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Reporting Levels for Large Trader Reports; TRAKRS

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Commodity Futures Trading Commission.


Final rule.


The Commodity Futures Trading Commission (Commission or CFTC) is amending its rules to establish a reporting level for TRAKRS futures contracts traded on the Chicago Mercantile Exchange (CME). The reporting level is 25,000 contracts. This rule will help ensure that the Commission receives adequate information to carry out its market surveillance program.


November 20, 2002.

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Gary J. Martinaitis, Deputy Associate Director, Market Surveillance Section, Division of Market Oversight, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington, DC 20581. Telephone: (202) 418-5260. E-mail: []

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On December 21, 2000, the President signed into law the Commodity Futures Modernization Act of 2000 (CFMA), Public Law 106-554, which extensively revises the Commodity Exchange Act (Act). Among other things, the CFMA Start Printed Page 64523facilitated the introduction of new futures products by the exchanges. In August 2002, the CME introduced a series of new products, called TRAKRS, which are low notional value futures contracts based on broad based indices of stocks, bonds, currencies, or other financial instruments. The first TRAKRS futures contract (the long-short technology TRAKRS), which began trading in August 2002, has traded between $26 and $22.[1]

TRAKRS, like all other commodities traded on Commission-designated markets, are subject to the Commission's large trader reporting rules. Those rules require futures commission merchants, members of contract markets and foreign brokers to report to the Commission position information of the largest futures and options traders and, upon special call by the Commission, require the traders themselves to file reports with the Commission. Reporting levels are set in the designated futures and option markets under the authority of sections 4i and 4c of the Act to ensure that the Commission receives adequate information to carry out its market surveillance programs. These market surveillance programs are designed to detect and to prevent market congestion and price manipulation and to enforce speculative position limits. They also provide information regarding the overall hedging and speculative use of, and foreign participation in, the futures markets and other matters of public interest.

On August 5, 2002, the Commission proposed establishing a reporting level for TRAKRS futures contracts of 25,000.[2] The proposed reporting level was based on the Commission's experience in administering a large trader reporting system that is designed to provide adequate market coverage in light of positions traded or expected to be traded. The Commission did not receive any comments on its proposal.

The Commission is adopting a reporting level of 25,000 contracts for TRAKRS futures contracts as proposed. The Commission intends to review this level over time to determine whether it provides adequate coverage. Furthermore, since the reporting level is significantly influenced by the relatively low value of the initial TRAKRS contract (in the mid-$20 range), the Commission intends to reconsider this reporting level if new TRAKRS contracts are introduced at a substantially higher price or any TRAKRS contract begins to trade at a substantially higher price.

As noted in the proposed rule,[3] the low value of TRAKRS contracts could result in very large positions being reported. Due to current limitations in the Commission's large trader record format,[4] and similar limitations in the CME's own large trader reporting system, the final rule provides for TRAKRS positions to be reported under 17 CFR part 17 only after they have been rounded down to the nearest 1000 and then divided by 1000. For example, a position of 27,955 contracts would be rounded down to 27,000, divided by 1000 and reported as 27.[5]

The Commission has granted no-action relief to futures commission merchants, members of contracts markets and foreign brokers that comply with the requirements of the proposed rule prior to its final adoption.[6] No-action relief was granted because, in its absence, the Commission's default reporting level of 25 contracts would apply to TRAKRS contracts. The Commission is continuing the no-action relief for futures commission merchants, members of contracts markets and foreign brokers that comply with the requirements of the proposed rule prior to the time this final rule becomes effective. Accordingly, the Commission will not bring any enforcement action against any futures commission merchant, member of a contract market or foreign broker who complies with the proposed rule (which is identical to the final rule being adopted today).

Cost Benefit Analysis

Section 15 of the Act requires the Commission to consider the costs and benefits of its action before issuing a new regulation under the Act. By its terms, section 15 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 the subject rule.

Section 15(a) further specifies that the costs and benefits of the proposed rule shall be evaluated in light of five broad areas of market and public concern: (1) Protection of market participants and the public; (2) efficiency, competitiveness, and financial integrity of futures markets; (3) price discovery; (4) sound risk management practices; and (5) other public interest considerations. The Commission may, in its discretion, give greater weight to any one of the five enumerated areas of concern and may, in its discretion, determine that, notwithstanding its costs, a particular rule is necessary or appropriate to protect the public interest or to effectuate any of the provisions or to accomplish any of the purposes of the Act.

The Commission's proposed rule contained an analysis of its consideration of these costs and benefits and solicited public comment thereon.[7] The Commission specifically invited commenters to submit any data that they may have quantifying the costs and benefits of the proposed rules. The Commission did not receive any comments on its proposal.

