sign in sign up
<<
Home , Prime brokerage

71772 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

COMMODITY FUTURES TRADING (202) 418–5985 or [email protected]; or investment trust, syndicate, or similar COMMISSION Christopher Cummings, Special form of enterprise, and who, with Counsel, at (202) 418–5445 or respect to that , solicits, 17 CFR Part 4 [email protected], Division of Swap accepts, or receives from others, funds, Dealer and Intermediary Oversight, securities, or property, either directly or RIN 3038–AE98 Commodity Futures Trading through capital contributions, the sale of Compliance Requirements for Commission, Three Lafayette Centre, or other forms of securities, or Commodity Pool Operators on Form 1151 21st Street NW, Washington, DC otherwise, for the purpose of trading in 3 CPO–PQR 20581. commodity interests. CEA section 4m(1) generally requires each person SUPPLEMENTARY INFORMATION: AGENCY: Commodity Futures Trading who satisfies the CPO definition to Commission. Table of Contents register as such with the Commission.4 ACTION: Final rule. I. Introduction and Background CEA section 4n(3)(A) requires registered A. Overview of Form CPO–PQR, as CPOs to maintain books and records and SUMMARY: The Commodity Futures Originally Adopted file such reports in such form and Trading Commission (CFTC or B. The Proposal manner as may be prescribed by the Commission) is adopting amendments II. Final Rule Commission.5 (the Final Rule) to Commission A. General Comments and Adopting the Following the enactment in 2010 of regulations on additional reporting by Revised Form the Dodd-Frank Wall Street Reform and commodity pool operators (CPOs) and B. The Elimination of Schedules B and C Consumer Protection Act (Dodd-Frank commodity trading advisors and to From the Revised Form Act) 6 and subsequent joint adoption Form CPO–PQR (also, the form). The C. Adoption of the Proposed Schedule of with the Securities and Exchange Investments in the Revised Form Commission (SEC) of Form PF (Joint Commission is: Eliminating existing D. Retaining the Five Percent Threshold for Schedules B and C of Form CPO–PQR, Reportable Assets Form PF) for advisers to large private 7 except for the Pool Schedule of E. Adding LEI Fields to the Revised Form funds, the CFTC adopted a new Investments; amending the information F. The Revised Form’s Definitions, reporting requirement for CPOs through requirements and instructions to request Instructions, and Questions Commission regulation at § 4.27, which, Legal Entity Identifiers (LEIs) for CPOs i. Quarterly Filing Schedule for All CPOs among other things, requires certain and their operated pools that have them, Completing the Revised Form CPOs to report periodically on Form and to delete questions regarding pool ii. Instructions 3 and 5 CPO–PQR.8 The Commission proposed auditors and marketers; and making iii. Instruction 4 this new reporting requirement after iv. Definition of ‘‘Broker’’ certain other changes due to the reevaluating its regulatory approach to v. Elimination of Questions Regarding CPOs due to the 2008 financial crisis rescission of Schedules B and C, Auditors and Marketers including the elimination of all existing vi. FAQs and Glossary and the purposes and goals of the Dodd- reporting thresholds. Pursuant to the G. Substituted Compliance Frank Act in light of the then-current Final Rule, all reporting CPOs will be i. NFA Form PQR economic environment. Amendments to required to file the revised Form CPO– ii. Joint Form PF the CPO regulatory program adopted at PQR (Revised Form CPO–PQR, or the iii. Substituted Compliance for CPOs of that time, including Form CPO–PQR Revised Form) quarterly. The Final Rule Registered Investment Companies and § 4.27, were intended to: (1) Align also amends Commission regulations to H. Compliance Date the Commission’s regulatory structure III. Related Matters for CPOs with the purposes of the Dodd- permit reporting CPOs to file NFA Form A. Regulatory Flexibility Act PQR, a comparable form required by the Frank Act; (2) encourage more B. Paperwork Reduction Act congruent and consistent regulation by National Futures Association (NFA), in i. Overview lieu of filing the Commission’s Revised ii. Revisions to the Collection of Federal financial regulatory agencies of Form. Conversely, Form PF will no Information: OMB Control Number similarly-situated entities, such as longer be accepted in lieu of the Revised 3038–0005 dually registered CPOs required to file Form, though it will remain a C. Cost-Benefit Considerations Joint Form PF; (3) improve Commission form. i. The Elimination of Pool-Specific accountability and increase Reporting Requirements in Schedules B transparency of the activities of CPOs DATES: Effective Date: The effective date and C and the commodity pools that they for the Final Rule, including the ii. The Revised Form operate or advise; and (4) facilitate a adoption of the Revised Form, is iii. Alternatives data collection that would potentially December 10, 2020. iv. Section 15(a) Factors assist the Financial Stability Oversight Compliance Date: All reporting CPOs D. Antitrust Laws will be required to file the Revised Form I. Introduction and Background 3 7 U.S.C. 1a(11); see also 17 CFR 1.3, with respect to their operated pools for ‘‘.’’ the first calendar quarter of 2021, which Section 1a(11) of the Commodity 4 7 U.S.C. 6m(1). ends on March 31, 2021. The deadline Exchange Act (CEA or the Act) 1 defines 5 7 U.S.C. 6n(3)(A). Registered CPOs have for filing the Revised Form for that the term ‘‘commodity pool operator,’’ as regulatory reporting obligations with respect to any person 2 engaged in a business that their operated pools. See, e.g., 17 CFR 4.22. reporting period is sixty days after the 6 is of the nature of a commodity pool, Public Law 111–203, 124 Stat. 1376 (2010). quarter-end, or May 30, 2021. 7 Section 202(a)(29) of the Investment Advisers FOR FURTHER INFORMATION CONTACT: Act of 1940 (Advisers Act) defines the term ‘‘private 1 7 U.S.C. 1a(11). The Act is found at 7 U.S.C. 1, fund’’ as ‘‘an issuer that would be an investment Joshua B. Sterling, Director, at 202–418– et seq. (2018), and is accessible through the company, as defined in section 3 of the Investment 6700 or [email protected]; Amanda Commission’s website, https://www.cftc.gov. Company Act of 1940 (15 U.S.C. 80a–3), but for Lesher Olear, Deputy Director, at 202– 2 7 U.S.C. 1a(38); 17 CFR 1.3, ‘‘person’’ (defining section 3(c)(1) or 3(c)(7) of that Act.’’ Advisers Act 418–5283 or [email protected]; Pamela M. ‘‘person’’ to include individuals, associations, Section 202(a)(29), 15 U.S.C. 80ab–2(a)(29). 8 Geraghty, Associate Director, at 202– partnerships, corporations, and trusts). The Commodity Pool Operators and Commodity Commission’s regulations are found at 17 CFR ch. Trading Advisors: Compliance Obligations, 77 FR 418–5634 or [email protected]; I (2020), and are accessible through the 11252 (Feb. 24, 2012) (Form CPO–PQR Final Rule); Elizabeth Groover, Special Counsel, at Commission’s website, https://www.cftc.gov. 17 CFR part 4, app. A; 17 CFR 4.27.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71773

Counsel (FSOC).9 To that end, the § 4.27 and Form CPO–PQR.15 In the PF.21 A Large CPO is a CPO that had at requirements of Form CPO–PQR were Proposal, the Commission stated that, least $1.5 billion in aggregated pool modeled closely after those of Joint after seven years of experience with the (AUM) 22 as of Form PF.10 form, the Commission was reassessing the close of business on any day during the form’s scope and alignment with the In adopting Form CPO–PQR, the the reporting period; a Mid-Sized CPO Commission’s current regulatory Commission indicated that the collected is a CPO that had at least $150 million, priorities.16 The Commission explained data would be used for several broad but less than $1.5 billion, in aggregated that its ability to make full use of the purposes, including: (1) Increasing the pool AUM as of the close of business on more detailed information collected 23 Commission’s understanding of its any day during the reporting period. under the form has not met the Although not defined in the form, registrant population; (2) assessing the Commission’s initial expectations.17 market risk associated with pooled ‘‘Small CPO,’’ as used herein, refers to The Commission emphasized that, since a CPO that had less than $150 million investment vehicles under its the form’s adoption, it has devoted jurisdiction; and (3) monitoring for in aggregated pool AUM during the substantial resources to developing reporting period. The reporting period systemic risk.11 Specifically, the other data streams and regulatory Commission was interested in receiving for Large CPOs is any of the individual initiatives, which are designed to calendar quarters (ending March 31, information regarding the operations of enhance the Commission’s ability to June 30, September 30, and December CPOs and their pools, including their broadly surveil financial markets for 31), whereas, for Small and Mid-Sized participation in commodity interest risk posed by all manner of market CPOs, the reporting period is the markets, their relationships with participants, including CPOs and their calendar year.24 intermediaries, and their operated pools.18 interconnectedness with the financial Thus, as further explained in the Prior to the Final Rule amendments system at large.12 In proposing the discussion that follows, the Commission adopted herein, Form CPO–PQR majority of the more pool-specific has concluded that the form should be consisted of three schedules: Schedules questions in the form, in particular, the revised to better facilitate the A, B, and C.25 Schedule A requires Commission believed the incoming data Commission’s oversight of CPOs and reporting CPOs to disclose basic would assist it in monitoring their operated pools, as well as its identifying information about the CPO commodity pools in such a way as to coordination of other Commission data (Part 1) and about each of the CPO’s allow the Commission to identify trends streams and regulatory initiatives, while pools and the service providers they use reducing the overall reporting burdens 26 over time, including a pool’s exposure (Part 2). Consistent with the for CPOs required to file the Revised to asset classes, the composition and ‘‘Reporting Period’’ definitions Form. liquidity of a commodity pool’s described above, Large CPOs submit portfolio, and a pool’s susceptibility to A. Overview of Form CPO–PQR, as Schedule A on a quarterly basis, failure in times of stress.13 Although the Originally Adopted whereas all other reporting CPOs submit it annually.27 Schedule B requires Commission recognized that the Pursuant to § 4.27, any CPO registered requested data may have some or required to be registered with the additional detailed information for each limitations, it believed that, in light of Commission is a ‘‘reporting person,’’ pool operated by Mid-Sized and Large the 2008 financial crisis and the sources except for a CPO that operates only CPOs, in particular regarding each of risk delineated in the Dodd-Frank Act pools for which it maintains an operated pool’s investment strategy, with respect to private funds, the exclusion from the CPO definition borrowings and types of creditors, detailed, pool-specific information to be available under § 4.5, and/or an counterparty credit exposure, trading collected by Form CPO–PQR was both exemption from CPO registration and clearing mechanisms, value of necessary and appropriately balanced to available under § 4.13.19 The amount of aggregated positions, and assess the risks posed by a single pool, information that a reporting CPO has 21 or a CPO’s operations as a whole.14 been required to disclose on the form See generally Instructions to Form PF, available varies depending on the size of the at http://www.sec.gov/about/forms/formpf.pdf. On April 16, 2020, the Commission Private fund investment advisers with ‘‘regulatory operator and the quantity and size of the unanimously approved, and, on May 4, AUM,’’ as that term is defined in Joint Form PF, of operated pools.20 at least $150 million are required to file Section 1 2020, subsequently published in the The form, as adopted in 2012, of Joint Form PF; private fund investment advisers Federal Register, a notice of proposed identifies three classes of filers: Large with regulatory AUM equal to or exceeding $1.5 billion are required to file Sections 1 and 2 of Joint rulemaking (Proposal or NPRM) that CPOs, Mid-Sized CPOs, and Small proposed to amend both Commission Form PF. Id. CPOs. The thresholds for determining 22 As used in the form, AUM refers to the amount Large and Mid-Sized CPO status, and of all assets that are under the control of the CPO. 9 Commodity Pool Operators and Commodity thus their reporting obligations, 17 CFR part 4, app. A, ‘‘Definitions of Terms’’ Trading Advisors: Compliance Obligations, 76 FR (providing specific definitions for terminology used 7976, 7978 (Feb. 11, 2011) (Form CPO–PQR generally align with those in Joint Form in the form, including AUM). The ‘‘Definitions of Proposal). Terms’’ section of the form is renamed by this Final 10 Id. (‘‘The Commission proposes [Form CPO– 15 Amendments to Compliance Requirements for Rule ‘‘Defined Terms’’ in the Revised Form. PQR] to solicit information that is generally Commodity Pool Operators on Form CPO–PQR, 85 23 Id. identical to that sought through Form PF’’). FR 26378 (May 4, 2020) (2020 CPO–PQR NPRM). 24 Id. (defining ‘‘Reporting Period’’). The form Commission regulation at § 4.27 further permits the 16 2020 CPO–PQR NPRM, 85 FR at 26380 (May 4, additionally defines, ‘‘Reporting Date,’’ as the last filing of Joint Form PF in lieu of Commission filing 2020). calendar day of the Reporting Period for which this requirements (i.e., Form CPO–PQR) for CPOs that 17 Id. Form CPO–PQR is required to be completed and are dually registered with the SEC as investment 18 Id. filed,’’ e.g., ‘‘the Reporting Date for the first advisers. 17 CFR 4.27(d). 19 17 CFR 4.27(b)(1)(i); see also 17 CFR calendar quarter of a year is March 31. Id. For Mid- 11 Form CPO–PQR Final Rule, 77 FR 11253–54 4.27(b)(2)(i) (establishing that CPOs operating only Sized and Small CPOs, their Reporting Date would (Feb. 24, 2012). pools for which they claim relief under 17 CFR 4.5 therefore be December 31. Id. 12 Id. at 77 FR 11266–67 (Feb. 24, 2012). or 4.13 are not considered ‘‘reporting persons’’ for 25 17 CFR part 4, app. A, ‘‘Reporting 13 Form CPO–PQR Proposal, 76 FR at 7981 (Feb. purposes of the Form CPO–PQR filing requirement). Instructions.’’ 11, 2011). 20 See generally 17 CFR part 4 app. A, ‘‘Reporting 26 Id. at ‘‘Reporting Instructions,’’ no. 2. 14 Id. Instructions.’’ 27 Id.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 71774 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

