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Fees for Product Review and Approval

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Commodity Futures Trading Commission.


Annual update of schedule of fees for product review and approval.


The Commission charges fees to designated contract markets and registered derivatives transaction execution facilities to recover the costs of its review of requests for product review and approval. The calculation of the fee amounts to be charged for the upcoming year is based on an average of actual program costs incurred in the most recent three full fiscal years, as explained below. The new fee schedule is set forth below.


June 4, 2002.

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Richard A. Shilts, Acting Director, Division of Economic Analysis, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581, (202) 418-5260.

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I. Summary of Fees

Fees Charged for Processing Requests for Product Review and Approval

Single Applications

  • A single futures contract or an option on a physical—$5,000;
  • A single option on a previously-approved futures contract—$1,000;Start Printed Page 38380
  • A combined submission of a futures contract and an option on the same futures contract—$5,500.

Multiple Applications

For multiple contract filings containing related contracts, the product review and approval fees are:

  • A submission of multiple related futures contracts—$5,000 for the first contract, plus $500 for each additional contract;
  • A submission of multiple related options on futures contracts—$1,000 for the first contract, plus $100 for each additional contract;
  • A combined submission of multiple futures contracts and options on those futures contracts—$5,500 for the first combined futures and option contract, plus $550 for each additional futures and option contract.

II. Background Information

1. General

The Commission recalculates each year the fees it charges with the intention of recovering the costs of operating certain programs.[1] All costs are accounted for by the Commission's Management Accounting Structure Codes (MASC) system operated according to a government-wide standard established by the Office of Management and Budget. The fees are set each year based on direct program costs, plus an overhead factor.

2. Overhead Rate

The fees charged by the Commission are designed to recover program costs, including direct labor costs and overhead. The overhead rate is calculated by dividing total Commission-wide direct program labor costs into the total amount of the Commission-wide overhead pool. For this purpose, direct program labor costs are the salary costs of personnel working in all Commission programs. Overhead costs consist generally of the following Commission-wide costs: indirect personnel costs (leave and benefits), rent, communications, contract services, utilities, equipment, and supplies. This formula has resulted in the following overhead rates for the most recent three years (rounded to the nearest whole percent): 105 percent for fiscal year 1999, 117 percent for fiscal year 2000, and 105 percent for fiscal year 2001. These overhead rates are applied to the direct labor costs to calculate the costs of reviewing contract approval requests.

3. Processing requests for contract approval

Calculations of the fees for processing requests for product review and approval have become more refined over the years as the types of contracts being reviewed have changed.

On August 23, 1983, the Commission established a fee for Contract Market Designation (48 FR 38214). Prior to its recent amendment, the Commodity Exchange Act (Act) provided for “designation” of each new contract as a “contract market.” The Commodity Futures Modernization Act (CFMA) amended the Act to limit the concept of “contract market designation” to the approval of certain markets or trading facilities on which futures and options are traded, as opposed to approval of a specific contract or product. Commission rules that implemented the CFMA, therefore, charged a fee for the contract review where approval has been requested by a designated contract market or registered derivatives transaction execution facility (DTF). No fee is charged a board of trade for its initial designation as a contract market or registration as a DTF.

The fee, as originally adopted in 1983, was based on a three-year moving average of the actual costs expended and the number of contracts reviewed by the Commission during that period. The formula for determining the fee was revised in 1985. At that time, most designation applications were for futures contracts and no separate fee was set for option contracts.

In 1992, the Commission reviewed its data on the actual costs for reviewing applications for both futures and option contracts and determined that the percentage-of applications pertaining to options had increased and that the cost of reviewing a futures contract designation application was much higher than the cost of reviewing an application for an option contract. The Commission also determined that when applications for a futures contract and an option on that futures contract are submitted simultaneously, the cost is much lower than when the contracts are separately reviewed. 'To recognize this cost difference, three separate fees were established: one for futures; one for options; and one for combined futures and option contract applications (57 FR 1372, Jan. 14, 1992).

