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Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Rules and Regulations
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the Commission. The Commission also proposed amendments to clarify certain existing requirements, including the renumbering of several provisions to present the requirements in a more cohesive manner.
The Commission is adopting the amendments to 37.1301 through 37.1307 as proposed. With respect to two questions posed in the notice of proposed rulemaking, the Commission will not adopt the requirement that financial statements be audited, and the Commission will retain the existing quarterly reporting requirement for SEFs, rather than moving to a semiannual reporting requirement.
As stated in the notice of proposed rulemaking, the Commission estimates the amendment to 37.1301b will decrease the annual recurring information collection burden hours by five burden hours; the amendment to 37.1306 will increase the annual recurring information collection burden hours by 10 burden hours and not impose an initial, non-recurring burden;
and the amendment to 37.1306c will impose an initial, non-recurring information collection of 20 burden hours and five annual recurring information collection burden hours after the initial year to update the information. Other than as discussed above, the Commission believes the amendment to 37.1306c will not impose new information collection burdens on SEFs or substantively or materially modify existing burdens.
iii. Chief Compliance Officer Requirements Statutory Core Principle 15 requires each SEF to designate a CCO and sets forth its corresponding duties. Among other responsibilities, the CCO is required to ensure the SEF complies with the CEA and applicable rules and regulations, and to establish and administer required policies and procedures. Core Principle 15 also requires the CCO to prepare and file an ACR to the Commission. The Commission promulgated requirements under 37.1501 to implement these requirements.
The Commission proposed several amendments to 37.1501 based on the Commissions experience since the part 37 implementation. These amendments streamline CCO requirements; allow SEF management to exercise discretion in CCO oversight; and simplify the preparation and submission of the ACR.
Specifically, the proposed changes: i Add the definition of senior officer;
ii eliminate the existing ROC-related requirements; iii allow the SEFs senior officer to have the same oversight
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responsibilities over the CCO as the board; iv eliminate the limitations on authority to remove the CCO, which currently restricts that removal authority to a majority of the board, or in the absence of a board, the senior officer; v add a new acceptable practice to Core Principle 15 in Appendix B associated with 37.1501b2i, which requires the CCO to have the background and skills appropriate to the position and states that a SEF should be especially vigilant regarding potential conflicts of interest when appointing the CCO; vi adopt several amendments to clarify and streamline the CCOs duties, including refining the scope of the CCOs duty to taking only reasonable steps to resolve material conflicts of interest that may arise; and vii make other amendments, including elimination of duplicative rules and renumbering and consolidation of existing provisions.
The amendments are being finalized as proposed, with one exception. The Commission is not eliminating the list of potential conflicts that the CCO
should resolve under existing 37.1501d2.
With respect to the ACR, existing 37.1501e requires the CCO to prepare and sign annually an ACR that, at a minimum: i Describes the SEFs written policies and procedures; ii reviews the SEFs compliance with the Act and Commission regulations; iii provides a self-assessment of the effectiveness of the SEFs policies and procedures; iv lists material changes to the policies and procedures; v describes the SEFs financial, managerial, and operational resources;
vi describes any material compliance matters identified through certain enumerated mechanisms and explains how they were resolved; and vii certifies that, to the best of the CCOs knowledge and reasonable belief and under penalty of law, the ACR is accurate and complete.
The Commission proposed several amendments to simplify the ACR
submission procedures including:
Providing SEFs with an additional 30
days to file the ACR with the Commission, but no later than 90
calendar days after a SEFs fiscal year end, and requiring the CCO to submit an amended ACR to the SEFs board or, in the absence of a board, the senior officer of the SEF, for review prior to submitting the amended ACR to the Commission. The proposed rules also would streamline the recordkeeping requirements that pertain to the CCOs duties and the preparation and submission of the ACR. The amendments to the ACR preparation,
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submission and recordkeeping requirements are being adopted and finalized as proposed.
As stated in the notice of proposed rulemaking, the Commission estimates the amendment to 37.1501d will reduce annual recurring information collection burden hours by approximately 10 burden hours per SEF.
The amendment to 37.1501d3 will reduce annual recurring information collection burden hours by approximately five burden hours per SEF. The amendment to 37.1501d4
will reduce annual recurring information collection burden hours per SEF by three burden hours. The amendment to 37.1501d5 will reduce annual recurring information collection burden hours per SEF/CCO
by 10 burden hours.
C. Cost-Benefit Considerations 1. Introduction Section 15a of the CEA requires the Commission to consider the costs and benefits of its actions before promulgating a regulation under the CEA or issuing certain orders.228
Section 15a further specifies that the costs and benefits shall be evaluated in light of the following five broad areas of market and public concern: i Protection of market participants and the public; ii efficiency, competitiveness, and financial integrity of futures markets; iii price discovery;
iv sound risk management practices;
and v other public interest considerations.
2. Background The Commission is finalizing several of the Proposed Rules. First, the Final Rules eliminate the requirement that a SEF capture post-execution allocation information in its audit trail data.
Second, regarding financial resources, the Final Rules finalize amendments to the existing six-month liquidity requirement and add new acceptable practices that provide further guidance to SEFs for making a reasonable calculation of their projected operating costs. Finally, the Final Rules streamline requirements for the CCO
position; allow SEF management to exercise discretion in CCO oversight;
and simplify the preparation and submission of the required ACR.
The baseline against which the Commission considers the costs and benefits of the Final Rules is the statutory and regulatory requirements of the CEA and Commission regulations now in effect, in particular CEA section 228 7

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