered entity
where Commission staff, in its discretion, determines that a
contract traded on a registered foreign board of trade may affect
such ability.
(2) A statement as to whether the regulatory authorities
governing the activities of the foreign board of trade and clearing
organization are signatories to the International Organization of
Securities Commissions Multilateral Memorandum of Understanding. If
not, describe any substitute information-sharing arrangements that
are in place.
(3) A statement as to whether the regulatory authorities
governing the activities of the foreign board of trade and clearing
organization are signatories to the Declaration on Cooperation and
Supervision of International Futures Exchanges and Clearing
Organizations. If not, a statement as to whether and how they have
committed to share the types of information contemplated by the
International Information Sharing Memorandum of Understanding and
Agreement with the Commission, whether pursuant to an existing
memorandum of understanding or some other arrangement.
EXHIBIT H - ADDITIONAL INFORMATION AND DOCUMENTATION
Attach, as Exhibit H, any additional information or
documentation necessary to demonstrate that the requirements for
registration applicable to the clearing organization or clearing
system set forth in Commission regulation 48.7 are satisfied.