The Commission refined its fee structure further in 1999 to recognize the unique processing cost characteristics of a class of contracts—cash-settled based on an index of non-tangible commodities (64 FR 30384, June 8, 1999). The Commission determined to charge a reduced fee for related simultaneously submitted contracts for which the terms and conditions of all contracts in the filing are identical, except in regard to a specified temporal or spatial pricing characteristic or the multiplier used to determine the size of each contract. Contracts on major currencies, defined as the Australian dollar, British pound, Euro (and its component currencies), Japanese yen, Canadian dollars Swiss franc, New Zealand dollar, Swedish krona, and the Norwegian krone (including contracts based on currency cross rates), were determined to be eligible for the reduced multiple contract fees.[2] The Commission determined that a 10 percent marginal fee for additional contracts in a filing would be appropriate for simultaneously submitted contracts eligible for the multiple contract filing fee.

Commission staff compiled the actual costs of processing a request for product review and contract approval for a futures contract for fiscal years 1999, 2000, and 2001, and found that the average cost over the three-year period was $5,000, including overhead. Review of actual costs of processing contract-approval reviews for an option contract for fiscal years 1999, 2000, and 2001 reveal that the average cost over the period was $1,000 per contract, including overhead.

In accordance with its regulations as codified at 17 CFR part 40 appendix B, the Commission has determined that the fee for approval of a futures contract will be set at $5,000 and the fee for approval of an option contract will be set at $1,000. The fee for simultaneously submitted futures contracts and option contracts on those futures contracts and the fees for filings containing multiple cash-settled indices on non-tangible commodities have been set similarly and as indicated in the schedule set forth in the Summary of Fee above.

III. Cost-Benefit Analysis

Section 15 of the Act, as amended by section 119 of the CFMR, requires the Commission to consider the costs and benefits of its action before issuing a new regulation under the Act. Section Start Printed Page 3838115 does not require the Commission to quantify the costs and benefits of a new regulation or to determine whether the benefits of the proposed regulation outweigh its costs. Rather, section 15 simply requires the Commission to “consider the costs and benefits” of its action, in light of five broad areas of market and public concern: protection of market participants and the public; efficiency, competitiveness, and financial integrity of futures markets; price discovery; sound risk management practices; and other public interest considerations. Accordingly, the Commission could in its discretion give greater weight to any one of the five enumerated areas of concern and could in its discretion determine that, notwithstanding its costs, a particular rule was necessary or appropriate to protect the public interest or to effective any of the provisions or to accomplish any of the purposes of the Act.

The submission of new products for Commission review and approved by designated contract markets or DTFs is voluntary. The Commission has therefore concluded that those entities choosing to make such submissions find that the benefits of doing so equal or exceed the fees, which, as explained above, are derived from the Commission's actual processing costs.

IV. Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 USC 601, et seq., requires agencies to consider the impact of rules on small business. The fees implemented in this release affect contract markets and registered DTFs. The Commission has previously determined that contract markets and registered DTFs are not “small entities” for purposes of the Regulatory Flexibility Act. Accordingly, the Chairman, on behalf of the Commission, certifies pursuant to 5 USC 605(b), that the fees implemented here will not have a significant economic impact on a substantial number of small entities.

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Issued in Washington, DC, on May 29, 2002 by the Commission.

Jean A. Webb,

Secretary of the Commission.

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1.  See Section 237 of the Futures Trading Act of 1982, 7 U.S.C. 16a and 31 U.S.C. 9701. For a broader discussion of the history of Commission fees, see 52 FR 46070 (Dec. 4, 1987).

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2.  Submissions containing a number of similar cash-settled contracts based on the government debt of different foreign countries would not be eligible for the reduced fee, since the manipulation potential of each contract would be related to the liquidity of the underlying instruments, and the individual trading practices and governmental oversight in each specific country require separate analysis.

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[FR Doc. 02-13861 Filed 6-3-02; 8:45 am]