schedule of investments.28 Large CPOs its advisory services to private funds,37 CPO–PQR, as well as several also submit Schedule B on a quarterly the CPO is deemed to have satisfied its amendments to § 4.27.42 Specifically, basis; Mid-Sized CPOs are required to Schedule B and C filing requirements, the Commission proposed to eliminate complete and submit Schedule B provided that the CPO completes and the requirement to complete and submit annually.29 files the referenced sections of Joint Schedules B or C of the form, with the Schedule C requires further detailed Form PF with respect to the pool(s) exception of the Pool Schedule of 38 information about the pools operated by operated during the reporting period. Investments (PSOI) (currently, question Large CPOs on an aggregate and pool- In addition to Joint Form PF and Form 6 of Schedule B). The Commission by-pool basis. Part 1 of Schedule C CPO–PQR, in 2010, NFA adopted and proposed to retain the questions set requires aggregate information for all implemented its own NFA Form PQR to forth in current Schedule A with certain pools operated by a Large CPO, elicit data in support of NFA’s risk- amendments, notably the addition of based examination program for its CPO questions regarding LEIs, and the including (1) a geographical breakdown 39 of the pools’ investment on an membership. Pursuant to NFA deletion of questions regarding pool 43 aggregated basis, and (2) the turnover Compliance Rule 2–46, all CPO NFA marketers and auditors. Thus, the members, which includes all CPOs rate of the aggregate portfolio of pools.30 Commission proposed the Revised Form registered with the Commission, must Part 2 of Schedule C requires certain consisting of a revised Schedule A, plus file NFA Form PQR on a quarterly basis detailed information for each ‘‘Large the PSOI and the instructions and with respect to all of their operated Pool’’ the Large CPO operates,31 where definitions in the current form that pools.40 44 a ‘‘Large Pool’’ is a commodity pool that NFA accepts the filing of Form remain relevant. The Proposal CPO–PQR (but not Joint Form PF) in has a net asset value (NAV) 32 required all reporting CPOs to file the lieu of filing NFA Form PQR for any individually, or in combination with Revised Form on a quarterly basis, quarter in which a Form CPO–PQR any parallel pool structure,33 of at least regardless of AUM or size of operations, filing is required under § 4.27.41 $500 million as of the close of business and such reporting CPOs would be on any day during the reporting Consequently, dually registered CPO- permitted to file NFA Form PQR in lieu investment advisers that file Joint Form 45 period.34 Specifically, Part 2 requires of the Revised Form. The Proposal PF in lieu of a Form CPO–PQR filing, information with respect to each Large included an amendment to § 4.27(d) that consistent with § 4.27(d), as it reads Pool the Large CPO operates during the would eliminate the substituted prior to these Final Rule amendments, given reporting period; this section of compliance currently available for are also required to file NFA Form PQR the form elicits information regarding dually registered CPO-investment with NFA quarterly. the Large Pool’s: (1) Identity; (2) advisers required to file Joint Form PF liquidity; (3) counterparty credit B. The Proposal with respect to their operated private funds, while retaining Joint Form PF as exposure; (4) risk metrics; (5) borrowing; As noted above, the Commission (6) derivative positions and posted a Commission form. The comment published the NPRM on May 4, 2020, period for the Proposal expired on June collateral; (7) financing liquidity; (8) proposing substantial revisions to Form participant information; and (9) the 15, 2020, and the Commission received 46 35 ten relevant comment letters: Two duration of its assets. 37 As used in the form, the term ‘‘private fund’’ Large CPOs complete and file Schedule has the same meaning as the definition of ‘‘private from individuals; one from a registered C on a quarterly basis: This filing fund’’ in Joint Form PF. 17 CFR part 4, app. A, futures association; and seven from includes Part 1 of Schedule C, as well ‘‘Definitions of Terms.’’ industry professional and trade 38 17 CFR part 4, app. A, ‘‘Reporting associations.47 as a separate Part 2 for each Large Pool Instructions,’’ no. 2. that a Large CPO operates during the 39 NFA Compliance Rule 2–46 (2017), available at 42 reporting period.36 If a CPO is also https://www.nfa.futures.org/rulebook/ 2020 CPO–PQR NPRM. registered with the SEC as an rules.aspx?RuleID=RULE%202-46&Section=4 43 2020 CPO–PQR NPRM, 85 FR at 26381, 26383 (May 4, 2020). investment adviser, and is therefore (noting this rule was initially adopted effective March 31, 2010, and subsequently amended in 44 2020 CPO–PQR NPRM, 85 FR at 26381 (May 4, required to file Joint Form PF regarding 2013, 2016, and most recently, 2017). Commission 2020). regulations require each person registered as a CPO 45 2020 CPO–PQR NPRM, 85 FR at 26381 and 28 17 CFR part 4, app. A, Sched. B, ‘‘Detailed to become and remain a member of at least one 26389 (May 4, 2020) (proposing to amend Information About the Pools Operated by Mid-Sized registered futures association, of which there is § 4.27(c)(1) by adding substituted compliance for CPOs and Large CPOs.’’ currently one, i.e., NFA. 17 CFR 170.17. this filing requirement with respect to NFA Form 29 17 CFR part 4, app. A, ‘‘Reporting 40 NFA Compliance Rule 2–46(a). CFTC staff has PQR). Instructions,’’ no. 2. previously advised that reporting CPOs should 46 The Commission received a total of 14 30 17 CFR part 4, app. A, Sched. C, pt. 1. exclude all pools operated subject to relief provided comment letters, four of which were either spam or in either 17 CFR 4.5 or 4.13 from their Form CPO– otherwise not substantively relevant to the Proposal 31 17 CFR part 4, app. A, Sched. C, pt. 2, PQR filings, including with respect to any in any respect. ‘‘Information About the Large Pools of Large CPOs.’’ applicable reporting threshold calculations. CFTC 47 Comments were submitted by Mr. Chris 32 As used in Form CPO–PQR, the term ‘‘net asset Division of Swap Dealer and Intermediary Barnard (Barnard) (May 8, 2020); NFA (June 10, value’’ has the same meaning as in § 4.10(b). See 17 Oversight Responds to Frequently Asked Questions 2020); the Management CFR 4.10(b) (defining ‘‘net asset value’’ as total Regarding Commission Form CPO–PQR (Nov. 5, Association (AIMA) (June 11, 2020); the Depository assets minus total liabilities, determined in accord 2015), available at http://www.cftc.gov/ucm/ Trust and Clearing Corporation (DTCC) (June 15, with generally accepted accounting principles, with groups/public/@newsroom/documents/file/faq_ 2020); the Global Legal Entity Identifier Foundation each position in a commodity interest transaction cpocta.pdf (2015 CPO–PQR FAQs). NFA Form PQR (GLEIF) (June 15, 2020); the Managed Funds accounted for at a fair market value). similarly focuses its data collection efforts on the Association (MFA) (June 15, 2020); the Investment 33 As used in the form, the term ‘‘parallel pool listed pools of registered CPO Members. NFA may, Adviser Association (IAA) (June 15, 2020); the structure’’ means any structure in which one or however, use NFA Form PQR to collect information Securities Industry and more Pools pursues substantially the same beyond that collected by the Commission’s Revised Association Asset Management Group (SIFMA investment objective and strategy and invests side Form. See, e.g., NFA Compliance Rule 2–46(b). AMG) (June 15, 2020); Ms. Talece Y. Hunter by side in substantially the same assets as another Nothing in the Commission’s Proposal or the Final (Hunter) (June 15, 2020); and the Investment Pool. 17 CFR part 4, app. A, ‘‘Definitions of Terms.’’ Rule restricts NFA’s ability to require reporting Company Institute (ICI) (June 15, 2020). The 34 17 CFR part 4, app. A, Sched. C, pt. 2, beyond that required by the Commission, provided complete comment file for the 2020 CPO–PQR ‘‘Information About the Large Pools of Large CPOs.’’ that such NFA requirements are consistent with the NPRM can be found on the Commission’s website. 35 Id. CEA and Commission regulations promulgated Comments for Proposed Rule 85 FR 26378 (May 4, 36 17 CFR part 4, app. A, ‘‘Reporting thereunder. See 7 U.S.C. 17(j). 2020), available at https://comments.cftc.gov/ Instructions,’’ no. 2. 41 NFA Compliance Rule 2–46(b). PublicComments/CommentList.aspx?3098.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71775

II. Final Rule pools,55 for the reasons it explained in information in Form CPO–PQR that has the Proposal.56 Today’s Final Rule A. General Comments and Adopting the not been helpful for the CFTC’s constitutes the first of several steps in 62 Revised Form oversight purposes.’’ Furthermore, ICI the Commission’s ongoing reassessment concurred with the Commission that the The comments that the Commission of Form CPO–PQR, the substantive agency’s limited resources should not be received were, in general, strongly information it seeks to collect, and the spent on trying to make use of the supportive of the Proposal.48 form and manner in which the ‘‘voluminous and very specific pool- Commenters largely agreed with the Commission collects and uses that level data sought in Schedules B and proposed amendments and viewed the information. 63 proposal of the Revised Form as a C.’’ Expressing support for the ‘‘helpful improvement to the current B. The Elimination of Schedules B and elimination of Schedules B and C, as system.’’ 49 Multiple commenters stated C From the Revised Form well as the retention of a revised PSOI that the Proposal, if adopted, would In proposing to eliminate a majority of for each pool, SIFMA AMG praised the simplify CPO reporting requirements, the pool-specific reporting requirements Commission for recognizing ‘‘lessons significantly reduce filers’ reporting in Schedules B and C of Form CPO– learned’’ from seven years of experience burdens, increase the regulatory PQR, the Commission observed that, with the form and the data it has integrity and utility of the data collected challenges with the data collected in elicited.64 SIFMA AMG described the by the Revised Form, and serve as a Schedules B and C, combined with the Proposal as a demonstration of the critical step in the development of a resource constraints of broader CFTC’s consideration of the utility of ‘‘holistic market surveillance program,’’ Commission priorities, have frustrated the data currently collected by the form, with respect to registered CPOs and the the Commission’s ability to fully realize and balancing that against the pools they operate.50 Similarly, NFA its vision for this data collection.57 As successful use of other Commission data stated its support of ‘‘the Commission’s described above, the eliminated data streams, which were developed after the efforts to streamline and simplify the elements in Schedules B and C include form was initially adopted.65 In reporting requirements for CPOs,’’ and detailed pool-specific information, asset addition, SIFMA AMG strongly its belief that ‘‘the [P]roposal will satisfy liquidity and concentration of positions, supported the adoption of a streamlined the Commission’s goal of reducing clearing relationships, risk metrics, Revised Form for all CPOs and their reporting requirements in a manner that financing, and composition.58 pools, thereby eliminating the CPO and continues to facilitate effective oversight In explaining the proposed rescission of pool threshold calculations that dictated of CPOs and the pools they operate.’’ 51 Schedules B and C, the Commission Although MFA stated its preference stated that its ability to identify trends the scope and burden of each CPO’s 66 for a consolidated form for both SEC across CPOs or pools using Form CPO– Form CPO–PQR filing. and CFTC filings with respect to pooled PQR data has been substantially Due to the logistical and timing investment vehicles and their operators challenged, due to the post hoc nature difficulties the Commission explained or advisers, MFA nonetheless expressed of the previous filings and the in detail in the NPRM,67 the its strong support for the Proposal’s substantial amount of flexibility the Commission has determined to forego Revised Form.52 Similarly, SIFMA AMG Commission permitted for CPOs the collection of the detailed stated that the Proposal is well-aligned completing the form.59 In the Proposal, information requested by Schedules B with the Commission’s intended the Commission noted that certain of its and C of Form CPO–PQR, in part, purpose for it, and subject to alternate data streams provide a more because the Commission was not able to recommended revisions, strongly timely, standardized, and reliable view fully incorporate the resulting data set recommended it be adopted.53 into relevant market activity than that into its oversight program for registered Encouraged by the Commission’s provided under Form CPO–PQR, which proposed amendments eliminating CPOs and their operated pools. The make them much easier to combine into Commission acknowledges the strong significant pool-specific sections of the 60 a holistic surveillance program. support from commenters with respect form, AIMA requested that the The proposed removal of Schedules B Commission consider further reducing and C was broadly supported by to this particular amendment, and the scope of the Revised Form, if at all commenters.61 For instance, IAA believes that, in conjunction with other possible.54 supported the Commission’s efforts to amendments explained below, the After considering the public streamline the process, stating, ‘‘We Commission will receive more complete comments received, the Commission appreciate the CFTC tailoring the and usable data regarding reporting has determined to adopt the Revised regulatory reporting requirements for CPOs’ pool operations due to the more Form and the amendments to § 4.27, CPOs to limit data collection that the targeted data collected in the Revised largely as proposed, in furtherance of its Commission will make use of[,] and Form. Accordingly, Schedules B and C, regulatory goals with respect to eliminating the more detailed along with all references to the registered CPOs and their operated thresholds associated therewith, have 55 Consistent with past Commission staff been removed in their entirety from the 48 See, e.g., DTCC, at 2. guidance, ‘‘operated pools,’’ as used in this Revised Form adopted by the Final 49 ICI, at 4 (noting that ‘‘the Proposal would document, means those pools for which a CPO is Rule. significantly reduce the reporting burdens to which required to be registered with the Commission. registered fund CPOs are currently subject’’). 56 2020 CPO–PQR Proposal, 85 FR at 26381–84 50 Hunter, at 1; AIMA, at 2; SIFMA AMG, at 2; (May 4, 2020). 62 IAA, at 4. 57 Barnard, at 1. 2020 CPO–PQR NPRM, 85 FR at 26381 (May 4, 63 ICI, at 6. 51 2020). NFA, at 1. 64 SIFMA AMG, at 4. 52 MFA, at 1–2. 58 2020 CPO–PQR NPRM, 85 FR at 26380 (May 4, 65 SIFMA AMG, at 4–5. 53 SIFMA AMG, at 2. 2020). 59 66 SIFMA AMG, at 6 (noting that these threshold 54 AIMA, at 2–3 (stating also that AIMA 2020 CPO–PQR NPRM, 85 FR at 26381 (May 4, welcomed the Proposal, instead of ‘‘incremental 2020). calculations for CPO and pool size have proved and non-transformative change,’’ and was ‘‘in 60 2020 CPO–PQR NPRM, 85 FR at 26382 (May 4, difficult to practically apply and calculate). favour of making better use of data obtained 2020). 67 2020 CPO–PQR NPRM, 85 FR at 26381 (May 4, through other reporting obligations’’). 61 E.g., IAA, at 3–4; NFA, at 1–2. 2020).

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 71776 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

C. Adoption of the Proposed Schedule the Commission has determined not to diminished dataset would provide the of Investments in the Revised Form make material revisions at this time. Commission an insufficient view into One of the specific questions posed by Events in the bond and energy markets, the actual holdings of operated the Commission in the Proposal was: both recently and in its past experience, commodity pools in markets subject to Should the Commission consider have reinforced the Commission’s the Commission’s oversight, which, in amending the Schedule of Investments understanding of the turn, potentially undermines the to align with the simpler schedule that interconnectedness of financial markets, Commission’s assessment of the risk appeared in NFA Form PQR in 2010? 68 and emphasized the importance of posed by CPOs and their operated pools The Commission received several understanding how CPOs are positioned within the commodity interest markets vis-a`-vis their counterparties and the and their vulnerabilities when faced comments on the content of the 74 proposed PSOI, including multiple economy as a whole. Moreover, with challenging market conditions. recommendations that the Commission incorporating a PSOI that is aligned This information is currently essential adopt a schedule in the Revised Form with the 2010 Schedule of Investments, to the Commission’s ability to identify that aligned with the former Schedule of particularly the 10% asset threshold CPOs and pools with whom the Investments originally adopted by NFA discussed below, in the Revised Form Commission should engage more deeply results in a material loss of information depending on market events, especially in 2010 for its NFA Form PQR (2010 from reporting CPOs on their operated in times of unpredictable market Schedule of Investments).69 The 2010 pools’ alternative investment or volatility. Therefore, the Commission Schedule of Investments is less detailed derivatives positions, which are the has decided to collect the more detailed than the PSOI currently in use by both primary focus of the Commission’s PSOI, as it continues to reassess its data Form CPO–PQR and NFA Form PQR.70 Several of the commenters argued that jurisdiction. For instance, the needs in this space. In the Commission’s experience, the detailed information required by the Commission notes that the 2010 commodity interest markets change over proposed PSOI is no longer necessary in Schedule of Investments lacks specific line items for crude oil, natural gas, and time, as do the Commission’s own the broader context of the Revised Form. some precious metals like gold, all of technological applications, surveillance For instance, NFA, in a comment that which have been subject to significant capabilities, and access to real-time data was supported by both MFA and ICI, volatility.75 streams, and thus, require the ongoing, supported aligning with the 2010 At this time, the Commission believes careful review of the appropriateness of Schedule of Investments because a that reducing the amount of information existing regulatory approaches. ‘‘more streamlined schedule will collected with respect to multiple asset Accordingly, the Commission hereby significantly alleviate filing burdens on classes, particularly those that are under instructs its staff to evaluate the ongoing CPOs without negatively impacting the the Commission’s primary jurisdictional utility of the PSOI information in the usefulness of the information that is mandate,76 is premature. The resulting Revised Form, including comparing it to 71 collected.’’ NFA explained that it does the 2010 Schedule of Investments, not need the more granular information 74 ‘‘Options trading firm blows up amid natural within 18–24 months following the in the PSOI, and that this granularity gas volatility,’’ Financial Times (Nov. 19, 2018), Final Rule’s Compliance Date. As part of has not, in NFA’s experience, improved available at https://ft.com/content/b7c525f6-ec44/ 11e8/89c8/d36339d835c0; ‘‘The Shine Is Off,’’ Slate its review, Commission staff should their analysis, in part, because ‘‘very (June 9, 2013), available at https://www.slate.com/ consider whether or not it is appropriate few CPOs include balances on a business/2013/06/gold-bubble-paranoid-- to adopt the 2010 Schedule of significant number of line items set pushed-gold-to-1900-an-ounce-in-2011-but-the- Investments, in light of such utility. forth in the current schedule.’’ 72 IAA bubble-has-burst; ‘‘Bond investors say some energy companies ‘will not survive’ oil rout slamming After completing this review, and taking also expressed its support, stating that markets,’’ Market Watch (Mar. 10, 2020), available into consideration the Commission’s the specific data fields in the PSOI at https://www.marketwatch.com/story/bond- current regulatory needs, the should be aligned with that of NFA investors-say-some-energy-companies-will-not- Commission expects its staff to develop 73 survive-oil-rout-slamming-markets-2020-03-09; Form PQR. ‘‘Global , oil prices, and government bonds recommendations or a proposed The Commission acknowledges and tumble,’’ Financial Times (Mar. 18, 2020), available rulemaking for the Commission’s further understands commenters’ arguments at https://www.ft.com/content/1b1b47d4-68bd- review to effectuate staff’s findings. supporting a more narrowly focused 11ea-a3c9/1fe6fedcca75; ‘‘Oil plunges into negative territory for the first time ever as demand In addition, as part of this review, PSOI in the Revised Form. Nevertheless, evaporates,’’ Business Insider (Apr. 20, 2020), Commission staff should continue to available at https://markets.businessinsider.com/ explore the use of data available from 68 2020 CPO–PQR NPRM, 85 FR at 26384 (May 4, commodities/news/us-crude-oil-wti-falls-to-21-year- designated contract markets, swap low-1029106364#. 2020). execution facilities, and swap data 69 IAA, at 4; ICI, at 6; NFA, at 1–2; MFA, at 3. 75 Id. 70 See infra pt. II.G.i for additional discussion on 76 ‘‘Gold prices settle at 1-week low as U.S. stock repositories—i.e., existing sources of permissible substituted compliance for § 4.27 with market tumbles,’’ MarketWatch (Sept. 3, 2020), transaction and position data—and its respect to NFA Form PQR. available at https://www.marketwatch.com/story/ application to effecting robust oversight 71 NFA, at 2 (discussing how the 2010 Schedule gold-heads-for-back-to-back-loss-amid-vaccine- hope-us-dollar-strength-2020-09-03; ‘‘Oil sinks with of CPOs and commodity pools, as of Investments elicits the information necessary for compared to the information received NFA’s risk assessment purposes). See also ICI, at 4; equities on wavering hopes for demand pickup,’’ MFA, at 4. ICI further emphasized that the overall Bloomberg (Sept. 3, 2020, updated Sept. 4, 2020), from Revised Form CPO–PQR. In success of the Proposal’s revisions to Form CPO– available at https://www.bloomberg.com/news/ addition, the Commission expects its articles/2020-09-03/oil-extends-biggest-weekly- PQR will depend on whether the resulting dataset drop-since-june-as-demand-woes-return; ‘‘U.S. oil staff to continue engaging with their is appropriately calibrated to the Commission’s prices settle at lowest in nearly a month as supplies, counterparts at the SEC during this 18– regulatory interests and limited to data the output log sharp but temporary hurricane-related Commission will employ in regulating CPOs and 24 month period regarding potential drop,’’ Market Watch (Sept. 2, 2020), available at modifications to Joint Form PF, which their commodity pools. ICI, at 4. https://www.marketwatch.com/story/oil-prices- 72 NFA, at 2 (concluding that its 2010 Schedule lifted-by-lackluster-bounce-in-opec-crude-output- should inform further revisions to of Investments ‘‘elicits the information necessary inventory-fall-2020/09/02; ‘‘Oil prices continue to Revised Form CPO–PQR. for both the CFTC’s and NFA’s needs’’). slide as U.S. data feeds fuel demand worry,’’ Consistent with the views expressed 73 IAA, at 5. MFA also supported this alignment Reuters (Sept. 2, 2020), available at https:// by other commenters, NFA stated its and strongly advocates for consistency between the www.reuters.com/article/us-global-oil/oil-prices- Schedules of Investment in the Revised Form and continue-to-slide-as-us-data-feeds-fuel-demand- belief that the more limited dataset NFA Form PQR. MFA, at 3–4. worry-idUSKBN25U04D. collected on the 2010 Schedule of