After considering the costs and benefits of these revisions to part 15, the Commission has decided to adopt them as discussed above.

Related Matters

A. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., requires that federal agencies, in proposing rules, consider the impact of those rules on small entities. The Commission has previously determined that large traders and FCMs are not “small entities” for purposes of the RFA.[8] These amendments to the Commission's reporting requirements primarily impact FCMs. Similarly, members of contract markets and foreign brokers report only if carrying or holding reportable, i.e., large positions. Therefore, the Chairman, on behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that the action taken herein will not have a significant economic impact on a substantial number of small entities.

B. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) (PRA), which imposes certain requirements on federal agencies (including the Commission) in connection with their conducting or sponsoring any collection of information as defined by the PRA, does not apply to this rule. As noted in the proposed rule, the Commission believes that the rule amendment does not contain information requirements which require the approval of the Office of Start Printed Page 64524Management and Budget. The purpose of this rule is to establish a specific reporting level for TRAKRS.

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List of Subjects in 17 CFR Part 15

  • Brokers
  • Reporting and recordkeeping requirements
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In consideration of the foregoing, and pursuant to the authority contained in the Act, and in particular sections 4g, 4i, 5, 5a and 8a of the Act, 7 U.S.C. 6g, 6i, 7, 7a and 12a, as amended, the Commission hereby amends part 15 of Chapter I of Title 17 of the Code of Federal Regulations as follows:

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1. The authority section for part 15 continues to read as follows:

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Authority: 7 U.S.C. 2, 5, 6a, 6c, 6f, 6g, 6i, 6k, 6m, 6n, 7, 7a, 9, 12a, 19, and 21, as amended by the Commodity Futures Modernization Act of 2000, Appendix E of Pub. L. 106-554, 114 Stat. 2763 (2000); 5 U.S.C. 552 and 552(b).

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2. Section 15.03 is amended by revising paragraph (b) to read as follows:

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Reporting levels.
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(b) The quantities for the purpose of reports filed under parts 17 and 18 of this chapter are as follows:

CommodityNumber of contracts
Soybean Oil200
Soybean Meal200
Frozen Concentrated Orange Juice50
Rough Rice50
Live Cattle100
Feeder Cattle50
Lean Hogs100
Sugar No. 11400
Sugar No. 14100
Natural Resources:
Silver Bullion150
No. 2 Heating Oil250
Crude Oil, Sweet350
Unleaded Gasoline150
Natural Gas175
Municipal Bond Index300
3-month (13-Week) U.S. Treasury Bills150
30-Year U.S. Treasury Bonds1,000
10-Year U.S. Treasury Notes1,000
5-Year U.S. Treasury Notes800
2-Year U.S. Treasury Notes500
3-Month Eurodollar Time Deposit Rates1,000
30-Day Fed Funds300
1-month LIBOR Rates300
3-month Euroyen100
Major-Foreign Currencies400
Other Foreign Currencies100
U.S. Dollar Index50
S&P 500 Stock Price Index1,000
E-Mini S&P Stock Price Index300
S&P 400 Midcap Stock Index100
Dow Jones Industrial Average Index100
New York Stock Exchange Composite Index50
Amex Major Market Index, Maxi100
NASDAQ 100 Stock Index100
Russell 2000 Stock Index100
Value Line Average Index50
NIKKEI Stock Index100
Goldman Sachs Commodity Index100
Security Futures Products:
Individual Equity Security1,000
Narrow-Based Index of Equity Securities200
TRAKRS1 25,000
All Other Commodities25
1 For purposes of part 17, positions in TRAKRS should be reported by rounding down to the nearest 1000 and dividing by 1000.
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Issued in Washington, DC, this 15th day of October, 2002, by the Commission.

Catherine D. Dixon,

Assistant Secretary of the Commission.

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1.  Securities broker-dealers and their registered representatives may offer and sell TRAKRS futures contracts pursuant to a no-action letter issued by Commission staff on July 11, 2001. See CFTC Letter 02-22, Division of Trading and Markets, CFTC (July 11, 2001), available on the Commission's Web site at

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3.  67 FR at 50609.

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5.  Contract markets should continue to report under 17 CFR part 16, the actual TRAKRS position without regard to the reporting convention applied for reports under part 17.

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6.  67 FR at 50609.

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7.  67 FR at 50609.

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8.  47 FR 18618—20 (Apr. 30, 1982).

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[FR Doc. 02-26714 Filed 10-18-02; 8:45 am]