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8 1.39 Simultaneous buying and selling promptly presents said record to such
orders of different principals; execu- official representative for verification
tion of, for and between principals. and initialing; (a) Conditions and requirements. A
(3) Such contract market keeps a member of a contract market who record in permanent form of each shall have in hand at the same time such transaction showing the transacboth buying and selling orders of dif- tion date, by whom executed, the ferent principals for the same com- exact time of execution, quantity, and, modity for future delivery in the same as applicable, underlying commodity, delivery month or the same option contract for future delivery or physi(both puts or both calls, with the same cal, price or premium, whether a put underlying contract for future deliv- or a call, and strike price; and ery or the same underlying physical, (4) Neither the futures commission expiration date and strike price) may merchant receiving nor the member execute such orders for and directly executing such orders has any interest between such principals at the market therein, directly or indirectly, except price, if in conformity with written as a fiduciary. rules of such contract market which (b) Not deemed filling orders by have been approved by the Commis- offset nor cross trades. The execution sion, and:
of orders in compliance with the con(1)(i) When trading is conducted in a ditions herein set forth will not be trading pit or ring, such orders are deemed to constitute the filling of first offered openly and competitively
orders by offset within the meaning of by open outcry in such trading pit or
paragraph (D) of section 4b, nor to ring (A) by both bidding and offering
constitute cross trades within the at the same price, and neither such bid
meaning of paragraph (A) of section nor offer is accepted, or (B) by bidding 4c, of the Act. and offering to a point where such offer is higher than such bid by not
(Approved by the Office of Management more than the minimum permissible
and Budget under control numbers 3038
0007 and 3038-0022) price fluctuation applicable to such futures contract or commodity option on
(Secs. 4b, 4c, 5a(12), 49 Stat. 1493, 1494, 82 such contract market, and neither
Stat. 27, 88 Stat. 1392, 1401, 1402; 7 U.S.C.
6b, 6c, 7a(12)) such bid nor offer is accepted; or (ii) When in nonpit trading in con
(41 FR 3194, Jan. 21, 1976, as amended at 46 tracts of sale for future delivery, bids
FR 63035, Dec. 30, 1981; 47 FR 57008, Dec.
22, 1982) and offers are posted on a board, such member (A) pursuant to such buying
MISCELLANEOUS order posts a bid on the board and, incident to the execution of such selling 8 1.40 Crop, market information letters, order, accepts such bid and all other
reports; copies required. bids posted at prices equal to or higher than the bid posted by him, or (B)
Each futures commission merchant pursuant to such selling order posts an
and each member of a contract market offer on the board and, incident to the
shall, upon request, furnish or cause execution of such buying order, ac
to be furnished to the Commission a cepts such offer and all other offers
true copy of any letter, circular, teleposted at prices equal to or lower than gram, or report published or given the offer posted by him;
general circulation by such futures (2) Such member executes such
commission merchant or member orders in the presence of an official
which concerns crop or market inforrepresentative of such contract market
mation or conditions that affect or designated to observe such transac
tend to affect the price of any comtions and, by appropriate descriptive modity, and the true source of or auwords or symbol, clearly identifies all
thority for the information contained such transactions on his trading card
therein. or other similar record, made at the (Approved by the Office of Management time of execution, and notes thereon
and Budget under control number 3038the exact time of execution and 0015)
41 FR 3194, Jan. 21, 1976, as amended at 46 "R 63035, Dec. 30, 1981)
1.41 Contract market rules; submission
of rules to the Commission; exemption
of certain rules. (a) Definitions. For purposes of this section:
(1) The term “rule" of a contract market means any constitutional provision, article of incorporation, bylaw, rule, regulation, resolution, interpretation, stated policy, or instrument corresponding thereto, in whatever form adopted, and any amendment or addition thereto or repeal thereof, made or issued by a contract market, or by the governing board thereof or any committee thereof.