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71777

Investments would be sufficient for both Commission should carefully review the CPOs and their operated pools.82 This is NFA’s and the Commission’s proposed PSOI, weigh the utility of the of particular importance to the purposes.77 The Commission notes, asset sub-categories, and eliminate those Commission given the recent however, that direct oversight of deemed to be unnecessary or not unprecedented market conditions reporting CPOs and their operated pools implicating the Commission’s regulatory discussed above. Accordingly, the is only one of the uses of the data interests.81 Revised Form adopted herein retains the collected by the Revised Form’s PSOI. Upon consideration of the comments, 5% asset reporting threshold, and the This information is also useful to the and consistent with the overall PSOI Commission reiterates its direction to Commission in developing its analysis above, the Commission is Commission staff to evaluate the understanding of the commodity declining to increase the threshold for a ongoing utility of the PSOI information interest markets more broadly, pool’s reportable assets from 5% to 10% in the Revised Form, within 18–24 including how various asset classes are at this time. The Commission has months of the Compliance Date for the being utilized by reporting CPOs and reviewed data from past Form CPO– Final Rule. their operated pools. Although there PQR filings, and concludes that, if it E. Adding LEI Fields to the Revised may be certain subcategories of asset were to raise the threshold from 5% to Form classes that have not had many, if any, 10%, the Commission would lose a The Commission also proposed responses over the past six reporting material portion of the data that it has adding fields to the Revised Form periods, that does not mean that such been receiving regarding pool positions requesting LEIs for reporting CPOs and subcategories of asset classes may not in derivatives and alternative their operated pools that are otherwise become more widely used in the future, investments. Specifically, the required to have them, due to their or that a pool’s exposure to asset classes Commission reviewed the first level of activity in the swaps market.83 The that are currently less widely utilized subcategory data within the seven Commission emphasized in the would not be useful in overseeing the headings of asset classes from the 2019 operations of reporting CPOs and their Proposal that the inclusion of existing year-end Form CPO–PQR filings. There LEIs within the smaller dataset on pools going forward. Eliminating was a total of 5,574 PSOIs filed, with questions due solely to a lack of past Revised Form CPO–PQR should enable 1,240 of those filings reporting at least the Commission to more efficiently and responses seems to presume that the one balance that was between 5% and operations and pool trading activity of accurately synthesize the various 10% of NAV, which means that 22% of Commission data streams on an entity- reporting CPOs will remain static going the total filed PSOIs reported an asset forward. The Commission knows from by-entity basis and may permit better balance that would be lost to the use of other data to illuminate the risk its direct regulatory experience in Commission, if the Commission overseeing CPOs that such a inherent in pools and pool families.84 increased the reporting threshold to Specifically, the NPRM queried, Should presumption is false because these 10%. registrants and their pools exhibit high the Commission include LEIs on Looking at the data further, the levels of variability and dynamism in Revised Form CPO–PQR? Why or why Commission found that, of those 1,240 85 their investment strategies. not? PSOIs reporting at least one asset Commenters supported the inclusion D. Retaining the Five Percent Threshold between 5 and 10% of a pool’s NAV, of LEIs because of their low cost, ability for Reportable Assets 660 of them reported balances in either to facilitate standardization across Aligning the Revised Form’s PSOI alternative investments or derivatives— multiple data streams and generally with the 2010 Schedule of Investments asset classes in which the Commission enhance reporting, and ‘‘their risk would include increasing the threshold retains a significant regulatory interest. management capabilities.’’ 86 SIFMA for reportable assets of a pool from 5% Those 660 PSOIs constitute 53% of all AMG also supported the addition of of a pool’s NAV to 10%, which multiple PSOIs reporting an asset as 5–10% of questions on LEIs, stating that it commenters specifically addressed and the pool’s NAV, and amount to understood that ‘‘[requiring LEIs in the supported.78 As discussed above, MFA approximately 12% of the total PSOI Revised Form CPO–PQR] is the key to also requested the Commission align its population. Losing data on 12% of its integrating the information collected in PSOI with NFA’s 2010 Schedule of total PSOI filings by reporting CPOs multiple data streams,’’ and would Investments, and increase the reportable regarding alternative investment or make information collected by the asset threshold from 5% to 10%.79 derivatives positions, which are the SIFMA AMG stated that revising the primary focus of the Commission’s 82 In concluding that losing Form CPO–PQR data jurisdiction, is a material loss, because for 22% of its total filing population was material, PSOI in this manner would greatly staff was guided by the SEC’s Staff Accounting reduce or eliminate the burden on CPOs it would provide the Commission with Bulletin 99, which addresses accounting materiality to provide information on pool assets or an incomplete picture of the actual thresholds. Materiality, SEC Staff Accounting investments that are, ‘‘either nominal or holdings of a pool in markets subject to Bulletin No. 99, 64 FR 45150 (Aug. 19, 1999), the Commission’s oversight, which available at https://www.sec.gov/interps/account/ so minimal they do not affect the daily sab99.htm. risk of a CPO.’’ 80 As an alternative to could undermine the Commission’s 83 2020 CPO–PQR NPRM, 85 FR at 26378 (May 4, adopting the 2010 Schedule of assessment of the market risk posed by 2020). Investments, SIFMA AMG also would 84 2020 CPO–PQR NPRM, 85 FR at 26383 (May 4, support a more holistic analysis by the 81 SIFMA AMG, at 14 (describing such an analysis 2020) (anticipating that the inclusion of LEIs would greatly facilitate the aggregation of data from Commission of the proposed PSOI: as ‘‘weighing the difficulty of certain CPOs to provide data for the more granular sub-categories commodity pools under different levels of common rather than simply doubling the compared with the usefulness of such data for the control). percentage threshold for reportable Commission, with a focus on categories of assets 85 2020 CPO–PQR NPRM, 85 FR at 26384 (May 4, assets, SIFMA AMG argued that the where the Commission does not have a specific 2020). regulatory interest or otherwise would have limited 86 DTCC, at 2; SIFMA AMG, at 6; GLEIF, at 1. See use for such detail’’). See also IAA, at 5 (questioning also Hunter, at 1, and Barnard, at 1. GLEIF noted 77 NFA, at 2. the relevance and necessity of certain line items in further that standardizing the LEI requirement 78 IAA, at 5; MFA, at 4; SIFMA, at 14. the proposed PSOI); MFA, at 6–14 (providing line would also contribute to the harmonization of rules 79 MFA, at 4. edits to the proposed PSOI, and recommending the and standards across regulatory regimes. GLEIF, at 80 SIFMA AMG, at 14. deletion of multiple asset classes). 2.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 71778 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

Revised Form ‘‘much easier to combine collected registrant data.93 According to entities 98 are the only Commission into a holistic surveillance program’’ for MFA, registered CPOs should be registrants required to maintain and registered CPOs and their operated permitted to file their LEIs for the renew their LEIs.99 Notably, CPOs and pools.87 Citing a list of benefits Revised Form in a separate submission, their operated pools are not among associated with LEIs, GLEIF and DTCC such that the LEIs and identifying those entities. Additionally, because advocated for further expanding the LEI information of the CPO and its pools are CPOs and their operated pools are not requirement to all reporting CPOs and separated from the confidential required to obtain, maintain, or renew pools, instead of only requiring them information the Revised Form otherwise LEIs to participate in the futures market, from entities that currently have them.88 collects.94 the Commission believes that imposing GLEIF also requested the Commission such a requirement solely for Form The Commission is adopting this consider two specific recommendations CPO–PQR reporting purposes would provision as proposed. The LEI fields regarding LEIs: (1) Adopting a not, at this time, advance the included in the Revised Form should requirement that only LEIs that are Commission’s goal of monitoring CPOs provide significant regulatory benefits, maintained and duly renewed would and their operated pools for market and satisfy this reporting obligation in the particularly with respect to the systemic risk. Revised Form; and (2) requiring LEIs for Commission’s stated goal of developing The Commission notes that this all reporting entities submitting the a holistic surveillance program for approach to LEIs in the Final Rule does Revised Form, as well as for a reporting registered CPOs and their operated not preclude expanding the LEI 95 CPO’s miscellaneous service providers, pools. At this time, the Commission requirement in the Revised Form in the like a third-party administrator, broker, will not require CPOs that do not future. As noted herein, and in the trading manager, and/or custodian.89 currently have LEIs to obtain them Proposal, the Final Rule is intended to DTCC argued that expanding the LEI solely for the purposes of reporting on the other data developed by the requirement to cover all reporting CPOs the Revised Form.96 The Commission’s Commission as they currently exist. The and all of their operated pools would regulations currently only require Commission currently does not require allow the Commission to obtain a more entities to obtain LEIs if they are LEIs to participate in the commodity complete picture of pool activity across engaged in swaps transactions. interest markets beyond the swaps all derivatives transactions, rather than Specifically, the Commission’s market; however, in the future, the LEI just with respect to swaps.90 DTCC also regulations regarding swap data requirement could be expanded to other provided specific cost estimates for LEI reporting, which were amended in commodity interest asset classes. If that acquisition, renewal, and maintenance, September 2020, require CPOs or should happen, reporting CPOs and positing that these costs would not be a commodity pools that are counterparties their pools would be required to report significant burden on CPOs. Moreover, to swaps to use LEIs in all swap data those LEIs on the Revised Form as well. DTCC argued that expanding the recordkeeping and reporting.97 The As LEIs become more ubiquitous in the requirement could instead ease CPOs’ Commission would therefore expect that market, and as more CPOs obtain and reporting burden, ‘‘through the any CPO or commodity pool entering use them in operating their pools, the standardization of a common into swap transactions would have an Commission anticipates that there will identifier,’’ i.e., an LEI for each reporting LEI. Conversely, if a reporting CPO and be a corresponding increase of reported entity and each operated pool, and its pools do not engage in swap LEIs on the Revised Form. further facilitate the synthesis of CPO transactions, they would not be required With respect to commenters’ concerns and pool data.91 to have LEIs. Moreover, futures market about cybersecurity, determining the MFA suggested that the Commission participants are not required to have feasibility of filing LEI information collect LEI data separately from the LEIs generally, and as such, LEIs are not separately from the Revised Form would Revised Form for purposes of protecting collected by the designated contract hinder the Commission’s ability to highly confidential information in these markets or derivatives clearing adopt the Final Rule in a timely manner. filings from potential cyber breaches.92 organizations with respect to futures The Commission believes that such Specifically, MFA recommended that transactions. Therefore, imposing such a delay serves neither its own regulatory the Commission incorporate requirement on reporting CPOs and interests nor the interests of alphanumeric identifiers to conceal the their pools that do not engage in swaps Commission registrants required to file identities of reporting CPOs in the would not assist the Commission in Form CPO–PQR. In arriving at this Revised Form, and that the Commission utilizing the other data streams available conclusion, the Commission weighed separate this data to mitigate potential to it regarding futures trading activity. the benefits of adopting Revised Form breaches and enhance protections for CPO–PQR sooner, including the Additionally, allowing only those opportunity to begin fully incorporating LEIs that are maintained and duly the Revised Form’s dataset into the 87 SIFMA AMG, at 2. renewed to satisfy the reporting 88 GLEIF, at 1 (stating that the Proposal’s current Commission’s oversight program for LEI requirement would not allow the Commission requirement in the Revised Form runs registered CPOs and their operated to aggregate all derivatives transactions by pools counter to the Commission’s stated pools, as well as operational efficiencies under common control); DTCC, at 2. purpose of the Revised Form. Currently, for the Revised Form’s filers, against 89 GLEIF, at 1. swap dealers and other registered whether the Commission should modify 90 DTCC, at 2. 91 DTCC, at 2–3 (discussing the average costs how data on the Revised Form is 93 associated with obtaining and maintaining an LEI: MFA, at 3. average cost for an LEI is $111, and the renewal fee 94 Id. 98 17 CFR 1.3, ‘‘registered entity’’ (including, inter is $91; the annual one-time cost for all CPOs 95 2020 CPO–PQR NPRM, at 85 FR 26382 (May 4, alia, designated contract markets, swap execution without an LEI would total $64,828; the annual 2020). facilities, derivatives clearing organizations, and renewal fee combined for all 1326 registered CPOs 96 See infra Form CPO–PQR, ‘‘Reporting swap data repositories, in the ‘‘registered entity’’ would total $120,666). Neither DTCC nor GLEIF Instructions,’’ no. 9. definition). provided any cost estimates with respect to 97 Swap Data Recordkeeping and Reporting 99 Swap Data Recordkeeping and Reporting expanding the LEI requirement to all operated pools Requirements, approved by the Commission on Requirements, approved by the Commission on or to all of a reporting CPO’s service providers. September 17, 2020. Publication in the Federal September 17, 2020. Publication in the Federal 92 MFA, at 3. Register is pending. Register is pending.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71779

