From: Riley, John <JRiley@CFTC.

gov>
Sent: Saturday, November 21,20096:52 AM
To: elizabethJitter@agriculture.senate.gov; Claussen, Cory (Agriculture)
<Cory_ Claussen@agriculture.senate.gov>
Cc: Leslie, Douglass <dleslie@CFTC.gov>; Arbit, Terry <tarbit@CFTC.gov>
Subject: CFTC Staff Technical Assistance 1112112009 -- Harmonization-related
Attach: Harmonization-Restitution Statutory Text 11.20.09.docx; Harmonization-Enhanced
Authority over Registered Entities Statutory Text 11.20.09.docx

Elizabeth and Cory -

I'm attaching two documents provided as technical assistance from CFTC staff. Both include
recommendations from the CFTC/SEC IQiDtR~pw1 on harmonization. Technical explanations are included, and
in addition, Terry has provided some further context with regard to discussions of the "Enhanced Authority" piece
to date:

As you will see, the proposed statutory text contains 6 subsections, (a) through (f). Four of these
subsections -- subsections (a), (b), (c), and (f) -- were already included in the Administration's OTC derivatives
reform bill, and thus are also included in the various Congressional Committee bills that have followed that
model.

Subsections (d) and (e), though, are new. Actually, subsection (d) is a modified version of a provision that
was in the Administration's bill. The Administration, at our request, included a provision giving the CFTC 10
days to review new or amended rules or products from registered entities, and an additional 90 days in certain
circumstances where further review would be necessary. This would be a departure from the 'next-day
certification' process under current law. After the Administration bill came out, additional discussion occurred
over distinguishing between this change for new and amended rules -- as opposed to with respect to products. We
appreciate the distinction, and upon further consideration, we feel it would be appropriate to have separate
provisions treating rules and products of registered entities differently. Accordingly, subsection (d) of our
attached statutory text implementing the Harmonization Report retains the 10/90 day review provision for new
and amended rules, but limits the new review period for self-certified products only to those products that may
violate public policy (for example, a contract based on war or assassination). In addition, for products, the
maximum review period would be 60 days instead of 90 days, and there is a provision assuring confidentiality
during the CFTC review process so that the submitting entity is not at risk of a competitor stealing its product.

Subsection (e) was not included in the Administration's bill, or in any of the Committee bills to date. The
Harmonization Report recommended that, whereas the CEA currently provides for rule and product approval
unless the Commission finds that it would violate the CEA, this new provision is based on the federal securities
laws -- which provide for disapproval unless the Commission finds that the change is consistent with the law.

Of course, if you would desire any further explanation, just let me know.

John

John P. Riley
Director of Legislative Affairs
Office ofthe Chairman
u.s. Connnodity Futures Trading Connnission

CFTC-CREW-0432
115521 51 St., NW
Washington, DC 20581
(202) 418-5383
JRi1ey@CFTC.gov

CFTC-CREW-0433