(2) The words “terms and conditions” mean any definition of the trading unit or the specific commodity underlying a contract for the future delivery of a commodity or commodity option contract, specification of settlement or delivery standards and procedures, and establishment of buyers' and sellers' rights and obligations under the contract. Terms and conditions shall be deemed to include provisions relating to the following:
(i) Quality or quantity standards for a commodity and any applicable exemptions or discounts;
(ii) Trading hours, trading months and the listing of contracts;
(iii) Minimum and maximum price limits and the establishment of settlement prices;
(iv) Position limits and position reporting requirements;
(v) Delivery points and locational price differentials;
(vi) Delivery standards and procedures, including alternatives to delivery and applicable penalties or sanctions for failure to perform;
(vii) Settlement of the contract; and
(viii) Payment or collection of commodity option premiums or margins.
(3) The term “contract market” includes a clearing organization that clears trades for the contract market.
(4) The term “emergency” means:
(i) Any occurrence or circumstance specifically defined as an "emergency” by the rules of a contract market which have been submitted to the
Commission pursuant to section 5a(12) of the Act; and
(ii) Any other occurrence or circumstance which, in the opinion of the governing board of the contract market, requires immediate action and threatens or may threaten such things as the fair and orderly trading in, or the liquidation of or delivery pursuant to, any contract for the future delivery of a commodity or any commodity option on such contract market. Occurrences and circumstances which a governing board of a contract market may deem emergencies include, but are not limited to:
(A) Any manipulative activity or attempted manipulative activity;
(B) Any actual, attempted, or threatened corner, squeeze, congestion, or undue concentration of positions;
(C) Any circumstances which may materially affect the performance of contracts or commodity options traded on the contract market;
(D) Any action taken by the United States or any foreign government or any state or local governmental body, any other contract market, board of trade, or any other exchange or trade association (foreign or domestic), which may have a direct impact on trading on the contract market;
(E) Any circumstance which may have a severe, adverse effect upon the physical functions of contract market including, for example, fire or other casualty, bomb threats, substantial inclement weather, power failures, communications breakdowns, and transportation breakdowns;
(F) The bankruptcy or insolvency of any member or member firm of the contract market or the imposition of any injunction or other restraint by any government agency, court or arbitrator upon a member of the contract market which may affect the ability of that member to perform on its contracts;
(G) Any circumstance in which it appears that a member or any other person has failed to perform contracts of sale for future delivery or commodity option contracts, is insolvent, or is in such financial or operational condition or is conducting business in such a manner that such person cannot be permitted to continue in business
without jeopardizing the safety of customer funds, members of the contract market, or the contract market; and
(H) Any other unusual, unforeseeable and adverse circumstance with respect to which it is impracticable for the contract market to submit, in a timely fashion, a rule to the Commission for prior review under section 5a(12) of the Act.
(5) The term “governing board” of a contract market means the board of directors, the board of governors, the board of managers or any other similar body of the contract market or any committee duly authorized, pursuant to a rule of the contract market that has been approved by the Commission or has become effective pursuant to section 5a(12) of the Act to take action for and on behalf of the contract market with respect to an emergency.
(6) The term "two-thirds vote" of a governing board of a contract market means the affirmative vote of two or more persons constituting not less than two-thirds of the members of such governing board either (i) physically present and voting at a meeting of such governing board at which a quorum of at least one-third of the members is physically in attendance or (ii) voting in any manner other than at a meeting of such board at which a quorum of at least one-third of the members is physically in attendance as permitted by applicable state corporation law.
(7) The term “temporary emergency rule” means a rule adopted by a “twothirds vote" of the governing board of a contract market to meet an emergency.