collected. That analysis also included to a limited portion of the Form CPO– i. Quarterly Filing Schedule for All an assessment of the state of the PQR filing population. The Commission CPOs Completing the Revised Form Commission’s current data finds that the outcome of this approach The simplified, uniform, quarterly protocols. would undermine and run counter to filing schedule proposed for the Revised With respect to the Commission’s data the Commission’s stated purposes in the Form with respect to all reporting CPOs security protocols, it is currently in full Proposal, i.e., revising Form CPO–PQR and their operated pools received broad compliance with all of the relevant in a way that supports the Commission’s support from commenters. NFA statutes relating to information security ability to exercise its oversight of CPOs generally expressed strong support for and protection.100 The Commission’s and their operated pools, while the Commission’s efforts to streamline Office of Inspector General (OIG) audits reducing reporting burdens for market and simplify the reporting regime for the agency’s security program annually, 103 participants. Taking all of this into reporting CPOs, including the quarterly and as of the 2019 audit, OIG identified account, the Commission concludes that filing schedule, and stated its belief that, no material weaknesses and made no adopting Revised Form CPO–PQR at ‘‘the proposal will satisfy the significant findings. Moreover, the OIG this time, absent any significant Commission’s goal of reducing reporting rated the Commission’s security modification as to how the information, 101 requirements in a manner that continues program as ‘‘effective.’’ In addition to including LEIs, is submitted, is the OIG review, the U.S. Department of to facilitate effective oversight of CPOs appropriate. In conjunction with and the pools that they operate.’’ 108 Homeland Security (DHS) also assesses Commission staff’s review of the the Commission on a semiannual basis, SIFMA AMG also expressed its support Revised Form’s PSOI within 18–24 to increase the filing frequency of the and DHS’ most recent assessment of the months of this Final Rule’s Compliance CFTC’s security program for compliance Revised Form for all reporting CPOs Date, the Commission further directs its with the Cybersecurity Framework because of the simplified filing schedule staff to determine the feasibility, (CSF), as required by the Office of across all CPOs, regardless of size, and necessity, and advisability of separating Management and Budget, resulted in the consistency in filing schedules a CPO’s LEIs from the rest of Revised ratings of ‘‘managed and measurable’’ in between the Revised Form and NFA Form CPO–PQR in that same time 109 all five functions of the CSF.102 Form PQR. In the Commission’s opinion, frame. Lastly, the Commission remains In adopting the changes as proposed, delaying the adoption of the Final Rule committed to devoting significant the Commission still favors employing a and of Revised Form CPO–PQR, resources to ensure its internal data simpler, more uniform filing specifically in order to separately collect security procedures are aligned with, or requirement for all reporting CPOs. This a filing CPO’s LEIs, would lead to an surpass, industry best practices, as they straightforward filing structure and undesirable regulatory outcome. This develop over time. schedule should facilitate compliance and reporting under § 4.27, thereby approach would delay the adoption of F. The Revised Form’s Definitions, enhancing the efficacy of the Revised Form CPO–PQR significantly, if Instructions, and Questions not indefinitely, thereby depriving filing Commission’s oversight of reporting CPOs of much-anticipated compliance As discussed above, the Commission CPOs and their operated pools. relief, for the purpose of addressing also proposed several amendments to ii. Instructions 3 and 5 arguably unwarranted (given the recent the Instructions of the Revised Form.104 objective and favorable evaluations of For instance, the Commission proposed Instruction 3 on Form CPO–PQR was this agency’s information security and to require all reporting CPOs to file the carried over, in relevant part, to the data protection protocols cited above) Revised Form quarterly by redefining Proposal’s Revised Form and states: The data security concerns only applicable ‘‘Reporting Period,’’ to mean a calendar CPO May Be Required to Aggregate quarter.105 Additionally, the Information Concerning Certain Types 100 See, e.g., the Federal Information Security Commission proposed significant of Pools. For the parts of Form CPO– Modernization Act of 2014, 44 U.S.C 3551, et seq. changes to Instructions 2 and 3, in PQR that request information about (Dec. 18, 2014). connection with deleting Form CPO– individual Pools, you must report 101 ‘‘Office of the Inspector General Semiannual aggregate information for Parallel Report to Congress: October 1, 2019-March 31, PQR’s Schedules B and C, as well as the 2020,’’ CFTC Office of the Inspector General, p. 8 elimination of terms related to the Managed Accounts and Master Feeder (Mar. 31, 2020), available at https://www.cftc.gov/ Arrangements as if each were an _ various thresholds used for those media/3946/oig reporttocongress033120/download. schedules, i.e., Mid-Sized CPO, Large individual Pool, but not Parallel Pools. 102 ‘‘Federal Information Security Modernization 106 Assets held in Parallel Managed Act of 2014 Annual Report to Congress: Fiscal Year CPO, and Large Pool. The 2019,’’ Office of Management and Budget. Although Commission further queried in the Accounts should be treated as assets of DHS has not yet published the Fiscal Year 2019 Proposal: Are there ways the the Pools with which they are 110 report to its website, the Commission notes that it Commission could further clarify and aggregated. Paragraphs in Instruction received similar ratings in fiscal year 2018. See 3 of the existing form describing how to ‘‘Federal Information Security Modernization Act of refine the reporting instructions for 2014 Annual Report to Congress: Fiscal Year 2018,’’ completing Revised Form CPO–PQR in determine if a CPO is a Mid-Sized or Office of Management and Budget, p. 49 (Aug. 23, order to provide CPOs with greater Large CPO required to complete 2019), available at https://www.whitehouse.gov/wp- certainty that they are completing the Schedules B or C, or if a pool is a Large content/uploads/2019/08/FISMA/2018/Report- Pool for purposes of completing FINAL-to-post.pdf. The CSF, developed by the form correctly? 107 National Institute of Standards and Technology, Schedule C, were proposed to be includes five function areas: ‘‘Identify, Protect, deleted from the Revised Form.111 In the 103 2020 CPO–PQR NPRM, 85 FR at 26380 (May Detect, Respond, and Recover.’’ Id. at 17. A finding 4, 2020). Proposal, the Commission also retained of ‘‘managed and measurable,’’ is the fourth highest 104 of five levels and means, ‘‘[q]uantitative and 2020 CPO–PQR NPRM, 85 FR at 26378 (May 108 qualitative measures on the effectiveness of 4, 2020). NFA, at 1. policies, procedures, and strategies are collected 105 2020 CPO–PQR NPRM, 85 FR at 26396 (May 109 SIFMA AMG, at 4. across the organization and used to assess them and 4, 2020). 110 2020 CPO–PQR NPRM, 85 FR at 26391 (May make necessary changes.’’ Id. at 31. Per the IG 106 2020 CPO–PQR NPRM, 85 FR at 26391 (May 4, 2020) (proposing Instruction 3 of the Revised Reporting Metrics, a finding of ‘‘managed and 4, 2020). Form). measurable’’ ‘‘is considered to be effective at the 107 2020 CPO–PQR NPRM, 85 FR at 26384 (May 111 2020 CPO–PQR NPRM, 85 FR at 26391 (May domain, function, and overall level[s].’’ Id. at 32. 4, 2020). 4, 2020).

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 71780 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

Instruction 5, which read as follows: I The Commission generally agrees because Instruction 5 is no longer am required to aggregate funds or with commenters with respect to PMAs applicable, the Commission has accounts to determine whether I meet a and the remaining references to removed it from the Revised Form. reporting threshold, or I am electing to reporting thresholds in the proposed iii. Instruction 4 aggregate funds for reporting purposes. Revised Form. Consequently, the How do I ‘‘aggregate’’ funds or accounts Commission believes that much of the The Proposal also retained Instruction for these purposes? 112 Instruction 5 language in these instructions should be 4, which provided the following: I then provided substantive examples on deleted for internal consistency in the advise a Pool that invests in other Pools how to aggregate funds as if they were Revised Form. Therefore, the or funds (e.g., a ‘‘’’). How one pool with respect to parallel Commission is revising Instruction 3 to should I treat these investments for managed accounts (PMAs) and/or remove all references to PMAs and purposes of Form CPO–PQR? 122 The Master-Feeder Arrangements.113 Parallel Pools, focusing solely on Instruction states, in pertinent part, that NFA responded to the Commission’s reporting information concerning pools for purposes of this Form CPO–PQR, question on additional clarifications to in a Master-Feeder Arrangement. Thus, you may disregard any Pool’s equity the Revised Form’s instructions, stating Instruction 3 in the Revised Form only investments in other Pools.123 NFA that, if the Revised Form is adopted as addresses how Master-Feeder requested that the Commission proposed, the reporting requirements for Arrangements should be reported.120 ‘‘consider eliminating the guidance in CPOs will no longer be dependent on With respect to the treatment of Instruction 4 regarding the ‘investments reporting thresholds, and therefore, a Master-Feeder Arrangements under the in other Pools generally’ heading’’ detailed instruction on PMAs is not Revised Form, commenters raise an because that guidance allows a CPO to necessary.114 NFA recommended interesting question as to the proper disregard a pool’s equity investments in accordingly that the Commission requirements to impose on structures other pools, and NFA would like these ‘‘consider whether these instructions meeting the form’s definition of a assets included.124 This reporting helps and the related definitional terms Master-Feeder Arrangement. NFA ‘‘identify pool assets that may also should be eliminated.’’ 115 SIFMA AMG Specifically, the form provides that a be reported by another pool or fund.’’ 125 also stated that the purpose of Master-Feeder Arrangement is ‘‘an However, IAA disagreed ‘‘with any aggregating pool assets would no longer arrangement in which one or more recommendation to eliminate be relevant under the Revised Form, and funds (‘‘Feeder Funds’’) invest all or Instruction 4,’’ because IAA would it would be unclear what these substantially all of their assets in a 121 consider that ‘‘a significant change in instructions mean under the Revised single fund (‘‘Master Fund’’).’’ This how CPOs currently report on the Form, absent those reporting definition encompasses many variations form.’’ 126 Consequently, IAA stated that thresholds.116 Therefore, SIFMA AMG of fund complexes from funds with this particular change should be also requested the Commission remove wholly-owned subsidiaries, to funds considered, if at all, ‘‘as part of a formal Instructions 3 and 5 related to PMAs, with multiple levels of intermediary rulemaking, with notice and funds between the feeder and master given the proposed deletion of comment.’’ 127 funds, to the more traditional structures Schedules B and C and the associated Instruction 4, in the original form, thresholds for CPOs and pools. SIFMA where two or more feeder funds invest substantially all of their assets into a was generally intended to provide clear AMG, like NFA, believed that the instruction that investments in other concept of PMAs and pool asset commonly owned master fund. The Commission believes that, to adequately pools should not be included in a aggregation, as a whole, is no longer consider the propriety of permitting all specific reporting CPO’s or operated relevant to completing the Revised such fund structures to consolidate their pool’s applicable reporting threshold. Form.117 SIFMA AMG also filings on the Revised Form, additional For example, a pool’s fund-of-funds recommended the Commission revise analysis is required to determine the investments, in which the reporting the Revised Form further to permit the appropriate parameters to impose on CPO may have little to no control over filing of Master-Feeder Arrangements as such relief. Therefore, the Commission the management or performance of one pool, rather than requiring each declines to change the reporting those assets, should not cause a pool to fund to report separately.118 Finally, approach for Master-Feeder be considered a ‘‘Large Pool,’’ which SIFMA AMG suggested the Commission Arrangements at this time and instead, would require additional, highly adopt the approach taken in Joint Form instructs staff to engage in such an detailed reporting with respect to that PF with respect to Master-Feeder analysis to determine what pool. Similarly, a reporting CPO should Arrangements, specifically in Joint Form not also have been categorized as a 119 modifications may be needed to provide PF Instruction 5. for consolidated reporting where Large or Mid-Sized CPO, with appropriate. consequences to the scope and breadth 112 2020 CPO–PQR NPRM, 85 FR at 26392 (May of their filings, solely due to the fact that 4, 2020) (proposing Instruction 5 of the Revised Upon consideration of the comments, Form). the Commission is deleting Instruction its aggregated pool AUM included 113 Id. 5 in its entirety because this instruction 114 NFA, at 3. was originally included to explain how 122 2020 CPO–PQR NPRM, 85 FR at 26391–92 115 Id. a reporting CPO should determine if it (May 4, 2020) (proposing to retain Instruction 4 in 116 SIFMA AMG, at 8–9 (stating its belief that the Revised Form). is a Large, Mid-Sized, or Small CPO, 123 these instructions were borrowed from Joint Form and what the resulting scope of its filing Id. PF and the main function of this instruction is to 124 NFA, at 3. aggregate pool assets of a CPO, for the purpose of should be, i.e., whether Schedules B or 125 Id. (emphasizing that NFA would like to see determining whether a firm is a Large, Mid-Sized, C (or both) were required. Accordingly, these ‘‘other pool investments’’ reflected in or Small CPO, and whether a pool is a Large Pool). multiple answers in the Revised Form, in particular 117 Id. for Master-Feeder Arrangements, a CPO should to Questions 2 and 8 on assets under management, 118 Id. at 9. provide the LEI of a Master Fund’’). Question 9 for the calculation of monthly rates of 119 SIFMA AMG, at 11–13 (explaining further 120 See infra Revised Form CPO–PQR, ‘‘Reporting return, and the PSOI in Question 11 on investments that, ‘‘[t]o align with the Commission’s proposal to Instructions,’’ no. 3. in other funds). require pool LEIs on the CPO–PQR, we are 121 17 CFR part 4, app. A, ‘‘Definitions of Terms,’’ 126 IAA, at 6, n.28. suggesting that should a single filing be permitted ‘‘Master-Feeder Arrangement.’’ 127 IAA, at 6.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71781

investments in other pools that it does private funds, and funds, the commodities markets.’’ 131 ICI also not operate. reporting CPOs must disclose their supported clarifying the ‘‘broker’’ Although NFA presents a compelling pools’ investments in other funds as definition in this manner, and limiting argument regarding its anticipated use part of the PSOI. The Commission the responses to the Revised Form ‘‘to of information regarding pools’ further believes that requiring these brokers that a CPO uses with respect to investments in other pools, the investments to be listed in the PSOI is commodity interest transactions,’’ Commission has determined to continue necessary for it to make full use of the because, ICI explained, such an to provide CPOs with the discretion to information provided on Question 8 in approach would be consistent with the include or exclude such investments, the Revised Form, for which such Proposal’s stated purpose of refining provided that their treatment is investments must also be included. reporting, ‘‘in order to better monitor consistent throughout the Revised Form. Without this detail in the PSOI, it would the commodity interest markets.’’ 132 The Commission understands from IAA be very difficult to determine the asset The Commission has consistently that this would be a significant change classes influencing the movement in a understood the term ‘‘broker,’’ in the in how CPOs of pools that invest in pool’s AUM and NAV from one context of Form CPO–PQR, to include other pools engage with the form and reporting period to the next. Therefore, more than just those service providers could be quite burdensome for CPOs the Revised Form retains the current engaging in the commodity interest that may be reporting such information general treatment of investments in markets,133 and has not limited the for the first time. Moreover, the other pools currently set forth in definition of the term ‘‘broker,’’ as used Commission believes that retaining the Instruction 4, with the additional either in the current form or the Revised obligation to include such investments clarification that they are included in Form, in any manner. Moreover, Form in the reported pool’s AUM and NAV the PSOI. CPO–PQR, as a general matter, has (Question 8 of the Revised Form), as consistently requested information on well as requiring the investments to be With respect to pools that invest substantially all of their assets in other all enumerated service providers used enumerated in the PSOI, as discussed by a reporting CPO for its operated below, provides adequate information pools, their investments in other pools were required to be included in the pool(s), regardless of the asset class or about a pool’s investments in other 134 reporting CPO’s responses to Schedule markets involved. Consistent with pools for the Commission to oversee this position, which is supported by the their activities, while the Commission A of Form CPO–PQR. Because under the Revised Form, Schedule A comprises plain meaning of the Form CPO–PQR’s continues to develop its abilities to definition of ‘‘broker,’’ reporting CPOs integrate its data regarding reporting the entirety of the Revised Form, with the exception of the addition of the currently filing the form should identify CPOs and their operated pools. any broker used in any transactions for Therefore, consistent with Instruction 4 PSOI, the Commission is revising Instruction 4 to provide that such other any pool not operated pursuant to an as originally adopted, the Commission exemption or exclusion during the will continue to require that such pool investments must be reported on in the Revised Form. reporting period. This is also consistent investments be included in a reporting with other aspects of the form and the CPO’s response to Question 10 in the iv. Definition of ‘‘Broker’’ Revised Form, e.g., the PSOI, which are current form, which solicits information not limited to collecting data solely on regarding the pool’s statement of Like the original iteration of the form, the commodity interest transactions of a changes concerning AUM, and which the Proposal defined ‘‘broker’’ as any reporting CPO and its operated pools. has been redesignated as Question 8 in entity that provides clearing, prime The Commission notes elsewhere in the Revised Form, as well as in the PSOI brokerage, or similar services to the this release that the trading activity or 128 in the Revised Form, but will not Pool. IAA recommended that the investments of pools in asset classes otherwise require such CPO to include Commission clarify whether a ‘‘broker’’ other than commodity interests may a pool’s investments in other pools in its in the Revised Form refers to only impact the viability of that pool and/or responses to the Revised Form. commodity-related brokers, or includes the overall operations of its CPO.135 129 The Final Rule’s revisions to non-commodity brokers. IAA further This fact has been highlighted by the Instruction 4 also require the reporting explained that CPOs may have many recent unprecedented market CPO to include such investments in relationships with executing brokers for movements and difficulties resulting other pools in the PSOI. In the Proposal, non-commodity interest transactions, from the Covid–19 pandemic and its the Commission amended the form by and absent a clarification of this broad negative effects on the U.S. and removing detailed pool information set definition, this prompt would constitute global economies. Therefore, the out in Schedules B and C, but retained a substantial burden for CPOs to include Commission finds that collecting data the PSOI, which has now become the 130 all brokers in the Revised Form. on CPO and pool activity outside of only section on Revised Form CPO–PQR Finally, IAA queried what regulatory commodity interests is also of general that provides detailed pool investment interest or benefit the Commission information. In the original form, the would gain from a broad definition of 131 IAA, at 6. IAA further stated its expectation PSOI supplemented the rest of the ‘‘broker,’’ and concluded that, ‘‘we do that, should the Commission clarify the ‘‘broker’’ information provided; going forward, not believe this information is necessary definition to refer only to brokers involved in with the amendments removing to implement [Revised] Form CPO–PQR commodity interest transactions, then NFA would likewise adopt an identical interpretation for NFA Schedules B and C, the PSOI’s value or to assist the CFTC in its oversight of and status has changed, as it is now the Form PQR. Id. 132 ICI, at 5. key collection of information through 128 2020 CPO–PQR NPRM, 85 FR at 26394 (May 133 See 17 CFR part 4, app. A, ‘‘Definitions of which the Commission can analyze the 4, 2020). Terms,’’ ‘‘broker’’ (defining ‘‘broker’’ as ‘‘an entity market activities and risks of CPOs and 129 IAA, at 5. that provides clearing, prime brokerage or similar their operated pools. Therefore, due to 130 Id. (stating that large numbers of non- services to the Pool’’). the change of importance and status of commodity interest transactions and differences in 134 See, e.g., 2015 CPO–PQR FAQs, in which brokerage firm names could make answering this Commission staff further echoed this broad the PSOI, along with its plain language, question completely particularly difficult for CPOs understanding of ‘‘broker’’ in its discussion of pool which includes line items for various that have hundreds of relationships with approved custodians, marketers, and underwriters. classes of funds, such as mutual funds, brokers for their non-commodity interest trading). 135 See supra II.C.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 71782 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

