7 USC § 7a–2 - Common provisions applicable to registered entities

(a) Acceptable business practices under core principles

(1) In general

Consistent with the purposes of this chapter, the Commission may issue interpretations, or approve interpretations submitted to the Commission, of sections 7 (d), 7a (d), and 7a–1 (c)(2) of this title, and section 2 (h)(7) of this title with respect to significant price discovery contracts, to describe what would constitute an acceptable business practice under such sections.

(2) Effect of interpretation

An interpretation issued under paragraph (1) shall not provide the exclusive means for complying with such sections.

(b) Delegation of functions under core principles

(1) In general

A contract market, derivatives transaction execution facility, or electronic trading facility with respect to a significant price discovery contract may comply with any applicable core principle through delegation of any relevant function to a registered futures association or a registered entity that is not an electronic trading facility.

(2) Responsibility

A contract market, derivatives transaction execution facility, or electronic trading facility that delegates a function under paragraph (1) shall remain responsible for carrying out the function.

(3) Noncompliance

If a contract market, derivatives transaction execution facility, or electronic trading facility that delegates a function under paragraph (1) becomes aware that a delegated function is not being performed as required under this chapter, the contract market, derivatives transaction execution facility, or electronic trading facility shall promptly take steps to address the noncompliance.

(c) New contracts, new rules, and rule amendments

(1) In general

Subject to paragraph (2), a registered entity may elect to list for trading or accept for clearing any new contract or other instrument, or may elect to approve and implement any new rule or rule amendment, by providing to the Commission (and the Secretary of the Treasury, in the case of a contract of sale of a government security for future delivery (or option on such a contract) or a rule or rule amendment specifically related to such a contract) a written certification that the new contract or instrument or clearing of the new contract or instrument, new rule, or rule amendment complies with this chapter (including regulations under this chapter).

(2) Prior approval

(A) In general

A registered entity may request that the Commission grant prior approval to any new contract or other instrument, new rule, or rule amendment.

(B) Prior approval required

Notwithstanding any other provision of this section, a designated contract market shall submit to the Commission for prior approval each rule amendment that materially changes the terms and conditions, as determined by the Commission, in any contract of sale for future delivery of a commodity specifically enumerated in section 1a (4) of this title (or any option thereon) traded through its facilities if the rule amendment applies to contracts and delivery months which have already been listed for trading and have open interest.

(C) Deadline

If prior approval is requested under subparagraph (A), the Commission shall take final action on the request not later than 90 days after submission of the request, unless the person submitting the request agrees to an extension of the time limitation established under this subparagraph.

(3) Approval

The Commission shall approve any such new contract or instrument, new rule, or rule amendment unless the Commission finds that the new contract or instrument, new rule, or rule amendment would violate this chapter.

(d) Violation of core principles

(1) In general

If the Commission determines, on the basis of substantial evidence, that a registered entity is violating any applicable core principle specified in section 7 (d), 7a (d), or 7a–1 (c)(2) or 2 (h)(7)(C) of this title with respect to a significant price discovery contract traded or executed on an electronic trading facility,, ^[1] the Commission shall—

(A) notify the registered entity in writing of the determination; and

(B) afford the registered entity an opportunity to make appropriate changes to bring the registered entity into compliance with the core principles.

(2) Failure to make changes

If, not later than 30 days after receiving a notification under paragraph (1), a registered entity fails to make changes that, in the opinion of the Commission, are necessary to comply with the core principles, the Commission may take further action in accordance with this chapter.

(e) Reservation of emergency authority

Nothing in this section shall limit or in any way affect the emergency powers of the Commission provided in section 12a (9) of this title.

(f) Rules to avoid duplicative regulation of dual registrants

Consistent with this chapter, each designated contract market and registered derivatives transaction execution facility shall issue such rules as are necessary to avoid duplicative or conflicting rules applicable to any futures commission merchant registered with the Commission pursuant to section 6f (a) of this title (except paragraph (2) thereof), that is also registered with the Securities and Exchange Commission pursuant to section 78o (b) of title 15 (except paragraph (11) thereof) with respect to the application of—

(1) rules of such designated contract market or registered derivatives transaction execution facility of the type specified in section 6d (c) of this title involving security futures products; and

(2) similar rules of national securities associations registered pursuant to section 78o–3 (a) of title 15 and national securities exchanges registered pursuant to section 78f (g) of title 15 involving security futures products.

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[1]  So in original.

