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All Letters

Date
All Letters
01/07/2004
04-02 PDF Image; Section 2(a); No-Action
Singapore Exchange Derivatives Trading Limited’s request for No-Action relief in connection with the offer and sale of its futures contract based on the Standard & Poors CNX Nifty Index in the United States.
01/15/2004
04-04 PDF Image; Rule 1.57(a)(1); Interpretation
The Division of Clearing and Intermediary Oversight permitted a futures commission merchant (FCM), at the request of its guaranteed introducing broker’s (IB) client, to “give up” to another FCM for clearing orders placed by the client. The guaranteeing FCM was sufficiently capitalized to meet all obligations it may have to the IB’s customers, and the IB would not be compensated by the second FCM in connection with orders that the client enters with the IB and that were cleared through the second FCM.
01/22/2004
04-05 PDF Image; Section 2(a); No-Action
The London International Financial Futures and Option Exchange Administration and Management’s request for No-Action relief in connection with the offer and sale of its futures contracts based on the FTSEurofirst 80 Index and the FTSEurofirst 100 Index in the United States.
01/21/2004
04-06 PDF Image; CFTC Regulations 1.32 and 1.17; Interpretation
The Division of Clearing and Intermediary Oversight (DCIO) has issued a letter to Sentinel Management Group, Inc. to reaffirm the staff’s views concerning the application of the Commission’s segregation and net capital regulations to certain accounts managed by Sentinel. Specifically, staff has confirmed that an FCM client of Sentinel may include its proportionate interest in the total funds held in a certain account managed by Sentinel in performing the daily segregated funds computation required by Regulation 1.32, subject to applicable haircuts. Further, an FCM client may include its proprietary funds held in a certain account managed by Sentinel as a current asset in computing its minimum adjusted net capital pursuant to Regulation 1.17, subject to certain conditions, including upon Sentinel informing each FCM client that it should report its proportionate interest in the account as an investment on financial reports filed with the Commission and self-regulatory organizations.
01/28/2004
04-07 PDF Image; CFTC Regulation 1.17(d); Interpretation
The Division of Clearing and Intermediary Oversight (DCIO) responded to an inquiry from a designated self-regulatory organization (DSRO) relating to the definition of equity capital in Commission Regulation 1.17(d). The DSRO requested confirmation that a futures commission merchant (FCM) may include in its equity capital the proceeds from a subordinated loan agreement that satisfies all of the terms and conditions for equity capital set forth in Rule 1.17(d), and also provides for the possibility of several advancements of principal, or drawdowns, during the term of the loan agreement. In its opinion letter, DCIO stated that Rule 1.17(d) does not preclude including such advances, if and when made, in the firm’s equity capital, so long as each advance separately satisfies the requirements for equity capital under Rule 1.17(d).
01/22/2004
04-08 PDF Image; Sections 4m(1) and 4n(1); No-Action
A person does not need to register as a CPO or CTA with the Commission where: (1) it is located outside the territorial U.S.; (2) none of the participants in any pool it operates is a United States person; (3) no funds or other capital are contributed to a pool from United States sources; (4) it has not and will not establish a location in the United States; (5) no person affiliated with it has undertaken or will undertake any marketing activity for the purpose, or that could reasonably be expected to have the effect, of soliciting participations from United States persons; and (6) no marketing activities in connection with it will be conducted within the United States.
02/20/2004
04-09 PDF Image; Section 4d of the Commodity Exchange Act; No-Action
In CFTC Letter No. 03-28; the Division of Clearing and Intermediary Oversight granted no-action relief to permit a firm exempt from registration as a futures commission merchant (FCM) pursuant to Rule 30.10 to act as an introducing broker (IB) so as to introduce institutional U.S. customers to an affiliated FCM (US FCM) for purposes of trading US exchange-traded futures and options. Today, the Division issued a letter granting no-action relief to permit the same Rule 30.10 Firm to act as an IB so as to introduce U.S. customers to any FCM for the purpose of trading U.S. exchange-traded futures and options. The relief was predicated upon, among other conditions, an acknowledgment by US FCM that it will be jointly and severally liable for any violations of the Act or the Commission’s rules committed by Rule 30.10 Firm in connection with the latter’s handling of orders for US Customers for trading of futures and options on US Exchanges, including those orders executed by Rule 30.10 Firm and given up to another FCM.
