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mission shall consider all information ticipated requirements for manufacso filed and, by notice to such person, turing, processing or feeding shall also shall specify the extent to which the include the information required Commission has determined that the under $ 1.48 of the regulations. transactions and positions may be clas- (c) Supplemental reports. Whenever sified as bona fide hedging. In no case the purchases or sales which a person shall transactions and positions de- wishes to classify as bona fide hedging scribed be considered as bona fide shall exceed the amount provided in hedging if they exceed the levels speci- the person's most recent filing pursufied in paragraph (d) of this section. ant to this section or the amount pre

(b) Initial statement. Initial state- viously specified by the Commission ments concerning the classification of

pursuant to paragraph (a) of this sectransactions and positions as bona fide tion, such person shall file with the hedging pursuant to $ 1.3(2)(3) shall Commission a statement which upbe filed with the Commission at least dates the information provided in the 30 days in advance of the date that person's most recent filing and prosuch transactions or positions would vides the reasons for this change at be in excess of limits then in effect least ten days in advance of the date pursuant to section 4a of the Act. that person wishes to exceed those Such statements shall:

amounts. (1) Describe the transactions and po- (d) Maximum purchases and sales. sitions for future delivery and the off- Purchases and sales for future delivsetting cash positions;

ery considered bona fide hedging pur(2) Set forth in detail information suant to $ 1.3(2)(3) of the regulations which will demonstrate that the pur- shall at no time exceed the lesser of: chases and sales are economically ap- (1) The value fluctuation equivalent propriate to the reduction of risk ex

(in terms of the commodity for future posure attendant to the conduct and

delivery) of the current cash position management of a commercial enter

described in the information most reprise;

cently filed pursuant to this section, or (3) Contain, and upon request of the

(2) The maximum level of long or Commission be supplemented by, such

short open positions provided in the other information which is necessary information most recently filed pursuto enable the Commission to make a

ant to this section or most recently determination whether the particular

specified by the Commission pursuant purchases and sales for future delivery

to paragraph (a) of this section. fall within the scope of those de

(e) Updated reports. Reports updatscribed in section 1.3(2)(1) of the regu

ing the information required pursuant lations; (4) Include a statement concerning

to this section also shall be filed with

the Commission upon specific request. the maximum size of positions for future delivery (both long and short) (Approved by the Office of Management which will be acquired any time during

and Budget under control number 3038the next fiscal year or marketing

0013) season of the person filing or on whose [42 FR 42751, Aug. 8, 1977, as amended at 46 behalf the filing is made.

FR 63035, Dec. 30, 1981) (5) In addition: statements filed by an agent, concerning a futures posi

§ 1.48 Requirements for classification of tion which would offset a cash posi

sales or purchases for future delivery tion which the agent does not own or

as bona fide hedging of unsold anticihas not contracted to buy or sell, shall

pated production or unfilled anticipat. contain information describing all con

ed requirements under 8 1.3(2)(2) (i)(B) tractual arrangements between the

or (ii)(C) of the regulations. agent filing and the person who owns (a) Any person who wishes to avail the commodity or holds the cash himself of the provisions of $ 1.3(2)(2) market commitment being offset; (i)(B) or (ii)(C) of the regulations and

(6) Statements concerning futures to make sales or purchases for future positions to be acquired against unsold delivery in any commodity in excess of anticipated production or unfilled an- trading and position limits then in

effect pursuant to section 4a of the Act for the purposes of bona fide hedging shall file statements with the Commission in conformity with the requirements of this section. All or a specified portion of the unsold anticipated production or unfilled anticipated requirements described in these statements shall not be considered as offsetting positions for bona fide hedging transactions and positions if such person is so notified by the Commission within ten days after the Commission is furnished with the information required under paragraphs (b) or (c) of this section. The Commission may request the person notified to file specific additional information with the Commission to support a determination that the statement filed accurately reflects unsold anticipated production or unfilled anticipated requirements for manufacturing, processing or feeding. In such cases, the Commission shall consider all additional information so filed and, by notice to such person, shall specify its determination as to what portion of the production or requirements described constitutes unsold anticipated production or unfilled anticipated requirements for the purposes of bona fide hedging. In no case shall such transactions and positions which offset unsold anticipated production or unfilled anticipated requirements be considered bona fide hedging if they exceed the levels specified in paragraph (d) of this section of the regulations.