Source

(Sept. 21, 1922, ch. 369, § 5c, as added and amended Pub. L. 106–554, § 1(a)(5) [title I, § 113, title II, § 251(h)], Dec. 21, 2000, 114 Stat. 2763, 2763A–399, 2763A–444; Pub. L. 110–234, title XIII, §§ 13105(e), (f), 13203(i)–(k), May 22, 2008, 122 Stat. 1434, 1440, 1441; Pub. L. 110–246, § 4(a), title XIII, §§ 13105(e), (f), 13203(i)–(k), June 18, 2008, 122 Stat. 1664, 2196, 2202, 2203; Pub. L. 111–203, title VII, §§ 717(d), 721 (e)(7), 745, 749(c),July 21, 2010, 124 Stat. 1652, 1671, 1735, 1747.)

Amendment of Section

Pub. L. 111–203, title VII, §§ 717(d), 721 (e)(7), 745, 749(c), 754,July 21, 2010, 124 Stat. 1652, 1671, 1735, 1747, 1754, provided that, effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, this section is amended as follows: (1) in subsection (a)— (A) in paragraph (1), by striking “, 7a(d),”; and by striking “and section (2)(h)(7) of this title with respect to significant price discovery contracts,”; and (B) by striking paragraph (2) and inserting the following: “(2) Effect of interpretation

“An interpretation issued under paragraph (1) may provide the exclusive means for complying with each section described in paragraph (1).”;

(2) in subsection (c)— (A) in paragraph (1)— (i) by striking “Subject to paragraph (2)” and inserting the following: “(A) Election

“Subject to paragraph (2)”; and

(ii) by adding at the end the following new subparagraph: “(B) Certification

“The certification of a product pursuant to this paragraph shall be stayed pending a determination by the Commission upon the request of the Securities and Exchange Commission or its Chairman that the Commission issue a determination as to whether the product that is the subject of such certification is a contract of sale of a commodity for future delivery, an option on such a contract, or an option on a commodity pursuant to section 8306 of title 15.”; and

(B) in paragraph (2)(B), by striking “section 1a (4)” and inserting “section 1a (9)”; (3) by striking subsection (c) and inserting the following: “(c) New contracts, new rules, and rule amendments “(1) In general

“A registered entity may elect to list for trading or accept for clearing any new contract, or other instrument, or may elect to approve and implement any new rule or rule amendment, by providing to the Commission (and the Secretary of the Treasury, in the case of a contract of sale of a government security for future delivery (or option on such a contract) or a rule or rule amendment specifically related to such a contract) a written certification that the new contract or instrument or clearing of the new contract or instrument, new rule, or rule amendment complies with this chapter (including regulations under this chapter).

“(2) Rule review

“The new rule or rule amendment described in paragraph (1) shall become effective, pursuant to the certification of the registered entity and notice of such certification to its members (in a manner to be determined by the Commission), on the date that is 10 business days after the date on which the Commission receives the certification (or such shorter period as determined by the Commission by rule or regulation) unless the Commission notifies the registered entity within such time that it is staying the certification because there exist novel or complex issues that require additional time to analyze, an inadequate explanation by the submitting registered entity, or a potential inconsistency with this chapter (including regulations under this chapter).

“(3) Stay of certification for rules

“(A) A notification by the Commission pursuant to paragraph (2) shall stay the certification of the new rule or rule amendment for up to an additional 90 days from the date of the notification.

“(B) A rule or rule amendment subject to a stay pursuant to subparagraph (A) shall become effective, pursuant to the certification of the registered entity, at the expiration of the period described in subparagraph (A) unless the Commission—

“(i) withdraws the stay prior to that time; or

“(ii) notifies the registered entity during such period that it objects to the proposed certification on the grounds that it is inconsistent with this chapter (including regulations under this chapter).

“(C) The Commission shall provide a not less than 30-day public comment period, within the 90-day period in which the stay is in effect as described in subparagraph (A), whenever the Commission reviews a rule or rule amendment pursuant to a notification by the Commission under this paragraph.

“(4) Prior approval “(A) In general

“A registered entity may request that the Commission grant prior approval to any new contract or other instrument, new rule, or rule amendment.

“(B) Prior approval required

“Notwithstanding any other provision of this section, a designated contract market shall submit to the Commission for prior approval each rule amendment that materially changes the terms and conditions, as determined by the Commission, in any contract of sale for future delivery of a commodity specifically enumerated in section 1a (10) (or any option thereon) traded through its facilities if the rule amendment applies to contracts and delivery months which have already been listed for trading and have open interest.

“(C) Deadline

“If prior approval is requested under subparagraph (A), the Commission shall take final action on the request not later than 90 days after submission of the request, unless the person submitting the request agrees to an extension of the time limitation established under this subparagraph.

“(5) Approval “(A) Rules

“The Commission shall approve a new rule, or rule amendment, of a registered entity unless the Commission finds that the new rule, or rule amendment, is inconsistent with this chapter (including regulations).