regulatory interest and concern to the be clarified and updated for Terms precede its Instructions, which Commission with respect to its effective completeness and accuracy.139 IAA the Commission hopes will facilitate oversight of reporting CPOs and their recommended that the Commission understanding of the Revised Form. operated pools. The Commission has improve the clarity of the FAQs by G. Substituted Compliance concluded that limiting the brokers removing language that would not apply reported solely to those used in to the Revised Form, specifically The Proposal also included connection with commodity interest referencing PMAs, parallel pool amendments to § 4.27 that would allow transactions would not be conducive to structures, and aggregating funds for CPOs to file NFA Form PQR in lieu of its effective oversight, would be a reporting threshold purposes.140 MFA filing the Revised Form with the significant departure from its clear past suggested the Commission amend the Commission,143 and eliminate the positions and interpretations of the instructions in the Revised Form to ability of dually registered CPO- form, and further, would result in ‘‘incorporate relevant, substantive FAQs investment advisers filing Joint Form PF internal inconsistency in the Revised into the instructions of Form CPO– to file such form in lieu of the Revised 144 Form, where some aspects of the data PQR.’’ 141 Furthermore, SIFMA AMG Form. collection would be limited to requested an additional change to the i. NFA Form PQR commodity interests, whereas others FAQs to create a complete Glossary of In general, commenters supported the would not. Therefore, after considering Terms for use by filers of the Revised proposed amendment permitting CPOs the comments, the Commission is not Form.142 to file NFA Form PQR in lieu of the changing the scope of the definition of The Commission understands Revised Form for the purpose of the term ‘‘brokers,’’ and confirms, in the commenters’ concerns that the form will improving filing efficiencies.145 IAA context of the Revised Form as adopted, be significantly revised by the Final commended the Commission ‘‘for that the term is not limited to those Rule, resulting in large portions of the 2015 CPO–PQR FAQs becoming offering CPOs additional filing brokers used in connection with efficiencies without compromising the commodity interest transactions. obsolete or inaccurate, absent commensurate revisions. Therefore, Commission’s ability to obtain affected v. Elimination of Questions Regarding while reviewing comments and data.’’ 146 IAA further recommended Auditors and Marketers developing the Revised Form for the that the Commission add a specific The Proposal also would remove Commission’s consideration, instruction to the Revised Form to Commission staff has also reviewed the reflect this allowing the filing of NFA questions regarding a CPO’s auditors 147 and marketers employed for its operated 2015 CPO–PQR FAQs in light of the Form PQR as substituted compliance. IAA stated that by explaining this pools because the Commission and NFA revisions adopted herein. The substituted compliance for NFA Form have access to this information through Commission expects staff to complete PQR within the Revised Form’s other regulatory sources, ‘‘which the this review and to publish updated instructions, the Commission would Commission preliminarily believes FAQs regarding the Revised Form, as ‘‘assist CPOs that frequently review the obviates the need for obtaining this soon as practicable, following the instructions for the form in addition to information through Revised Form adoption of the Final Rule. or instead of the text of the rule to CPO–PQR.’’ 136 SIFMA AMG The Commission is also making some ensure the filing is accurate and specifically supported the removal of technical changes to regulatory citations complete.’’ 148 Additionally, as noted these questions, stating this proposed and cross-references in the Revised with respect to the proposed uniform, deletion is especially appropriate where Form, and further clarifying its quarterly filing schedule above, SIFMA the information is already required definitions and instructions to facilitate AMG expressed its strong support for a elsewhere by other regulations or completion of the Revised Form. The single filing schedule across the Revised filings, and is therefore, easily technical clarifications include revising Form and NFA Form PQR, as well as for accessible to the CFTC and NFA.137 the definition of ‘‘GAAP’’ in the Revised the adoption of substituted compliance With respect to questions regarding a Form to reflect the ability of reporting with respect to NFA Form PQR.149 CPO’s auditors or marketers, the CPOs to use certain ‘‘alternative accounting principles, standards, or The Commission has determined that, Commission is adopting the Revised upon NFA’s inclusion of questions Form as proposed, omitting those practices’’ currently permitted under § 4.27(c)(2), which is redesignated by eliciting LEIs, NFA Form PQR will be questions, for the reasons articulated in substantively consistent with Revised the Proposal. the Final Rule as § 4.27(c)(4). The Commission is also reorganizing the Form CPO–PQR. The Commission vi. FAQs and Glossary Revised Form, so that the Defined recognizes, however, that absent a The Revised Form includes a list of condition requiring NFA Form PQR to ‘‘Defined Terms,’’ which was entitled 139 SIFMA AMG, at 17 (recommending further the be substantively consistent with Form ‘‘Definitions of Terms’’ in its prior creation of a centralized ‘‘Glossary of Terms’’ for CPO–PQR on an ongoing basis, it is use by filers of the Revised Form and/or NFA Form possible for the two forms to diverge iteration. In 2015, Commission staff PQR). Currently, SIFMA AMG states that some published responses to frequently asked definitions may be found in NFA Form PQR, while 143 questions (the 2015 CPO–PQR FAQs, or others are solely in the Revised Form, and still 2020 CPO–PQR NPRM, 85 FR at 26378 (May other definitions or information solely published in 4, 2020). FAQs) providing detailed answers to 144 the FAQs. SIFMA AMG would like to see this 2020 CPO–PQR NPRM, 85 FR at 26378 (May questions from CPOs attempting to information centralized and easily accessible for 4, 2020) (citing the lack of similarities between Joint complete Form CPO–PQR.138 SIFMA CPOs filing the Revised Form. Id. Form PF and the Proposal’s Revised Form). AMG requested that the Commission 140 IAA, at 6. 145 Barnard, at 1–2; Hunter, at 1; IAA, at 4. align the 2015 CPO–PQR FAQs with the 141 MFA, at 3. MFA stated that otherwise, 146 IAA, at 4. 147 Revised Form, such that these items can Commission staff would need to separately issue IAA, at 6 (requesting that ‘‘the instruction state FAQs with respect to the adopted Revised Form to that a CPO ‘required to file NFA Form PQR with replace the existing 2015 CPO–PQR FAQs, which the NFA for the reporting period may make the 136 2020 CPO–PQR NPRM, 85 FR at 26383 (May MFA views as less effective than centralizing and NFA filing in lieu of the Form CPO–PQR report 4, 2020). incorporating FAQs and instruction examples in the required under Rule 4.27(c)’’’). 137 SIFMA AMG, at 7. Revised Form. Id. at 4. 148 IAA, at 6. 138 2015 CPO–PQR FAQs. 142 SIFMA AMG, at 17. 149 SIFMA AMG, at 15–16.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71783

over time while still being eligible for Conversely, AIMA requested that the After considering the comments substituted compliance, and that this Commission and NFA allow dually received, the Commission is adopting could undermine the Commission’s registered CPOs to file Joint Form PF in the amendments to § 4.27, eliminating collection of vital information regarding satisfaction of the reporting obligations the substituted compliance for a dually reporting CPOs and their operated in § 4.27 and NFA Compliance Rule 2– registered CPO-investment adviser pools. Therefore, the Commission will 46, because this approach would reduce completing Joint Form PF in lieu of the review any proposed changes to NFA the reporting burden, ‘‘while still Revised Form, as proposed for the Form PQR consistent with the assuring NFA has the necessary reasons stated in the Proposal.160 The procedure set forth in CEA section information from a supervisory original § 4.27(d), which provided that 17(j).150 This will ensure the continued perspective.’’ 154 Rather than eliminate substituted compliance mechanism with alignment of the forms. Because any § 4.27(d) entirely, SIFMA AMG respect to Joint Form PF, is no longer alterations to NFA Form PQR would be requested that the Commission preserve appropriate because: (1) The Revised accomplished through amendments to substituted compliance with respect to Form will differ from Joint Form PF, NFA membership rules, which are Joint Form PF on a voluntary basis both in substance and filing schedule; subject to review by Commission staff because some of its members believe and (2) continuing to accept Joint Form and either notice to, or review by, the there would be efficiencies in allowing PF in lieu of the Revised Form would Commission, ongoing monitoring of the Joint Form PF to be filed for both private frustrate an intended and clearly stated continued substantive consistency of fund and non-private fund pools.155 purpose of the Proposal, i.e., is to the forms should be easily implemented The Commission specifically asked in enhance and better coordinate the through this existing process. Commission’s own internal data streams Therefore, the Commission is the Proposal, For CPOs dually-registered to more efficiently and effectively adopting, as proposed, the amendments with the CFTC and the SEC, if Form oversee its registered, reporting CPOs to § 4.27(c)(2) clearly establishing CPO–PQR is amended as proposed, and their operated pools. substituted compliance for the Revised would you cease reporting data for these Form with respect to NFA Form PQR. pools on Joint Form PF?’’ 156 AIMA iii. Substituted Compliance for CPOs of Finally, upon consideration of the responded that these CPOs are likely to Registered Investment Companies comments, the Commission is adding a continue including them rather than new Instruction 2 in the Revised Form incurring the costs of a separate filing ICI also commented particularly on that explicitly states that to the extent a obligation, if ‘‘the inclusion of such the burdens imposed by the proposed CPO has timely filed the National non-private fund pools on Form PF can amendments on CPOs of registered Futures Association’s Form PQR, such be treated as satisfaction of separate investment companies (RICs). filing shall be deemed to satisfy this Form CPO–PQR and NFA Form PQR Specifically, ICI requested that, to Form CPO–PQR.151 filing obligations, and those pools have eliminate duplicative reporting between been included in the Form PF the SEC and CFTC regimes applicable to ii. Joint Form PF previously.’’ 157 ICI argued that, the operations of RICs, the Commission The decision to rescind substituted although adopting the Proposal may consider adopting a substituted compliance with respect to Joint Form mean less data with respect to compliance approach with respect to PF elicited differing opinions from commodity pools would be reported on periodic reporting by CPOs of RICs, commenters. For instance, NFA did not Joint Form PF, that prospect, in general, similar to its 2013 rulemaking to support the alternative of filing all or should not be the driving factor in this harmonize RIC and CPO/pool regulatory part of Joint Form PF, in lieu of the policy decision—rather, the requirements.161 Although the Revised Form, because Joint Form PF is Commission should focus on whether Commission noted in the Proposal that at least as burdensome as the the Revised Form elicits the information RICs are subject to comprehensive Commission’s form, and further, it it needs and will use in pursuit of its regulation by the SEC, it did not discuss includes ‘‘significantly more regulatory mission with respect to CPOs the possibility of deferring to the SEC 152 information than NFA needs.’’ ICI and their pools.158 SIFMA AMG noted, with respect to collecting information also disagreed with replacing the form however, that it generally supports the from CPOs of RICs. Under these with all or part of Joint Form PF because elimination of detailed reporting circumstances, the Commission would that would impose additional burdens requirements for CPOs, and it does not be unable to address the issue of on dually registered CPOs, who are not believe there would be regulatory harm, providing additional substituted currently required to file Joint Form PF if information is no longer being compliance to CPOs of RICs without re- for their registered funds, and therefore, provided on Joint Form PF with respect proposing and reopening the comment would be required to adapt their current to non-private fund pools.159 period for the NPRM.162 systems and processes to Joint Form PF.153 Moreover, the Commission believes would permit the Commission to discharge its that the suggested approach by ICI regulatory duties with respect to CPOs and their 150 7 U.S.C. 21(j). operated pools that might have the greatest impact would simply not be practical. As 151 See infra Revised Form CPO–PQR, ‘‘Reporting on market and systemic risk, while easing reporting explained by ICI, RICs file numerous Instructions,’’ no. 2. obligations on a significant number of CPOs’’). 152 NFA, at 2 (stating there is no need to ensure 154 AIMA, at 2. 160 similar reporting obligations between the SEC and 2020 CPO–PQR NPRM, 85 FR at 26383 (May 155 SIFMA AMG, at 16. 4, 2020). CFTC, where ‘‘the Commission believes it will have 156 sufficient tools with [the Revised Form] and other 2020 CPO–PQR NPRM, 85 FR at 26384 (May 161 ICI, at 2–3, n.6. ICI suggested that the CFTC data streams to effectively oversee registered CPOs 4, 2020). use the SEC filings and reports already filed by and the commodity interest markets’’). NFA noted 157 AIMA, at 2 (noting that if the Commission CPO/IAs of RICs, which require disclosure of LEIs, further that, even if the CFTC were to rescind Form decides against allowing Joint Form PF as to glean data on the commodity interest activities CPO–PQR in favor of Joint Form PF, NFA would substituted compliance for § 4.27, ‘‘it is likely that of these operators and pools. Id. See also still require its CPO Members to file NFA Form non-private fund commodity pools will no longer Harmonization of Compliance Obligations for PQR, ‘‘which is tailored to NFA’s needs and is not be included in Form PF to reduce the filing burden Registered Investment Companies Required to a significant burden on Members to complete.’’ Id. as far as possible’’). Register as Commodity Pool Operators, 78 FR 52308 153 ICI, at 5 (agreeing that ‘‘the proposed changes 158 ICI, at 5–6. (Aug. 22, 2013). to Form CPO–PQR, relative to the alternatives, 159 SIFMA AMG, at 16. 162 5 U.S.C. 553(c).

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 71784 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

regulatory filings, 163 each of which are and, if so, to provide a regulatory collection of information within the designed for a particular purpose by the flexibility analysis regarding the meaning of the PRA, as discussed SEC. Incorporating those filings into the economic impact on those entities. Each below. The Commission therefore Commission’s filing regime via Federal agency is required to conduct an submitted the Proposal to OMB for substituted compliance would be initial and final regulatory flexibility review. The Proposal also invited the difficult to accomplish and would analysis for each rule of general public and other Federal agencies to require the devotion of significant time applicability for which the agency comment on any aspect of the proposed and resources by both the Commission issues a general notice of proposed information collection requirements and NFA. None of these filings, rulemaking.165 discussed therein; 170 however, no such however, is a direct analog to the The Final Rule adopted by the comments were received. Revised Form, which adds to the Commission will affect only persons The Final Rule affects a single complexity of any undertaking to create registered or required to be registered as collection of information for which the a substituted compliance regime with CPOs. The Commission has previously Commission has previously received a respect to those filings. Finally, the established certain definitions of ‘‘small control number from OMB. This Commission has identified limited entities’’ to be used by the Commission collection of information is, ‘‘Rules benefit in providing such relief, if it in evaluating the impact of its rules on Relating to the Operations and were possible, because such CPOs such entities in accordance with the Activities of Commodity Pool Operators would remain subject to NFA’s requirements of the RFA.166 With and Commodity Trading Advisors and independent reporting requirement in respect to CPOs, the Commission to Monthly Reporting by Futures NFA Form PQR. Therefore, the previously has determined that a CPO is Commission Merchants, OMB control Commission declines to provide a small entity for purposes of the RFA, number 3038–0005’’ (Collection 3038– additional substituted compliance for if it meets the criteria for an exemption 0005). Collection 3038–0005 primarily CPOs of RICs in the amendments to from registration under § 4.13(a)(2).167 accounts for the burden associated with § 4.27 adopted by the Final Rule. Because the Final Rule generally applies part 4 of the Commission’s regulations to persons registered or required to be that concern compliance obligations H. Compliance Date registered as CPOs with the generally applicable to CPOs and MFA requested that the Commission Commission, the RFA is not applicable commodity trading advisors (CTAs), as consider providing registered CPOs with to the Final Rule.168 well as certain enumerated exemptions six months from the adoption of a Final Accordingly, the Chairman, on behalf from registration as such, exclusions Rule with respect to Form CPO–PQR to of the Commission, hereby certifies from those definitions, and available permit reporting CPOs to make ‘‘coding pursuant to 5 U.S.C. 605(b) that this relief from compliance with certain and software changes’’ to accommodate Final Rule will not have a significant regulatory requirements. Revised Form CPO–PQR’s economic impact on a substantial As discussed above, the Final Rule requirements.164 The Commission has number of small entities. includes substantive changes to the current form, such as (1) amending determined not to require filing of B. Paperwork Reduction Act reports on the Revised Form for the Schedule A, (which, together with the reporting period ending December 31, i. Overview PSOI that is currently part of Schedule 2020. However, to the extent reporting The Paperwork Reduction Act (PRA) B, will constitute the entirety of the CPOs are required to file NFA Form imposes certain requirements on Revised Form), to add a requirement to PQR for the reporting period ending Federal agencies in connection with disclose the LEIs (if any) for each December 31, 2020, that filing must still their conducting or sponsoring any reporting CPO and operated pool; (2) be submitted in accordance with collection of information as defined by moving Schedule B’s ‘‘Schedule of applicable NFA membership rules. the PRA.169 Under the PRA, an agency Investments’’ section to Schedule A; Therefore, reporting CPOs will be may not conduct or sponsor, and a and (3) rescinding the remainder of the required to submit the Revised Form person is not required to respond to, a current form’s current Schedules B and sixty days after the first 2021 reporting collection of information unless it C. Additionally, § 4.27(c)(2) will now period ends on March 31, 2021, making displays a currently valid control permit the filing of NFA Form PQR with initial compliance with the Revised number from the Office of Management NFA in lieu of reporting CPOs filing the Form due on May 30, 2021. The and Budget (OMB). The amendments set Revised Form with the Commission. Commission has determined that this forth in the Proposal would result in a Therefore, the Commission is amending schedule allows for adequate time for Collection 3038–0005 to be consistent CPOs and NFA to prepare their systems 165 5 U.S.C. 601 et seq. with the finalized restructuring of the and procedures with respect to the 166 See, e.g., Policy Statement and Establishment Revised Form. Specifically, the Revised Form. of Definitions of ‘‘Small Entities’’ for Purposes of Commission is amending the collection the Regulatory Flexibility Act, 47 FR 18618, 18620 to reflect the expected adjustment in III. Related Matters (Apr. 30, 1982). burden hours for registered CPOs filing 167 Id. at 47 FR 18619–20 (Apr. 30, 1982). A. Regulatory Flexibility Act Commission regulation at § 4.13(a)(2) exempts a the Revised Form for their operated The Regulatory Flexibility Act (RFA) person from registration as a CPO when: (1) None pools, and also to include in the of the pools operated by that person has more than requires Federal agencies, in collection, a reporting CPO’s ability to 15 participants at any time, and (2) when excluding file NFA Form PQR in lieu of filing the promulgating regulations, to consider certain sources of funding, the total gross capital whether the rules they propose will contributions the person receives for units of Revised Form, provided that it is have a significant economic impact on participation in all of the pools it operates or determined to be substantively intends to operate do not, in the aggregate, exceed a substantial number of small entities consistent with the Revised Form. $400,000. 17 CFR 4.13(a)(2). This Final Rule is not expected to 168 Moreover, § 4.27(b)(2)(i) specifically excludes impose any significant new burdens on 163 ICI, at 2, n.7. These reports include N–PORT from the obligation to file Form CPO–PQR any CPO and N–CEN and address information about the that operates only pools for which it maintains . . . CPOs, but rather will constitute a RIC’s portfolio, investment policies and practices, an exemption from registration as a commodity and other information. Id. pool operator as provided in § 4.13. 170 2020 CPO–PQR NPRM, 85 FR at 26386 (May 164 MFA, at 4. 169 44 U.S.C. 3501, et seq. 4, 2020).