(b) Submission of rules for prior Commission approval. Except as provided herein and in paragraph (f) of this section, all proposed contract market rules that relate to terms and conditions and any other rules that the Commission has determined pursuant to paragraph (c) of this section require prior approval must, and any other rule may, be submitted to the Commission for approval pursuant to section 5a(12) of the Act prior to their proposed effective dates. Three copies of each such rule shall be furnished to the Commission at its Washington, D.C. headquarters, and one copy shall
be furnished to the regional office of the Commission having local jurisdiction over the contract market. Each such submission shall, in the following order:
(1) Label the submission as being submitted pursuant to Commission regulation 1.41(b);
(2) Set forth the text of the proposed rule (in the case of any change in, addition to, or deletion from any current rule of the contract market, the current rule shall be fully set forth, with brackets used to indicate words to be deleted and underscoring used to indicate words to be added);
(3) Describe the proposed effective date of the proposed rule and any action taken or anticipated to be taken to adopt the proposed rule by the contract market, or by the governing board thereof or any committee there of, and cite the rules of the contract market which authorize the adoption of the proposed rule;
(4) Explain the operation, purpose, and effect of the proposed rule, including, as applicable, a description of the anticipated benefits to market participants or others, any potential anticompetitive effects on market participants or others, how the rule fits into the contract market's scheme of selfregulation, information which demonstrates that the proposed rule is not inconsistent with the policies and purposes of the Act, and any other information which may be beneficial to the Commission in analyzing the proposed rule. If a proposed rule affects, directly or indirectly, the application of any other rule of the contract market, set forth the pertinent text of any such rule and describe the anticipated effect; and
(5) Note and briefly describe any substantive opposing views expressed by the members of the contract market or others with respect to the proposed rule which were not incorporated into the proposed rule prior to its submission to the Commission. The Commission may remit to the contract market, with an appropriate explanation where practicable, and not accept for review any rule submission that does not comply with the form and content requirements of paragraphs (b) (1)-(5) of this section.
(c) Rules that do not relate to terms and conditions. (1) Except as provided in paragraphs (d) and (f) of this section (exempt or temporary emergency rules), three copies of any rule which does not relate to terms and conditions or which a contract market proposes to place into effect without submission to the Commission for approval under section 5a(12) of the Act and paragraph (b) of this section shall be furnished to the Commission at its Washington, D.C. headquarters at least ten days prior to its proposed effective date. One copy shall also be transmitted by the contract market to the regional office of the Commission having local jurisdiction over the contract market. Each such submission shall be labeled as being submitted pursuant to Commission regulation 1.41(c) and include the information required by paragraphs (b) (2)-(5) of this section.
(2) The Commission may remit to the contract market, with an appropriate explanation where practicable, and not accept pursuant to this paragraph (c) any submission that does not comply with the form and content requirements of this paragraph. Rules submitted pursuant to this paragraph (c) otherwise may become effective ten days after receipt (or at such earlier time as may be determined by the Commission) unless the Commission notifies the contract market in writing of its determination to review such rules for prior approval under section 5a(12) of the Act and paragraph (b) of this section.
(d) Rules that are exempt from the requirements of section 5a(12) of the Act. (1) Except as otherwise provided in this paragraph (d), contract market rules that do not relate to terms and conditions are exempt from the requirements of section 5a(12) of the Act and this section where such rules address:
(i) Standards of decorum or attire or similar provisions relating to admission to the floor, badges, visitors, but not the establishment of penalties for violations of such rules;
(ii) Requirements relating to gratuity and similar funds, but not guaranty, reserves, or similar funds;
(iii) Correction of typographical errors, renumbering, or other such non-substantive revisions of rules;
(iv) Procedures and forms for the purchase, sale or transfer of membership, but not including qualifications for membership, any right or obligation of membership, or dues or assessments;
(v) The organization and administrative procedures of a contract market's governing bodies such as a Board of Directors, Officers and Committees, but not voting requirements and procedures or requirements or procedures relating to conflicts of interest;
(vi) The declaration of holidays;
(vii) Facilities housing the contract market or physical changes in the trading floor or trading area; or
(viii) The routine, daily administration, direction and control of contract market employees.