“(B) Contracts and instruments

“The Commission shall approve a new contract or other instrument unless the Commission finds that the new contract or other instrument would violate this chapter (including regulations).

“(C) Special rule for review and approval of event contracts and swaps contracts “(i) Event contracts “In connection with the listing of agreements, contracts, transactions, or swaps in excluded commodities that are based upon the occurrence, extent of an occurrence, or contingency (other than a change in the price, rate, value, or levels of a commodity described in section 1a (2)(i) of this title), by a designated contract market or swap execution facility, the Commission may determine that such agreements, contracts, or transactions are contrary to the public interest if the agreements, contracts, or transactions involve— “(I) activity that is unlawful under any Federal or State law; “(II) terrorism; “(III) assassination; “(IV) war; “(V) gaming; or “(VI) other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest. “(ii) Prohibition “No agreement, contract, or transaction determined by the Commission to be contrary to the public interest under clause (i) may be listed or made available for clearing or trading on or through a registered entity. “(iii) Swaps contracts “(I) In general “In connection with the listing of a swap for clearing by a derivatives clearing organization, the Commission shall determine, upon request or on its own motion, the initial eligibility, or the continuing qualification, of a derivatives clearing organization to clear such a swap under those criteria, conditions, or rules that the Commission, in its discretion, determines. “(II) Requirements “Any such criteria, conditions, or rules shall consider— “(aa) the financial integrity of the derivatives clearing organization; and “(bb) any other factors which the Commission determines may be appropriate. “(iv) Deadline “The Commission shall take final action under clauses (i) and (ii) in not later than 90 days from the commencement of its review unless the party seeking to offer the contract or swap agrees to an extension of this time limitation.”; (4) by striking subsection (d); and (5) in subsection (f)(1), by striking “section 6d (c) of this title” and inserting “section 6d (e) of this title”.

Codification

Pub. L. 110–234and Pub. L. 110–246made identical amendments to this section. The amendments by Pub. L. 110–234were repealed by section 4(a) ofPub. L. 110–246.

Amendments

2008—Subsec. (a)(1). Pub. L. 110–246, § 13203(i), which directed amendment of par. (1) by inserting “, and section 2 (h)(7) of this title with respect to significant price discovery contracts,” after “, and 7a–1(d)(2) of this title”, was executed by making the insertion after “, and 7a–1(c)(2) of this title” to reflect the probable intent of Congress and the intervening amendment by Pub. L. 110–246, § 13105(e). See below.

Pub. L. 110–246, § 13105(e), substituted “7a–1(c)(2)” for “7a–1(d)(2)”.

Subsec. (b)(1). Pub. L. 110–246, § 13203(j)(1), added par. (1) and struck out heading and text of former par. (1). Text read as follows: “A contract market or derivatives transaction execution facility may comply with any applicable core principle through delegation of any relevant function to a registered futures association or another registered entity.”

Subsec. (b)(2), (3). Pub. L. 110–246, § 13203(j)(2), (3), substituted “contract market, derivatives transaction execution facility, or electronic trading facility” for “contract market or derivatives transaction execution facility” wherever appearing.

Subsec. (d)(1). Pub. L. 110–246, § 13203(k), which directed amendment of par. (1) by inserting “or 2(h)(7)(C) of this title with respect to a significant price discovery contract traded or executed on an electronic trading facility,” after “7a–1(d)(2)”, was executed by making the insertion after “7a–1(c)(2)” in introductory provisions to reflect the probable intent of Congress and the intervening amendment by Pub. L. 110–246, § 13105(e). See below.

Pub. L. 110–246, § 13105(e), substituted “7a–1(c)(2)” for “7a–1(d)(2)” in introductory provisions.

Subsec. (f)(1). Pub. L. 110–246, § 13105(f), substituted “6d(c)” for “6d(3)”.

2000—Subsec. (f). Pub. L. 106–554, § 1(a)(5) [title II, § 251(h)], added subsec. (f).

Effective Date of 2010 Amendment

Amendment by Pub. L. 111–203effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 ofPub. L. 111–203, set out as a note under section 1a of this title.

Effective Date of 2008 Amendment

Amendment of this section and repeal of Pub. L. 110–234by Pub. L. 110–246effective May 22, 2008, the date of enactment of Pub. L. 110–234, except as otherwise provided, see section 4 ofPub. L. 110–246, set out as an Effective Date note under section 8701 of this title.

Amendment by section 13203(i)–(k) of Pub. L. 110–246effective June 18, 2008, see section 13204(a) ofPub. L. 110–246, set out as a note under section 2 of this title.