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71785

substantial reduction in reporting above, the Commission has determined been provided by OMB, and it was burden for most impacted registrants. to accept the filing of NFA Form PQR renewed recently on January 30, Approximately half of all registered in lieu of filing the Revised Form. 2019.175 As stated above, Collection CPOs are currently considered Mid- Because any data on NFA Form PQR 3038–0005 governs responses made Sized CPOs or Large CPOs under the submitted as substituted compliance for pursuant to part 4 of the Commission’s existing form and filing regime. Due to required § 4.27 reporting would thereby regulations, pertaining to the operations the Final Rule and its significant become data collected by the of CPOs and CTAs, including the revisions to the form, these reporting Commission, the burden associated with required responses of registered CPOs CPOs will be required to answer far NFA Form PQR must also be included on Form CPO–PQR pursuant to § 4.27. fewer questions, when compared to the in a collection of information with an Generally, the Commission is adjusting, historical Form CPO–PQR’s OMB control number. Therefore, the as discussed below, the information requirements.171 CPOs classified as Commission is amending the current collection to reflect an increase in the Small CPOs may experience a slight burden associated with OMB Control burden hours associated with the increase in burden, due to an increase Number 3038–0005 to also reflect the collection of information in the Revised in the frequency of reporting to a burden resulting from NFA Form PQR, Form. The Commission anticipates, quarterly basis rather than annually, and which the Commission estimates to be however, that (1) CPOs currently the addition of the PSOI to the Revised substantively identical to that derived categorized as either Mid-Sized or Large Form for all reporting CPOs. The from the Revised Form.173 CPOs are expected to experience a Commission believes, however, that for Despite the fact that the Commission substantial reduction in burden relative many of these CPOs, this burden will accept the filing of NFA Form PQR to the current filing requirements under increase will practically be slight or in lieu of a filing on the Revised Form, § 4.27 and Form CPO–PQR; and (2) very technical in nature, because all the Commission has determined that it CPOs considered Small CPOs under the reporting CPOs currently complete NFA should retain its own form for data current filing requirements will Form PQR, which also includes a collection purposes and to ensure that it experience no practical or substantial schedule of investments identical to the retains the ability to perform its increase in burden because, like all Revised Form’s PSOI, on a quarterly regulatory duties and satisfy its data other registered CPOs, they are currently basis pursuant to NFA membership needs regarding CPOs in the future on required to file NFA Form PQR, which rules. The Commission anticipates that a unilateral basis, if necessary. already includes a schedule of going forward, pursuant to amended Moreover, the Commission anticipates investments identical to the Revised § 4.27(c)(2), reporting CPOs, regardless that it will incorporate the information Form’s PSOI, on a quarterly basis, and of their size or classification under the collected on the Revised Form more such Small CPOs, as well as all other original form, will complete and file consistently with its other data streams. reporting CPOs, will be permitted to file NFA Form PQR in lieu of the Revised To that end, retaining its own form NFA Form PQR in lieu of filing the Form, which will further allow them to independent of NFA confirms and Revised Form. maximize efficiency by fulfilling both preserves the Commission’s The currently approved total burden NFA and CFTC reporting requirements independent and primary role in associated with Collection 3038–0005, 172 with one filing. developing its regulatory and in the aggregate, is as follows: Therefore, the Commission infers that compliance program with respect to Estimated number of respondents: the Final Rule and the Revised Form registered CPOs and their pools 45,097. will generally prove to be less generally, notwithstanding its history of Annual responses for all respondents: burdensome for reporting CPOs, or at delegating certain registration and 118,824. least, will not create any new net compliance functions to NFA. Estimated average hours per response: burdens for them. As a result, the Furthermore, retaining the Revised 3.16.176 Commission is amending Collection Form should ensure that the public is Annual reporting burden: 375,484. 3038–0005, as proposed, to reflect the able to exercise its rights to receive The portion of the aggregate burden elimination of reporting thresholds and notice and provide comment as to the that is derived from the current Form classifications of CPO by size, as well as content and structure of the Revised CPO–PQR filing requirements is as the multiple Schedules in the original Form, as required by the Administrative follows: form; to account for the uniform Procedure Act, and consistent with Schedule A (for non-Large CPOs and quarterly filing schedule adopted for all prior practice for the original form.174 reporting CPOs for their operated pools; Large CPOs filing Joint Form PF): Therefore, the Commission concludes Estimated number of respondents: and to adopt an overall estimated that the final Revised Form announced burden for all filings that includes the 1,450. today in the Final Rule is not Annual responses for all respondents: retained questions from Schedule A, as unnecessarily duplicative to well as the adopted PSOI (from original 1,450. information otherwise reasonably Estimated average hours per response: Schedule B) discussed above. Although accessible to the Commission. the Final Rule results in an increase in 6. the burden hours associated with ii. Revisions to the Collection of Annual reporting burden: 8,700. completing the Revised Form, the Information: OMB Control Number Schedule A (for Large CPOs not filing Commission anticipates that, in 3038–0005 Joint Form PF): practice, reporting CPOs will either Collection 3038–0005 is currently in Estimated number of respondents: experience no change in their burden, or force with its control number having 250. some decrease in burden. As discussed 173 As stated in the Proposal, ‘‘the PRA estimates 175 See Notice of Office of Management and 171 See, e.g., supra pt. II.B (discussing the . . . assume that all registered CPOs will either file Budget Action, OMB Control No. 3038–0005, elimination of Schedules B and C from the Revised Revised Form CPO–PQR on a quarterly basis, or available at https://www.reginfo.gov/public/do/ Form). NFA Form PQR, but in no event will a CPO be PRAViewICR?ref_nbr=201701-3038-005. 172 See infra § 4.27(c)(2), as amended by this Final required to file both.’’ 2020 CPO–PQR NPRM, 85 FR 176 The Commission rounded the average hours Rule (permitting the filing of NFA Form PQR in lieu at 26386 (May 4, 2020). per response to the second decimal place for ease of filing the Revised Form with the Commission). 174 APA, 5 U.S.C. 553(c). of presentation.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 71786 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

Annual responses for all respondents: respondent. Further, in the public concern: (1) Protection of market 1,000. Commission’s experience, the PSOI participants and the public; (2) Estimated average hours per response: comprised a considerable portion of the efficiency, competitiveness, and 6. burden hours previously associated financial integrity of swaps markets; (3) Annual reporting burden: 6,000. with completing Schedule B, depending price discovery; (4) sound risk Schedule B (for Mid-Sized CPOs): on the complexity of a reporting CPO’s management practices; and (5) other Estimated number of respondents: operations and the number of pools it public interest considerations. The 400. operated. Thus, the Commission is Commission considers the costs and Annual responses for all respondents: estimating average hours per response benefits resulting from its discretionary 400. in such a way as to ensure that burden determinations with respect to the CEA Estimated average hours per response: continues to be counted. As noted section 15(a) considerations. 4. above, although the estimated hours per As discussed above, the Commission Annual reporting burden: 1,600. response is expected to increase due to is finalizing amendments to Form CPO– Schedule B (for Large CPOs not filing the retention of the PSOI and the filing PQR that would significantly reduce the Joint Form PF): frequency increasing to quarterly for amount of reporting required Estimated number of respondents: many reporting CPOs, CPOs should not thereunder. Specifically, the Final Rule: 250. practically experience an increase in (1) Eliminates the pool-specific Annual responses for all respondents: burden. The Commission comes to this reporting requirements in existing 1,000. conclusion because all reporting CPOs Schedules B and C of Form CPO–PQR, Estimated average hours per response: are already required to provide a other than the PSOI (question 6 of 4. schedule of investments identical to the Schedule B); (2) amends the information Annual reporting burden: 4,000. PSOI, as part of their existing NFA Form in existing Schedule A of the form to Schedule C (for Large CPOs not filing PQR filings, which NFA membership request LEIs for CPOs and their operated Joint Form PF): rules require on a quarterly basis, and pools and to eliminate questions Estimated number of respondents: because the Commission expects that regarding the pool’s auditors and 250. those CPOs will continue to make such marketers; (3) requires all reporting Annual responses for all respondents: filings to take advantage of the CPOs to submit all information retained 1,000. substituted compliance for NFA Form in the Revised Form on a quarterly Estimated average hours per response: PQR with respect to the Revised Form, basis; and (4) allows CPOs to file NFA 18. as adopted by the Final Rule. Form PQR in lieu of filing the Revised Annual reporting burden: 18,000. Therefore, the Commission estimates Form, provided that NFA amends NFA The burden associated with NFA the burden to registered CPOs for Form PQR to include LEIs. In the Form PQR was proposed as follows: completing the Revised Form and NFA sections that follow, the Commission Estimated number of respondents: Form PQR, because of the option to file considers the various costs and benefits 1,700. this form in lieu of the Revised Form, associated with each aspect of the Final Annual responses by each to be as follows: Rule. The baseline against which these respondent: 6,800. For the Revised Form and NFA Form costs and benefits are compared is the Estimated average hours per response: PQR for All Registered CPOs: regulatory status quo, represented by 8. Estimated number of respondents: Form CPO–PQR as codified in appendix Annual reporting burden: 54,400. 1,700. A to part 4 prior to these amendments. Total annual reporting burden for all Annual responses by each The consideration of costs and CPOs for current Form CPO–PQR and respondent: 6,800. benefits below is based on the NFA Estimated average hours per response: understanding that the markets function Form PQR: 86,900. 8. internationally, with many transactions Annual reporting burden: 54,400. The Commission will no longer be involving U.S. firms taking place across The new total burden associated with estimating burden hours according to international boundaries; with some Collection 3038–0005, in the aggregate, each individual Schedule of the form, Commission registrants being organized reflecting the adjustment in burden because, pursuant to the Final Rule, the outside of the United States; with some associated with § 4.27 and the Revised Revised Form will not have schedules. leading industry members typically Therefore, the Commission is amending Form, is as follows: Estimated number of respondents: conducting operations both within and the collection for Form CPO–PQR outside the United States; and with compliance to be a single burden-hours 43,062. Annual responses for all respondents: industry members commonly following estimate for each reporting CPO substantially similar business practices completing the Revised Form in its 113,980. Estimated average hours per response: wherever located. Where the entirety.177 As noted above, the Commission does not specifically refer Commission is also requiring that the 3.25. Annual reporting burden: 370,467. to matters of location, the discussion of Revised Form be filed quarterly by each costs and benefits below refers to the reporting CPO, regardless of the size of C. Cost-Benefit Considerations effects of this proposal on all activity their operations, which would result in Section 15(a) of the CEA requires the subject to the proposed and amended four (4) annual responses by each Commission to consider the costs and regulations, whether by virtue of the benefits of its discretionary actions activity’s physical location in the 177 Additionally, the Commission will be United States or by virtue of the accepting the filing of NFA Form PQR in lieu of the before promulgating a regulation under Revised Form, which the Commission has designed the CEA or issuing certain orders.178 activity’s connection with or effect on purposefully to be very similar. See supra pt. II.G.i. Section 15(a) further specifies that the U.S. commerce under CEA section The Commission reiterates that these PRA estimates costs and benefits shall be evaluated in 2(i).179 Some CPOs are located outside assume that all registered CPOs will either file the of the United States. Revised Form on a quarterly basis, or NFA Form light of five broad areas of market and PQR, but in no event will a CPO be required to file both. 178 7 U.S.C. 19(a). 179 7 U.S.C. 2(i).

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71787

i. The Elimination of Pool-Specific those CPOs considered Mid-Sized CPOs reporting CPOs and their operated pools Reporting Requirements in Schedules B or Large CPOs, and which may move that engage in swaps with respect to the and C between those filing categories with initial filing of the Revised Form, as The Commission is adopting as final some regularity, under the status quo. LEIs do not change over time, amendments that eliminate the pool- Consequently, those reporting CPOs potentially allowing fields for those specific reporting requirements in would no longer need to devote their questions to be prepopulated in existing Schedules B and C of Form resources to compiling, analyzing, and subsequent filings. The Commission CPO–PQR, other than the PSOI reporting this data, which may have had observes further that neither the Revised (question 6 of Schedule B). The limited utility with respect to their day- Form nor § 4.27 independently creates Commission acknowledges that this to-day operations, to the Commission. an affirmative requirement for CPOs to change could result in less information Additionally, reporting CPOs in general obtain LEIs for themselves and their available to the Commission and, will no longer be required to monitor operated pools, and that CPOs engaging their AUMs for the specific purpose of potentially, to FSOC. The detailed and in swaps already have LEIs for determining their filing obligations specific information requested in themselves and/or their pools. because, pursuant to the Final Rule, Schedules B and C of Form CPO–PQR Additionally, the Commission has there is now a single filing requirement is not available to the Commission declined in the Final Rule to require the for all reporting CPOs. It is possible that through any of its other data streams renewal or maintenance of LEIs for the resulting cost savings may allow and, if put to its full use, would allow purposes of meeting this Revised Form those CPOs to devote their resources to 180 for monitoring of CPOs and their requirement. Accordingly, the other compliance or operational operated pools in a way that could help Commission finds that there is likely no initiatives, or to potentially pass those identify trends and points of stress. The additional cost to consider for a cost savings on to pool participants challenges associated with the Form reporting CPO related to LEIs beyond through reduced fees. These cost the minimal one-time expenditure for CPO–PQR dataset are a primary reason savings will likely be reduced, however, for the Commission’s decision to the initial Revised Form filing that for any CPO that is dually registered includes LEIs. discontinue its collection of this with the SEC and required to file Joint information, including challenges posed The Final Rule also eliminates from Form PF because that form requires the Revised Form questions regarding by the degree of flexibility afforded reporting of information substantially CPOs in reporting this information, and the pool’s auditors and marketers. The similar to that required in the Commission has determined that these the fact that this information is only eliminated Schedules B and C, and the reported to the Commission on a amendments will result in reduced costs Final Rule does not alter any such for reporting CPOs without affecting the quarterly basis, at its most frequent. CPO’s Joint Form PF filing obligations. Given these limitations associated with scope of information available to the Finally, the Commission recognizes that Commission, as the Commission already the data collected, the Commission has the Final Rule also does not alleviate determined to prioritize its limited receives information regarding CPO’s any of the fixed or long-term costs accountants and has alternate means of resources to pursue other key regulatory reporting CPOs may have already initiatives. obtaining information about a pool’s incurred in developing systems and marketers. For example, persons However, considering the alternate procedures designed to meet the data streams currently available to the soliciting for pool participation units are reporting requirements of the original typically either associated persons of Commission, the Commission should form, including Schedules B and C. nevertheless be able to effectively the CPO or registered representatives of oversee registered CPOs and their ii. The Revised Form a broker-dealer. Such persons are operated pools, and potentially do so in This Final Rule adopts the Revised already subject to regulation by either a more efficient and effective manner, Form, which retains questions from the Commission and NFA, or the SEC by adopting the Revised Form as existing Schedule A of Form CPO–PQR, and FINRA, and therefore readily proposed, with some additional and also adds questions to request LEIs identifiable by the Commission outside clarifications to the Instructions and for CPOs and their operated pools. The of Form CPO–PQR. Defined Terms. Furthermore, due in Commission anticipates that adding Currently, all CPOs other than Large part to the identified data quality issues, these LEI questions will allow it to CPOs submit the information required the Commission has not provided FSOC integrate the data collected by the by the existing form’s Schedule A with any Form CPO–PQR data to date. Revised Form with the Commission’s annually. Increasing the frequency with The Commission acknowledges, though, other more current data streams. which this information is reported will that FSOC would now receive less data Leveraging these other data sources in assist the Commission in its efforts to from the Commission, as a result of combination with filings of the Revised integrate the Revised Form with the changes made by the Final Rule, as Form will enable the Commission to Commission’s other timelier data some CPOs that are filing CFTC-only continue its oversight and monitoring of sources, which the Commission believes pool information through Joint Form PF counterparty and liquidity risk for some will improve the overall efficacy of its may stop. Nonetheless, the Commission of the largest pools within the monitoring and oversight of CPOs and does not believe that FSOC’s monitoring Commission’s jurisdiction. The their operated pools. Although this abilities would be materially or Commission thereby concludes that the amendment will result in an increased negatively affected, compared to the Final Rule will allow it to focus on areas regulatory cost for CPOs considered to status quo, by the Commission’s relevant for assessing and monitoring be Small and Mid-Sized CPOs under the rescission of most of Schedules B and C market and systemic risk, while existing form, when compared to the in Form CPO–PQR, as the Commission eliminating the reporting burden regulatory status quo, the Commission has not provided FSOC with any data. associated with Schedules B and C, concludes that the costs actually The Commission anticipates that particularly with respect to pools that realized by these CPOs will not be as eliminating these pool-specific reporting would be considered Large Pools. significant, as they are already reporting requirements will also reduce the The addition of these LEI fields may ongoing variable compliance costs for minimally increase the cost for 180 See supra pt. II.E.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 71788 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

