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Interpretative Letters

Interpretative Letters
00-42 PDF Image; Investment of FCM Assets: Commodity Futures Trading Commission Regulation 1.17; Interpretation
Net capital treatment of an investment in a money market mutual fund operated by an affiliate.
00-48 PDF Image; Rule 30.10; Interpretation
The Division of Trading and Markets (Division) confirmed that, for U.S. customers trading the LMEX contract on the London Metal Exchange (LME), LME firms may comply with the standard provision for segregation of customer funds instead of the alternative segregation provision. Under Commission Rule 30.10 the Commission issued orders in May 1989 permitting U.K. firms to solicit and accept orders from U.S. customers for trading on U.K. markets, including LME. Because LME contracts have traditionally not been cash settled, U.K. firms were permitted, in lieu of standard segregation, to maintain a binding letter of credit or bank guarantee to cover forward profits and clearing exposures on the LME (i.e., the alternative segregation provision). The LMEX contract, however, will be cash settled and LME believes that standard segregation is appropriate with respect to that contract. The Division has confirmed that LME firms can treat the LMEX contract under standard segregation and all other LME contracts under the alternative segregation provision, even if the same customer is involved.
00-56 PDF Image; 1996-1998 Transfer Binder; Interpretation
This letter revises a Commission letter dated December 4, 1997, and advises the National Futures Association (NFA) to cease using CFTC Rule 1.63 as the basis for evaluating the impact of a floor broker's (FB) or floor trader's (FT) exchange disciplinary history on his or her fitness to be registered pursuant to the "other good cause" provision of Section 8a(3)(M) of the Commodity Exchange Act (Act). Instead, NFA should rely on the standard enunciated in In the Matter of Clark
00-57 PDF Image; Rule 4.13(a)(1), Rule 4.13(b)(2)(I)(A) and (B), and Rule 4.7(a)(1)(ii)(B)(2)(xi); Interpretation
The Division of Trading and Markets confirmed availability of CPO registration exemption under Rule 4.13(a) for managing members where LLC was formed as investment vehicle for partners and key employees of a law firm. The Division also granted exemption permitting substitute compliance with reporting requirements for the LLC because it trades through investee vehicles and thus cannot timely obtain necessary information from investee vehicle operators to permit normal compliance. The Division granted exemption permitting the LLC to be treated as a QEP, notwithstanding that not all of its members are QEPs, if the LLC invest more than ten percent of its assets in Rule 4.7 exempt pools.
00-89 PDF Image; CEAct ' 4m(1), Regulation 4.10(d)(1); Interpretation
Intrepration that a limited partnership engaged in pork production that trades commodity interests solely to hedge against the price risks associated with that business is not a "pool" within the meaning and intent of Rule 4.10(d)(1), and that consequently, the general partner of the partnership is not a CPO thereof.
00-98 PDF Image; CEA ? 4m(1), Regulation 4.10(d)(1); Interpretation
The Division of Trading and Markets confirmed that certain family limited partnerships would not be "pools" within the meaning and intent of Rule 4.10(d), and, consequently, the general partners of the partnerships would not be CPOs thereof. In addition, the Division also confirmed that none of the general partners would be required to register as CTAs either because: (1) they are not CTAs within the meaning in Section 1a(5) of the CEA, because they do not receive compensation or profit; or (2) they qualify for exemption from CTA registration under Section 4m(1) of the CEAct.
00-100 PDF Image; Regulation 4.10(d)(1); Interpretation
The Division of Trading and Markets found that a limited partnership composed of family members was not a commodity pool within the means and intent of Rule 4.10(d)(1) and, consequently, that the General Partner was not a CPO thereof.
00-106 PDF Image; 7 U.S.C. Section 4d(2); Interpretation
Requestor inquired concerning: 1) the obligations of an FCM that is unable to meet its obligation to customers, but subsequently receives additional funds or property, and 2) the effect of the assignment of such obligation by a customer to a third party. The Division of Trading and Markets noted the prohibition against the use of the funds or property of any customer to purchase, margin, guarantee, or settle the trades or contracts or extend the credit of any other customer. This prohibition, taken together with the requirement that the funds and property of every customer be segregated and treated as belonging to such customer, mandates that if the segregated balance of any one customer falls into a deficit, the FCM must restore the amount of such deficit out of its own funds. This obligation continues even though an FCM does not possess sufficient funds to satisfy it. Any funds subsequently obtained by the FCM must be applied to this obligation. None of the foregoing principles is affected by an assignment, valid under state law, by a customer to a third party of the customer's claim against the FCM