(b) Initial statement. Initial statements concerning the classification of transactions and positions as bona fide hedging pursuant to $ 1.3(z)(2) (i)(B) or (ii)(C) shall be filed with the Commission at least ten days in advance of the date that such transactions or positions would be in excess of limits then in effect pursuant to section 4a of the Act. Such statements shall set forth in detail for a specified operating period not in excess of one year the person's unsold anticipated production or unfilled anticipated requirements for processing or manufacturing or feeding and explain the method of determination thereof, including, but not limited to, the following information:

(1) For unsold anticipated production:

(i) Annual production of such commodity for the three complete fiscal years preceding the current fiscal year;

(ii) Anticipated production of such commodity for a specified period not in excess of one year;

(iii) Fixed-price forward sales of such commodity;

(iv) Unsold anticipated production of such commodity for a specified period not in excess of one year.

(2) For unfilled anticipated requirements:

(i) Annual requirements of such commodity for processing or manufacturing or feeding for the three complete fiscal years preceding the current fiscal year;

(ii) Anticipated requirements of such commodity for processing or manufacturing or feeding for a specified operating period not in excess of one year;

(iii) Inventory and fixed-price forward purchases of such commodity, including any quantity in process of manufacture and finished goods and byproducts of manufacture or processing (in terms of such commodity);

(iv) Unfilled anticipated requirements of such commodity for processing or manufacturing or feedings for a specified operating period not in excess of one year.

(3) Additional information: Persons hedging unsold anticipated production or unfilled anticipated requirements which are not the same quantity or are not the same commodity as the commodity to be sold or purchased for future delivery shall furnish this information both in terms of the actual commodity produced or used and in terms of the commodity to be sold or purchased for future delivery. In addition, such persons shall explain the method for determining the ratio of conversion between the amount of the actual unsold anticipated production or unfilled anticipated requirements and the amount of commodity to be sold or purchased for future delivery. Persons hedging unfilled annual feeding requirements for livestock and poultry shall provide the number of cattle, hogs, sheep, or poultry expected to be fed during the specified period, not to exceed one year, and the derivation of their annual requirements based upon these numbers. Persons filing as an agent shall furnish this information on the basis of the fiscal or operating year of the person on whose behalf the filing is made.

(c) Supplemental reports. Whenever the sales or purchases which a person wishes to consider as bona fide hedging of unsold anticipated production or unfilled anticipated requirements shall exceed the amounts described by the figures for requirements furnished in the most recent filing pursuant to this section or the amounts determined by the Commission to constitute unsold anticipated production or unfilled anticipated requirements pursuant to paragraph (a) of this section, such person shall file with the Commission a statement which updates the information provided in the person's most recent filing and supplies the reason for this change at least ten days in advance of the date that person wishes to exceed these amounts.

(d) Maximum sales and purchases. Sales or purchases for future delivery considered as bona fide hedges pursuant to § 1.3(2)(2) (i)(B) or (ii)(C) shall at no time exceed the lesser of:

(1) A person's unsold anticipated production of unfilled anticipated requirements as described by the information must recently filed pursuant to this section or determined by the Commission pursuant to paragraph (a) of this section; or

(2) A person's actual unsold anticipated production or current unfilled anticipated requirements for

the length of time specified in the information most recently filed pursuant to this section.

