17 C.F.R. § 48 app to Part 48
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), and in the regulations of the Commodity Futures Trading Commission (Commission or CFTC).
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 FBOTapplications@cftc.gov. 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. 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.
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. 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.
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 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):
(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:
(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), and in the regulations of the Commodity Futures Trading Commission (Commission or CFTC).
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 FBOTapplications@cftc.gov. 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. 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. 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. 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. 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:
(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.
17 C.F.R. § 48 app to Part 48