(2) Rules that are exempt from the requirements of section 5a(12) of the Act in accordance with the provisions of this paragraph (d) shall nonetheless be submitted to the Commission pursuant to the provisions of section 5a(1) of the Act. Each such submission shall be labeled as being submitted pursuant to section 5a(1) of the Act and Commission regulation 1.41(d). One copy of each such submission shall be furnished to the Commission at its Washington, D.C. headquarters and one copy shall also be transmitted by the contract market to the regional office of the Commission having local jurisdiction over the contract market.
(3) Notwithstanding the provisions of this paragraph (d), a contract market may submit any such rule to the Commission for its approval pursuant to the provisions of section 5a(12) of the Act and paragraph (b) of this section.
(4) The Commission may remit to the contract market, with an appropriate explanation where practicable, and not accept pursuant to this paragraph any rule which the Commission determines to be a rule that is not exempt from the provisions of section 5a(12) of the Act and paragraphs (b) or (c) of this section.
(e) Membership changes. Each contract market shall promptly furnish the Commission with written notification of any changes in its membership. One copy of such notification shall be furnished to the Commission at its Washington, D.C., headquarters, and one copy shall be transmitted to the regional office of the Commission having local jurisdiction over the contract market.
(f) Temporary emergency rules. In the event of an emergency, a contract market, by a two-thirds vote of its governing board, may place into immediate effect a temporary emergency rule to deal with the emergency without prior Commission approval, and without compliance with the ten-day notice requirement pursuant to section 5a(12) of the Act and paragraphs (b) and (c) of this section, respectively, subject to the following provisions:
(1) A temporary emergency rule, including any modification thereof, may not extend beyond the duration of the emergency, as determined by the contract market; but in no event shall a temporary emergency rule, or any modification thereof, continue, without express Commission authorization, beyond 30 days after the temporary emergency rule is first put into effect. In no event shall a temporary emergency rule, or any modification thereof, remain in effect for more than 90 days after the temporary emergency rule is first put into effect.
(2) The contract market shall notify the Commission at its Washington, D.C., headquarters of the adoption, modification and termination of a temporary emergency rule by the fastest available means of communication. A written copy of each such temporary emergency rule, and any modification and termination thereof, shall promptly thereafter be furnished to the Commission at its Washington, D.C., headquarters, along with a complete explanation of the emergency and the action taken to meet the emergency; two additional such copies shall also be promptly furnished by the contract market to the regional office of the Commission having local jurisdiction over the contract market.
(3) A temporary emergency rule may provide for, or may authorize the con
tract market, or the governing board thereof or any committee thereof, to undertake actions necessary or appropriate to meet the emergency, including, but not limited to, such actions as:
(i) Limiting trading to liquidation only, in whole or in part, or limiting trading to liquidation only except for new sales by parties who have the commodity to deliver pursuant to such sales;
(ii) Extending or shortening the ex. piration date for trading in contracts;
(iii) Extending the time of delivery; (iv) Changing delivery points;
(v) Ordering the liquidation of contracts, the fixing of a settlement price or the reduction in positions;
(vi) Ordering the transfer of contracts, and the money, securities, and property securing such contracts, held on behalf of customers by a member of the contract market to another member, or other members, of the contract market willing to assume such contracts or obligated to do so;
(vii) Extending, limiting or changing hours of trading;
(viii) Suspending trading; and
(ix) Modifying or suspending any provision of the rules of the contract market.
(g) Physical emergencies. In the event the physical functions of a contract market are, or are threatened to be, severely and adversely affected by a “physical emergency,” such as fire or other casualty, bomb threats, substantial inclement weather, power failures, communications breakdowns, or transportation breakdowns, a contract market official, duly authorized to take such action for and on behalf of the contract market with respect to such a "physical emergency” pursuant to a rule of the contract market that has been approved by the Commission or has become effective pursuant to section 5a(12) of the Act and these regulations, may take any action authorized by such rule necessary or appropriate to deal with the emergency, including, but not limited to, suspending trading on the contract market. In no event, however, shall suspension of trading on the contract market by such a designated official continue in effect for more than five (5) days. If so authorized by such a rule of the con