(e) Updated reports. Reports updating the information required pursuant to this section shall also be filed with the Commission upon specific request. (Approved by the Office of Management and Budget under control number 30380013) (42 FR 42752, Aug. 8, 1977, as amended at 46 FR 63035, Dec. 30, 1981)

8 1.50 Demonstration of continued com.

pliance with the requirements for con

tract market designation. (a) With respect to each commodity or commodity option for which it has been designated as a contract market, each contract market shall file with the Commission within 60 days of a Commission request, or within such longer period as the Commission may specify in the request, a written report containing such supporting data, and other information and documents as the Commission may specify, that demonstrates that such contract market is complying with the conditions and requirements of sections 5 and 5a of the Act and these regulations. At the discretion of the Commission, the information requested may be limited to certain conditions and requirements of sections 5 and 5a of the Act and these regulations.

(b) Any failure by a contract market to continue to comply with the conditions and requirements for designation as a contract market as set forth in sections 5 and 5a of the Act or these regulations, and any failure or refusal to file the information required by this section shall be cause for action by the Commission under the Act or these regulations.

(c) Upon showing of good cause by a contract market, the Commission may extend for a reasonable time the filing date for any report under this section. (Approved by the Office of Management and Budget under control numbers 30380007 and 3038-0016) (46 FR 54525, Nov. 3, 1981, as amended at 46 FR 63035, Dec. 30, 1981)

8 1.51 Contract market program for en

forcement. (a) Each contract market shall use due diligence in maintaining a continuing affirmative action program to secure compliance with the provisions of sections 5, 5a, 5b, 6(a), 6b, 8a(7), 8a(9) and 8c of the Act, with the regulations implementing section 4c(c) of the Act, and with all of the contract market's bylaws, rules, regulations and resolutions which such contract market is required by the Act or these regulations to enforce. Such program shall include:

(1) Surveillance of market activity for indications of possible congestion or other market situations conducive to possible price distortion;

(2) Surveillance of trading practices on the floor of such contract market;

(3) Examination of the books and records kept by contract market members relating to their business of dealing in commodity futures, commodity options, and cash commodities, insofar as such business relates to their dealing on such contract market;

(4) Investigation of complaints received from customers or option customers concerning the handling of their accounts or orders;

(5) Investigation of all other alleged or apparent violation of such bylaws, rules, regulations and resolutions;

(6) Such other surveillance, record examination and investigation as is necessary to enforce such bylaws, rules, regulations and resolutions; and

(7) A procedure which results in the taking of prompt, effective disciplinary action for any violation which is found to have been committed.

(b) Each contract market shall keep full, complete, and systematic records which will clearly set forth all action taken as a part of, and as a result of, its program required under paragraph (a) of this section. (Approved by the Office of Management and Budget under control numbers 30380007 and 3038-0022) (Sec. 5a, 49 Stat. 1497; 7 U.S.C. 7a) (41 FR 3194, Jan. 21, 1976, as amended at 46 FR 54525, Nov. 3, 1981; 46 FR 63035, Dec. 30, 1981)

have a category of membership for introducing brokers must adopt and submit for Commission approval rules prescribing minimum financial and related reporting requirements for all its members who are registered introducing brokers. Each self-regulatory organization shall submit for Commission approval any modification or other amendments to such rules. Such requirements must be the same as, or more stringent than, those contained in $$ 1.10 and 1.17 and the definition of adjusted net capital must be the same as that prescribed in § 1.17(c): Provided, however, A designated selfregulatory organization may determine the number of Form 1-FRs it receives from its member registrants so long as it requires at least semiannual Form 1-FRs, one of which must be certified in accordance with $ 1.16 for each such registrant, except that such a requirement shall not apply to an introducing broker which is operating pursuant to a guarantee agreement and which is not also a securities broker or dealer: And, provided further, A designated self-regulatory organization may permit its member registrants which are registered with the Securities and Exchange Commission as securities brokers or dealers to file (in accordance with $ 1.10(h)) a copy of their Financial and Operational Combined Uniform Single Report under the Securities Exchange Act of 1934, Part II or Part IIA, in lieu of Form 1-FR.

(b) Each self-regulatory organization shall have in effect and enforce rules submitted to the Commission pursuant to paragraph (a) of this section and approved by the Commission.