this information on a quarterly basis via scope of information available to the likely result in increased costs for NFA Form PQR, as required by NFA. Commission under the Revised Form. registered fund CPOs, noting that, Under the current form, only Mid- As mentioned above, the Commission although CPOs of RICs are regulated by Sized and Large CPOs are required to acknowledges that, through adopting both the Commission and the SEC, such submit a PSOI, and Mid-Sized CPOs this revision to § 4.27(d), the Final Rule CPOs are not currently required to file submit that information annually. The could result in less data being collected Joint Form PF.183 The Commission Revised Form, as adopted by the Final on Joint Form PF, as compared to the agrees that this alternative would likely Rule, will require all CPOs to submit current status quo. Many dually increase the reporting burdens and costs that information quarterly. The registered CPOs currently include for CPOs not so dually registered, as Commission believes that receiving this commodity pools that are not private well as for CPOs that are dually information from all reporting CPOs funds in data that they report on Joint registered, yet do not currently file Joint more frequently will, when combined Form PF, in lieu of filing Form CPO– Form PF; under this alternative, those with the new questions regarding LEIs, PQR for such pools, in reliance on CPOs would incur increased reporting further enhance its ability to integrate § 4.27(d). As a result of the Final Rule’s burdens and costs without providing the data collected by the Revised Form revisions to § 4.27(d), these CPO- information directly to the Commission with other data streams and to identify investment advisers could decide to that will be integrated with its other trends on a timelier basis. As a result, stop including these pools in their Joint data sources to develop its internal the Commission concludes that Form PF filings. The Commission oversight initiatives over CPOs and their adopting a quarterly filing schedule for concludes though that this loss of data operated pools. all CPOs reporting on the Revised Form to the SEC and FSOC will not The second alternative described in will ultimately support its goal of meaningfully impact the efficacy and the Proposal that the Commission effectively monitoring CPOs and their intent of Joint Form PF in furthering the considered was to devote resources to operated pools for market and systemic oversight of the private fund industry, rectifying the challenges with the data risk, while also simplifying the given that it would only result in the reported under the current form, and reporting requirements applicable to loss of data with respect to non-private amend it to require greater consistency registered CPOs. fund pools; the Commission and frequency of reporting of the data The Commission realizes that acknowledges, however, that FSOC may fields eliminated by the Final Rule. requiring all information on the Revised lose data for a specific type of private However, the Commission stated in the Form, including a PSOI for each fund asset class, specifically, managed Proposal its preliminarily belief that its operated pool, from all reporting CPOs futures.181 limited resources could be better on a quarterly basis will result in an Additionally, all CPOs will be directed in line with its regulatory increased regulatory cost, when required to make a certain amount of priorities, and that its objectives with compared to the regulatory status quo, alterations to their reporting systems to respect to oversight of reporting CPOs particularly for CPOs that would be accommodate the changes adopted and their operated pools could be considered Small and Mid-Sized CPOs herein, even if it is just to deactivate effectively and potentially, more under the existing filing regime. For certain data elements that are no longer efficiently, achieved through integration instance, CPOs previously considered required and to add the questions with existing data streams.184 ICI Small CPOs may be required to develop regarding LEIs. The Commission supported this preliminary conclusion the procedures and systems necessary to anticipates that any such costs will by the Commission and argued that a meet the additional reporting generally be one-time expenditures, and ‘‘more targeted data set is most useful obligations for the Revised Form’s PSOI, moreover, should not be extensive, for initial monitoring purposes.’’ 185 and CPOs previously considered either given the Commission’s efforts in the After considering the alternatives and Small CPOs or Mid-Sized CPOs will be Final Rule to align the Revised Form the responsive comments, the required by the Final Rule to report that with NFA Form PQR, to the greatest Commission concludes that the changes information to the Commission on a extent possible. to the form and § 4.27 adopted by the quarterly basis. The Commission iii. Alternatives Final Rule, relative to the alternatives, emphasizes, however, that all registered will facilitate the Commission’s CPOs, regardless of the size of their In lieu of amending Form CPO–PQR effective discharging of its regulatory operations or AUM, are currently as proposed, the Commission also duties in a manner that simultaneously required to report the PSOI on a considered two alternative approaches has the greatest impact on market and quarterly basis via NFA Form PQR, as in the Proposal, and requested systemic risk and eases reporting required by NFA membership rules, comments and data on how those obligations on a significant number of meaning the actual costs as realized by potential alternatives might impact the reporting CPOs with respect to their these CPOs as a result of the Final Rule estimated costs and benefits to market operated pools. participants and the public.182 The first should not be as significant, given the iv. Section 15(a) Factors Commission’s goal of aligning the alternative considered by the Revised Form with NFA Form PQR. Commission was requiring all CPOs, a. Protection of Market Participants and The Final Rule also amends § 4.27(c) regardless of whether they are dually the Public such that it allows reporting CPOs to file registered, to file Joint Form PF. ICI commented that this alternative would The Commission believes that the NFA Form PQR in lieu of filing the Final Rule will enhance the ability of Revised Form, provided that NFA 181 ICI commented that it did not believe that the the Commission to protect derivatives amends NFA Form PQR to include Commission should focus on any perceived data questions regarding LEIs. Under NFA’s needs of the FSOC in determining the scope and 183 ICI, at 5 (noting additionally that CPOs of RICs membership rules, all CPOs regardless focus of Form CPO–PQR, but rather the would thus incur costs related to adapting their of size are currently required to file NFA Commission should act in whatever manner best current systems and processes for the purpose of supports its own regulatory interests in revising the filing Joint Form PF instead). Form PQR on a quarterly basis. This form. ICI, at 5–6. 184 2020 CPO–PQR NPRM, 85 FR at 26388 (May provision will help CPOs maintain their 182 2020 CPO–PQR NPRM, 85 FR at 26388 (May 4, 2020). current filing costs without affecting the 4, 2020). 185 ICI, at 6.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71789

markets, its participants, and the public e. Other Public Interest Considerations (c) Reporting. (1) Each reporting by allowing it to integrate the data The Commission did not identify any person shall file with the National collected by the Revised Form with other public interest considerations that Futures Association, a report with other existing, more up-to-date data the Final Rule would have. respect to the directed assets of each streams in a way that will allow the pool under the advisement of a Commission to better exercise its D. Antitrust Laws commodity pool operator consistent oversight of registered CPOs and their Section 15(b) of the CEA requires the with appendix A to this part, or a operated pools. As discussed above, the Commission to ‘‘take into consideration commodity trading advisor consistent Final Rule may result in a loss of data the public interest to be protected by the with appendix C to this part. available to FSOC, which could limit antitrust laws and endeavor to take the (2) A reporting person required to file FSOC’s visibility into the activities of least anticompetitive means of NFA Form PQR with the National CPOs and their operated pools. achieving the purposes of the CEA, in Futures Association for the reporting issuing any order or adopting any period may make such filing in lieu of b. Efficiency, Competitiveness, and Commission rule or regulation the report required under paragraph Financial Integrity of Markets (including any exemption under CEA (c)(1) of this section; provided that, the The Commission believes that the section 4(c) or 4c(b)), or in requiring or Commission has determined that NFA Final Rule will assist the Commission in approving any bylaw, rule, or regulation Form PQR is substantively consistent its efforts to support market efficiency, of a contract market or registered futures with appendix A to this part. competitiveness, and financial integrity. association established pursuant to (3) Nothing in this provision restricts 186 Under the Final Rule, reporting CPOs section 17 of this Act.’’ the National Futures Association’s will continue to provide useful The Commission believes that the ability to require reporting beyond that information about themselves and their public interest to be protected by the required by the Commission; provided operated pools to the Commission in a antitrust laws is generally to protect that, such additional requirements are competition. The Commission requested way that will permit the Commission to consistent with the Commodity comment on whether the Proposal incorporate that data with its other data Exchange Act and 17 CFR chapter I. implicates any other specific public streams. The Commission believes that (4) All financial information shall be interest to be protected by the antitrust consolidating the data collected in this reported in accordance with generally laws, but did not receive any comments manner will improve its oversight of accepted accounting principles on whether the Proposal was reporting CPOs, their operated pools, consistently applied. A reporting person anticompetitive. operating a pool that meets the and how they affect the derivatives The Commission has considered the conditions specified in § 4.22(d)(2)(i) to markets. Additionally, the Commission Final Rule to determine whether it is present and compute the commodity believes that the specific requirement anticompetitive and has identified no pool’s financial statements contained in that a reporting CPO prepare a PSOI on anticompetitive effects. Because the the Annual Report other than in a quarterly basis for each of its operated Commission has determined the Final accordance with United States generally pools may result in heightened Rule is not anticompetitive and has no accepted accounting principles and has diligence by such CPOs, with respect to anticompetitive effects, the Commission filed notice pursuant to § 4.22(d)(2)(iii) their pools’ ongoing operations, and has not identified any less may also use the alternative accounting may encourage particularly smaller anticompetitive means of achieving the principles, standards, or practices CPOs to adopt more formalized controls purposes of the CEA. for their businesses. The Commission identified in that notice in reporting believes that both of those results will List of Subjects in 17 CFR Part 4 information required to be reported generally enhance the confidence of Advertising, Brokers, Commodity pursuant to paragraph (c)(1) of this other market participants in transacting futures, Commodity pool operators, section. with registered CPOs and their operated Commodity trading advisors, Consumer (d) Investment advisers to private pools, and generally, support the protection, Reporting and recordkeeping funds. Commodity pool operators and efficiency, competitiveness, and requirements. commodity trading advisors that are financial integrity of the markets. For the reasons stated in the dually registered as investment advisers with the Securities and Exchange c. Price Discovery preamble, the Commodity Futures Trading Commission hereby amends 17 Commission, and that are required to The Commission has not identified CFR part 4 as set forth below: file Form PF under the rules any impact that the Final Rule would promulgated under the Investment have on price discovery. PART 4—COMMODITY POOL Advisers Act of 1940, shall file Form PF OPERATORS AND COMMODITY with the Securities and Exchange d. Sound Risk Management Practices TRADING ADVISORS Commission, in addition to filings made pursuant to paragraph (c)(1) of this Although the Commission is no ■ 1. The authority citation for part 4 section. Dually registered commodity longer requiring reporting CPOs and continues to read as follows: pool operators and commodity trading their operated pools to report certain Authority: 7 U.S.C. 1a, 2, 6(c), 6b, 6c, 6l, advisors that file Form PF with the risk information on the Revised Form, 6m, 6n, 6o, 12a, and 23. Securities and Exchange Commission the Commission recognizes that CPOs ■ 2. In § 4.27, revise paragraphs (c) and will be deemed to have filed Form PF will likely, in general, continue to (d) to read as follows: with the Commission, for purposes of benefit from establishing and possessing any enforcement action regarding any systems that collect and review risk- § 4.27 Additional reporting by commodity false or misleading statement of material pool operators and commodity trading related information, even if it is no fact in Form PF. longer reported. The Commission has advisors. not identified any other impact that the * * * * * * * * * * Final Rule would have on sound risk ■ 3. Revise appendix A to part 4 to read management practices. 186 7 U.S.C. 19(b). as follows:

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 71790 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

Appendix A to Part 4—Form CPO–PQR

BILLING CODE 6351–01–P

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00020 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.002 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71791

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.003 71792 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00022 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.004 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71793

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00023 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.005 71794 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00024 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.006 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71795

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00025 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.007 71796 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00026 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.008 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71797

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.009 71798 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00028 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.010 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71799

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00029 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.011 71800 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00030 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.012 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71801

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00031 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.013 71802 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00032 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.014 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71803

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00033 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.015 71804 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00034 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.016 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71805

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00035 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.017 71806 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00036 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.018 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71807

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00037 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.019 71808 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00038 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.020 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71809

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4725 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.021 71810 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

BILLING CODE 6351–01–C is, the concept that flawed, or nonsense, Background on Form CPO–PQR Issued in Washington, DC, on October 9, input data produces nonsense output or Form CPO–PQR requests information 2020, by the Commission. ‘‘garbage.’’ regarding the operations of a CPO, and each Robert Sidman, Since becoming Chairman, I have pool that it operates, in varying degrees of prioritized improving the CFTC’s approach to frequency and complexity, depending upon Deputy Secretary of the Commission. collecting data. As a federal agency, we must the assets under management of both the Note: The following appendices will not be selective about the data we collect, and CPO and the operated pool(s). When it appear in the Code of Federal Regulations. then make sure we are actually making good adopted Form CPO–PQR in 2012, the use of the data for its intended purpose.3 For Commission determined that form data Appendices to Compliance example, we recently adopted three final would be used for several broad purposes, rules to revise CFTC regulations for swap including: Requirements for Commodity Pool • Operators on Form CPO–PQR— data reporting, dissemination, and public Increasing the CFTC’s understanding of reporting requirements for market our registrant population; Commission Voting Summary, • participants.4 One purpose of those assessing the market risk associated with Chairman’s Statement, and pooled investment vehicles under our Commissioners’ Statements amendments was to simplify the swap data reporting process to ensure that market jurisdiction; and • monitoring for systemic risk.6 Appendix 1—Commission Voting participants are not burdened with unclear or For the majority of pool-specific questions Summary duplicative reporting obligations that do little on Form CPO–PQR, the Commission believed to reduce market risk or facilitate price On this matter, Chairman Tarbert and the incoming data would assist the CFTC in discovery.5 Commissioners Quintenz, Behnam, Stump, monitoring commodity pools to identify and Berkovitz voted in the affirmative. No Today we are engaged in a similar exercise. trends over time. For example, the CFTC Commissioner voted in the negative. The amendments to the compliance would get information regarding a pool’s requirements for CPOs on Form CPO–PQR exposure to asset classes, the composition Appendix 2—Supporting Statement of that we are considering reflect the CFTC’s and liquidity of a pool’s portfolio, and a Chairman Heath P. Tarbert reassessment of the scope of the form and pool’s susceptibility to failure in times of how it aligns with our current regulatory 7 When the Commission considered the stress. priorities. By refining our approach to data proposed rule to amend the compliance collection, the final rule—in conjunction Shortcomings of Form CPO–PQR requirements for commodity pool operators (CPOs) on Form CPO–PQR,1 I observed that with our current market surveillance Seven years of experience with Form CPO– the esteemed 19th century mathematician efforts—will enhance the CFTC’s ability to PQR, however, have not borne out that Charles Babbage had asked ‘‘if you put into gain more timely insight into the activities of vision. To begin with, in an effort to take into the machine the wrong figures, will the right CPOs and their operated pools. At the same account the different ways CPOs maintain answers come out?’’ 2 Baggage foresaw what time, the final rule will reduce reporting information, the Commission has allowed would evolve in the 20th century as the burdens for market participants. CPOs flexibility in how they calculate and ‘‘garbage-in, garbage-out’’ predicament—that present certain of the data elements. As a result, it has been challenging, to say the 3 See Statement of Chairman Heath P. Tarbert in least, for the CFTC to identify trends across 1 Amendments to Compliance Requirements for Support of Revising Form CPO–PQR, supra note 2. Commodity Pool Operators on Form CPO–PQR, 86 4 CFTC Finalizes Rules to Improve Swap Data CPOs or pools using Form CPO–PQR data. In FR 26378 (May 4, 2020). Reporting, Approves Other Measures at September 2 Statement of Chairman Heath P. Tarbert in 17 Open Meeting, available at: https:// 6 See Commodity Pool Operators and Commodity Support of Revising Form CPO–PQR (Apr. 14, www.cftc.gov/PressRoom/PressReleases/8247/20. Trading Advisors: Compliance Obligations, 77 FR 2020), available at: https://www.cftc.gov/ 5 See Statement of Chairman Heath P. Tarbert in 11252 (Feb. 24, 2012). PressRoom/SpeechesTestimony/ Support of Final Rules on Swap Data Reporting 7 See Commodity Pool Operators and Commodity tarbertstatement041420b. See Charles Baggage, (Sep. 17, 2020), available at: https://www.cftc.gov/ Trading Advisors: Amendments to Compliance Passages from the Life of a Philosopher (London PressRoom/SpeechesTestimony/ Obligations, 76 FR 7976, 7981 (Form CPO–PQR 1864). tarbertstatement091720c. Proposal) (Feb. 11, 2011).