(c) Any two or more self-regulatory organizations may file with the Commission a plan for delegating to a designated self-regulatory organization, for any registered futures commission merchant or any registered introducing broker which is a member of more than one such self-regulatory organization, the responsibility of:

(1) Monitoring and auditing for compliance with the minimum financial and related reporting requirements adopted by such self-regulatory organizations in accordance with paragraph (a) of this section; and

$ 1.52 Self-regulatory organization adop

tion and surveillance of minimum fi

nancial requirements. (a) Each self-regulatory organization must adopt, and submit for Commission approval, rules prescribing minimum financial and related reporting requirements for all its members who are registered futures commission merchants. Each self-regulatory organization other than a contract market must adopt, and submit for Commission approval, rules prescribing minimum financial and related reporting requirements for all its members who are registered introducing brokers. Each contract market which elects to

(2) Receiving the financial reports necessitated by such minimum financial and related reporting requirements. Such plan may also delegate the responsibility of monitoring, and examining the books and records kept by, such registered futures commission merchant or registered introducing broker relating to its business of dealing in commodity futures, commodity options, and cash commodities, insofar as such business relates to its dealings on contract markets, as required by $ 1.51(a)(3) and/or Part 33 of this chapter.

(d) Any plan filed under this section may contain provisions for the allocation of expenses reasonably incurred by the designated self-regulatory organization among the self-regulatory organizations participating in such a plan.

(e) A plan's designated self-regulatory organization must report to that plan's other self-regulatory organizations any violation of such other selfregulatory organizations' rules and regulations for which the responsibiity to monitor, audit or examine has been delegated to such designated self-regulatory organization under this section.

(f) The self-regulatory organizations may, among themselves, establish programs to provide access to any necessary financial or related information.

(g) After appropriate notice and opportunity for comment, the Commission may, by written notice, approve such a plan, or any part of the plan, if it finds that the plan, or any part of it:

(1) Is necessary or appropriate to serve the public interest;

(2) Is for the protection and in the interest of customers or option customers;

(3) Reduces multiple monitoring and auditing for compliance with the minimum financial rules of the self-regulatory organizations submitting the plan for any futures commission merchant or introducing broker which is a member of more than one self-regula. tory organization;

(4) Reduces multiple reporting of the financial information necessitated by such minimum financial and relat. ed reporting requirements by any futures commission merchant or intro

ducing broker which is a member of more than one self-regulatory organization;

(5) Fosters cooperation and coordi. nation among the contract markets; and

(6) Does not hinder the development of a registered futures association under section 17 of the Act.

(h)(1) Upon the approval of a plan or part of one under paragraph (g) of this section, a self-regulatory organization which is included in such a plan shall be considered to have met its af. firmative action responsibilities under $ 1.51 to the extent that such responsibilities have been delegated to a designated self-regulatory organization.

(2) After the Commission has ap. proved a plan or part of one under 8 1.52(g), a self-regulatory organization relieved of responsibility must notify each of its members which is subject to such a plan: (i) Of the limit. ed nature of its responsibility for such a member's compliance with its mini. mum financial and related reporting requirements; and (ii) of the identity of the designated self-regulatory organization which has been delegated responsibility for such a member.

(i) The Commission may at any time, after appropriate notice and opportu. nity for hearing, withdraw its approval of any plan or part of one established under this section, if such plan or part of one ceases to effectuate adequately the purposes of section 4f(2) of the Act or of this section.

(j) Whenever a registered futures commission merchant or a registered introducing broker holding member. ship in a self-regulatory organization ceases to be a member in good stand. ing of that self-regulatory organiza. tion, such self-regulatory organization must, on the same day that event takes place, give telegraphic notice of that event to the principal office of the Commission in Washington, D.C. and send a copy of that notification to such futures commission merchant or such introducing broker.

(k) Nothing in this section shall pre. clude the Commission from examining any futures commission merchant or introducing broker for compliance with the minimum financial and relat. ed reporting requirements to which

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