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 ER10NO20.022 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71811

addition, taking into account the volume and timely and frequent basis than the data which the NFA may revise to include complexity of the data it was requesting, the received on the current iteration of Form questions regarding LEIs. Under these Commission decided not to require the data CPO–PQR. Furthermore, CFTC programs to circumstances, we could permit a CPO to file to be provided in real-time, but instead conduct surveillance of exchanges, NFA Form PQR in lieu of our Form CPO– mandated only post hoc quarterly or annual clearinghouses, and futures commission PQR as revised. In doing so, we would offer filings. merchants already include CPOs and do not CPOs greater filing efficiencies without As the CFTC staff has reviewed the data rely on the information contained in compromising our ability to obtain relevant over the years, it has become apparent that Schedules B and C of Form CPO–PQR. data. the disparate, infrequent, and delayed nature Taken together, the CFTC’s other existing of CPO reporting has made it difficult to data efforts have enhanced our ability to Form CPO–PQR, as Revised, has Other assess the impact of CPOs and their operated surveil financial markets, including with Regulatory Benefits pools on markets. This is largely because respect to the activities of CPOs and the The Dodd-Frank Act established the Office conditions and relative CPO risk profiles may pools they operate. In general, the CFTC’s of Financial Research (OFR) nearly a decade have changed, potentially significantly, by alternate data streams provide a more ago to look across our financial system for prompt, standardized, and reliable view into the time Form CPO–PQR is filed with the risks and potential vulnerabilities.10 It was relevant market activity than that provided CFTC. contemplated that, for the OFR to do its under Form CPO–PQR. As revised, data from work, it would have access to data from other Sound Regulation Means Collecting Only Form CPO–PQR will more easily be Information We Intend to Use integrated with these existing and more U.S. financial regulators. Yet to date, the What we need is not over-regulation or developed data streams. This will enable the CFTC has shared none of the Form CPO–PQR even de-regulation, but rather sound CFTC to oversee and assess the impact of data with the OFR, largely because of the regulation. In the midst of the coronavirus CPOs and their operated pools in a way that shortcomings outlined above. pandemic, when we are facing the greatest is both more effective for us and less Once Form CPO–PQR is revised, it has the economic challenge since the 2008 financial burdensome for those we regulate. potential to be useful not only to the CFTC. crisis, and possibly since the Great In keeping with these principles— To this end, we have negotiated a Depression, the fact that we are asking particularly the principle that we should not memorandum of understanding (MOU) with market participants to put significant time collect data we cannot use effectively—I note the OFR, under which we will for the first and effort into providing us data that is that as part of this rulemaking the time provide to the OFR the information we difficult to integrate with the CFTC’s other Commission is instructing the staff to collect regarding CPOs. Under the MOU, the more timely and standardized data streams is evaluate the ongoing utility of the Pool OFR will receive the Form CPO–PQR not sound regulation. Frankly, it is wasteful Schedule of Investments information in Information consistent with the provisions of and an example of ineffective government. revised Form CPO–PQR. This will include Section 8(e) of the CEA, which establishes My colleague Commissioner Dan Berkovitz comparing it to the 2010 Schedule of important protections for CFTC data made the following observation in Investments. The review will be completed sharing.11 connection with a different rulemaking: ‘‘In within 18–24 months following the date addition to obtaining accurate data, the upon which persons are required to comply Conclusion Commission must also develop the tools and with the final rule and may result in further For these reasons, I am pleased to support resources to analyze that data.’’ 8 He is spot recommended actions. During the review the Commission’s final rule to amend the on. But I believe the converse is also true. We period, the staff also may identify and extend compliance requirements for CPOs on Form should not collect data we cannot use targeted relief for data fields that the CFTC CPO–PQR. As revised, Form CPO–PQR will effectively. In the case of Form CPO–PQR, receives from other sources. focus on the collection of data elements that this means not requiring market participants can be used with other CFTC data streams to provide information that the CFTC has Legal Entity Identifiers Are Something We Need and regulatory initiatives to facilitate neither the resources nor the ability to oversight of CPOs and their operated pools. analyze with our other data streams. Our The final rule does more than simply This will primarily reduce current data credibility as a regulator is strengthened eliminate certain data collections. It also collection requirements, but also mandate requires the collection of an additional piece when we honestly admit that our regulations disclosure of LEIs by CPOs and their of key information: Legal entity identifiers ask for data that we both have not used operated pools. Focusing on enhancing data (LEIs) for CPOs and their operated pools. effectively and have no intention of using collection by the agency is no doubt tedious. going forward. That is what we are doing LEIs are critical to understanding the Nonetheless, I am convinced it leads to today. activities and interconnectedness within financial markets. Although LEIs have been smarter regulation that helps promote the Alternative, and Sometimes Better, Sources around since 2012 and authorities in over 40 integrity, resilience, and vibrancy of U.S. of Data Are Available to the Commission jurisdictions have mandated the use of LEI derivatives markets. Form CPO–PQR is not our only source of codes to identify legal entities involved in a data regarding commodity pools. The CFTC financial transaction,9 this is a new 10 See Sections 151–56 of the Dodd-Frank Wall has devoted substantial resources to requirement for Form CPO–PQR. The lack of Street Reform and Consumer Protection Act, Public developing other data streams and regulatory LEI information for CPOs and their operated Law 111–203, 124 Stat. 1376 (2010). initiatives designed to enhance our ability to pools has made it challenging to align the 11 In Section 8(e) of the CEA (7 U.S.C. 12(e)), surveil financial markets for risk posed by all data collected on Form CPO–PQR with the Congress authorized the CFTC to share nonpublic manner of market participants, including data received from exchanges, information it obtains under the CEA with other federal agencies acting within the scope of their CPOs and their operated pools. clearinghouses, swap data repositories, and jurisdiction. Although Congress prohibited the These alternative data streams, which futures commission merchants. As a result, CFTC from publishing data and information that include extensive information related to we cannot always get a full picture of what would separately disclose the business transactions trading, reporting, and clearing of swaps, are is happening in the markets we regulate. or market positions of any person and trade secrets in some cases more useful or robust than Adding an LEI requirement for CPOs and or names of customers, Section 8(a) allows the information from Form CPO–PQR. their operated pools will help give us a CFTC to publish research and analysis based on Importantly, most of the transaction and complete perspective. such data and information where it has been position information the CFTC uses for our In addition, the final rule better aligns appropriately aggregated, anonymized, or otherwise Form CPO–PQR with Form PQR of the NFA, masked to avoid such separate disclosure. In surveillance activities is available on a more conjunction, these two provisions of Section 8 give which all CPOs must file quarterly and the CFTC the power to review the work product of 8 Dan M. Berkovitz, Commissioner, CFTC, other federal agencies with which it shares data and Statement on Proposed Amendments to Parts 45, 9 See Financial Stability Board, Thematic Review information to ensure that they do not separately 46, and 49: Swap Data Reporting Requirements on Implementation of the Legal Entity Identifier, disclose confidential information obtained from the (Feb. 20, 2020), available at: https://www.cftc.gov/ Peer Review Report (May 28, 2019), available at: CFTC, and to authorize those agencies to publish PressRoom/SpeechesTestimony/ https://www.fsb.org/2019/05/thematic-review-on- research and analysis based on such confidential berkovitzstatement022020b. implementation-of-the-legal-entity-identifier/. information.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 71812 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations

Appendix 3—Supporting Statement of I am disappointed that this final rule does In determining to reduce the frequency and Commissioner Brian Quintenz not amend the form to adopt the 2010 scope of commodity pool operator (CPO) data Schedule of Investments, but I am reporting and collection, the Commission is I support today’s final rule that would encouraged that the preamble instructs DSIO pivoting away from what was an ambitious simplify and streamline the reporting staff to evaluate the ongoing utility of the vision for ongoing oversight, monitoring, and obligations of commodity pool operators current Schedule of Investments, including trend analysis inspired by the events and (CPOs) on Form CPO–PQR. The Commission comparing it to the 2010 Schedule of fallout of the 2008 financial crisis.3 To be first adopted Form CPO–PQR in 2012 and Investments, within 18–24 months following sure, keeping pace with regulatory change closely modeled the form on Form PF. The the compliance date. As part of this review, and shifting priorities while exercising Commission adopted the Form of its own staff is instructed to consider whether or not, appropriate discipline in collecting, volition; unlike Form PF, which is in light of its utility, the Commission should handling, and managing data is an endless specifically mandated by the Dodd-Frank revert back to the 2010 Schedule of endeavor. Nevertheless, I am pleased with Act, there is no similar statutory directive Investments. After completing this review, in today’s outcome, and I am confident that as 1 requiring the adoption of Form CPO–PQR. whole or in stages, staff will develop we continue moving forward, the tremendous In my opinion, since its adoption, the recommendations, provide relief, or propose abilities of the dedicated staff whose direct detailed information requested on Form a rulemaking for the Commission’s further insight and experience informed our CPO–PQR has not significantly enhanced the consideration to effectuate staff’s findings. decisions will ensure we continue to act Commission’s oversight over CPOs and has This review will allow staff to carefully decisively in furthering our goals and never been fully utilized by staff. I have long consider which questions on the Schedule of supporting our mission critical duties. questioned the Commission’s need to know Investments are necessary to effectively The CFTC shares aspects of its regulatory the litany of data requested on the Form. oversee CPOs and to propose eliminating any initiatives, risk surveillance, and monitoring In my view, many of the questions on the fields which are being received through other duties with respect to CPO and commodity existing form are more academic than data channels or have no regulatory use case pools with the Securities and Exchange pragmatic in nature—information that may to the Commission’s oversight function. I Commission (SEC), the National Futures be nice for the Commission to have, but data think this review is long overdue and is Association (NFA), and the FSOC. The Final that is certainly not necessary for the especially timely given the developments in Rule in its detailed preamble identifies areas Commission to effectively oversee other data streams, like part 45 swap data, of overlap in which commenters suggested commodity pools and the derivatives that DSIO is actively working to combine that the Commission ought to retreat from its markets. This is why I am very pleased that with clearinghouse data to provide a proposed baseline for data collection in the final rule eliminates the most complete picture of a CPO’s derivatives Revised Form CPO–PQR. I am pleased that burdensome sections on the current form— activity. I believe that DSIO’s ability to the Commission reasonably considered such Schedules B and C, which together contain monitor, in real time, a fund’s derivatives comments and provides well-reasoned roughly 72 distinct questions, if one includes positions will be absolutely vital to the responses based on analysis of facts and data all the separately identifiable subparts. Many oversight and regulation of commodity pools incorporated directly into the record. While of these questions are challenging for CPOs in the future. the Commission and its staff must always be to calculate precisely and require numerous In closing, I deeply appreciate DSIO staff’s prudent and judicious in our allocation of data, resources, authority, and deference in underlying assumptions that vary from firm efforts to address my concerns on this point to firm, making it difficult, if not impossible, working amicably towards common goals, we in the weeks leading up to today’s vote. for the Commission to perform an apples-to- should exercise great care so as to avoid Thank you all very much for your apples comparison across the commodity sacrificing primacy and independence when engagement and dedication. pool industry. acting directly in support of Congressional While today’s final rule represents a Appendix 4—Concurring Statement of mandates and statutory directives. marked improvement over the current CPO Commissioner Rostin Behnam I appreciate the Commission and its staff’s reporting regime, more work remains to be ongoing engagement with the SEC and FSOC, done. Importantly, the proposal requested I respectfully concur with the Commodity as well as with NFA, throughout the drafting comment about reverting back to the former Futures Trading Commission’s (the of the NPRM and the Final Rule, and I am Schedule of Investments originally adopted ‘‘Commission’’ or ‘‘CFTC’’) issuance of encouraged that discussions are ongoing. As by the National Futures Association (NFA) in today’s final rule (the ‘‘Final Rule’’) we move forward, it is my intention to ensure 2010 for its NFA Form PQR (2010 Schedule amending Regulation 4.27 and Form CPO– that the Commission provides staff the of Investments). In 2012, the Schedule of PQR. As a whole, the Final Rule provides a support and resources necessary to effectuate Investments adopted by the Commission thoughtfully balanced and complete its current plans for Form CPO–PQR data and went further than the 2010 Schedule of evaluation of the issues identified in the make future amendments and adjustments, as Investments, by lowering the itemized notice of proposed rulemaking 1 and the appropriate. reporting thresholds and adding significantly responsive comments. Perhaps, just as Appendix 5—Statement of more granular subcategories of investments. importantly, the Final Rule clearly For example, the Commission sought acknowledges that it is the first of several Commissioner Dan M. Berkovitz information regarding the tranches of various steps in the Commission’s ongoing I am voting for the final rule to amend types of and the types of assessment of Form CPO–PQR not only for its Regulation 4.27 and Form CPO–PQR (‘‘Final bonds held by the pool. Historically, the utility as a regulatory tool, but as a yardstick Rule’’). This Final Rule makes adjustments to information on the Schedule of Investments to measure improvements to the the reporting requirements for Commodity has mostly been used by the NFA for their Commission’s data integration and analytical Pool Operators (‘‘CPOs’’) and their pools CPO examination program. However, in its capabilities. The Final Rule makes smart, based on lessons learned over several years comment letter to the Commission, the NFA targeted corrections without forgoing the since the requirements were first adopted. noted that it ‘‘does not have a need for the possibility of future adjustments should the more granular information currently in the Commission later determine that additional asked to provide information necessary for the Schedule’’ and that it ‘‘fully supports data would support evolving regulatory FSOC to perform its statutorily mandated duties, [aligning the current schedule with the 2010 initiatives or Financial Stability Oversight but the FSOC may issue recommendations to the Schedule of Investments] because [NFA] Counsel (FSOC) requirements to fulfill Commission regarding more stringent regulation of believe[s] a more streamlined schedule will statutorily mandated duties and initiatives financial activities that FSOC determines may significantly alleviate filing burdens on CPOs aimed at identifying and monitoring risks to create or increase systemic risk. See Dodd-Frank Act sections 112(d)(1), 120; See also Reporting by without negatively impacting the usefulness financial stability.2 2 Investment Advisers to Private Funds and Certain of the information that is collected.’’ Commodity Pool Operators and Commodity 1 Amendments to Compliance Requirements for Trading Advisors on Form PF, 76 FR 71128, 71129 1 See section 404 of the Dodd-Frank Act. Commodity Pool Operators on Form CPO–PQR, 85 (Nov. 16, 2011); Commodity Pool Operators and 2 NFA Comment Letter (June 20, 2020), https:// FR 26378 (proposed May 4, 2020) (the ‘‘NPRM’’). Commodity Trading Advisors: Compliance comments.cftc.gov/Handlers/ 2 See NPRM, 85 FR at 26379. Not only is the Obligations, 77 FR 11252, 11253 (Feb. 24, 2012). PdfHandler.ashx?id=29369. Commission among those agencies that could be 3 See, e.g., NPRM, 85 FR at 26381.

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3 Federal Register / Vol. 85, No. 218 / Tuesday, November 10, 2020 / Rules and Regulations 71813

Eight years ago, the Commission began total portfolio of each pool and its trading To ensure that the Commission has a collecting information from CPOs on Form strategy. Recent market volatility—including complete picture of pool activity across all CPO–PQR. During that period, the historic price movements in crude oil— derivatives markets, it should continue Commission has come to learn that certain underscores the importance of the CFTC’s working to integrate swaps data with futures information in Form CPO–PQR has not ability to understand the nature of the data. Some commenters have suggested that materially improved the Commission’s participants in our markets and the scope of one way to do this would be to require all understanding of CPOs’ participation in their activities in order to conduct timely reporting CPOs and their pools—not just commodity interest markets, or its ability to oversight and spot emerging trends or risks. those that trade swaps—to obtain LEIs and assess the risks their pools may pose. The Since joining the Commission I have submit them on Form CPO–PQR. I encourage Final Rule eliminates information that has supported and encouraged efforts to improve the Commission and staff to continue to not proven to be of value to the Commission. our data and analytical capabilities, and explore this approach, among others, so that Several commenters suggested that the believe they should be expanded in the the CFTC is able to aggregate all derivatives Commission collect less information on the coming years. Commission staff currently is transactions by pools under common control. Pool Schedule of Investments (‘‘PSOI’’) about taking steps to better synthesize swap data I would like to thank the Division of Swap CPO investments in various asset classes. I for large account controllers and develop a Dealer and Intermediary Oversight for their support the Commission’s decision in the more holistic surveillance program. Once efforts in finalizing this rule in a form that Final Rule to continue to collect position these analytical tools have been further I can support. data about pool investments. To evaluate the developed, staff will then be in a position to risks posed by CPOs and the pools they advise the Commission regarding whether [FR Doc. 2020–22874 Filed 11–9–20; 8:45 am] operate, it is necessary to understand the any changes to the PSOI are appropriate. BILLING CODE 6351–01–P

VerDate Sep<11>2014 18:44 Nov 09, 2020 Jkt 253001 PO 00000 Frm 00043 Fmt 4701 Sfmt 9990 E:\FR\FM\10NOR3.SGM 10NOR3 jbell on DSKJLSW7X2PROD with RULES3