03/05/2004
04-10 PDF Image; Rule 1.55; Interpretation
The Division of Clearing and Intermediary Oversight declined to confirm that an FCM that conducts most of its business over an Internet-based electronic trading platform could comply with the risk disclosure requirement of Rule 1.55 by including in the hard-copy account opening agreement signed by the customer a statement that the customer had visited the FCM’s website and had accessed and read the required risk disclosure statement. The Division reiterated that requirement of Rule 1.55 that where the risk discourse statement is included as a package with other materials, even in an electronic format, it must appear as the cover page or the first page and as the only material on such page.
03/24/2004
04-11 PDF Image; 4b(d) of the CEAct and Commission regulation 1.20; Interpretation
A bank requested an interpretation that a deposit account product that the Division of Clearing and Intermediary Oversight had previously interpreted as acceptable for the deposit of customer segregated funds by futures commission merchants was similarly acceptable for the deposit of customer segregated funds by derivatives clearing organizations. Based on an analysis of account, the Division issued an interpretation that the account would be acceptable as a deposit location as the account would be properly titled and covered by appropriate acknowledgements by the bank, and the funds in the account would at all times be immediately available for withdrawal on demand.
04/02/2004
04-12 PDF Image; Section 4m(1); No-Action
The Division of Clearing and Intermediary Oversight issued a letter granting no-action relief to permit an energy management firm to provide commodity trading advice to customers, without registering as a commodity trading advisor. The relief was based upon, among other reasons, the representation that the commodity trading advice would be limited to hedging transactions on behalf of entities that qualify as "eligible contract participants" under the Commodity Exchange Act.
04/15/2004
04-13 PDF Image; Rule 4.13(a)(3); Interpretation
The Division of Clearing and Intermediary Oversight issued an interpretation permitting CPOs who claim registration exemption under Rule 4.13(a)(3) to offer and sell pool participants to Non-United States persons, as defined in Commission Rule 4.7(a)(1)(iv), regardless of whether such persons meet any of the sophistication criteria of Rule 4.13(a)(3)(iii). The Division noted that a Non-United States person may participate in pools operated by CPOs claiming exemption under Rule 4.13(a)(4), which imposes no trading restrictions on the pool, regardless of the person's income, net worth, or other indicia of financial sophistication.
04/13/2004
04-14 PDF Image; Section 4d of the CEAct; No-Action
In CFTC Letter No. 04-09, the Division of Clearing and Intermediary Oversight granted no-action relief to permit a firm exempt from registration as a futures commission merchant (FCM) pursuant to rule 30.10 (rule 30.10 Firm) to act as an introducing broker (IB) so as to introduce institutional U.S. customers to any FCM, including an affiliated FCM (US FCM), for purposes of trading US exchange-traded futures and options. Today, the Division issued a letter granting similar no-action relief to a second rule 30.10 firm that also is affiliated with a US FCM. The relief granted today was predicated upon conditions corresponding to those in CFTC Letter No. 04-09 that included, among others, an acknowledgement by the US FCM that it will be jointly and severally liable for any violations of the Act or the Commission's rules committed by the rule 30.10 firm in connection with the latter's handling of orders for US Customers for trading of futures and options on US exchanges, including those orders executed by the rule 30.10 firm and given up to another FCM.
03/22/2004
04-15 PDF Image; Section 1a(23) and Regulation 1.3 (mm); Interpretation
The Division of Clearing and Intermediary Oversight issued an interpretation that a software provider is not an introducing broker, within the meaning of section 1a(23) and regulation 1.3(mm), when it markets and distributes a trading and order management software program that allows institutional customers to directly access their futures commission merchant's order entry system through the proprietary software screen. This interpretation is based on the representations that: (1) the software provider does not solicit customers or orders for an FCM or the trading of futures contracts (customer indicate to the software provider the FCM with which they have an existing relationship or with whom they wish to trade); (2) even in response to a customer inquiry, the software provider does not recommend, propose, or encourage that customers use any particular FCM, or place any orders for futures contracts; (3) the software does not provide express "buy" or "sell" signals; (4) the fees paid to the software provider by the FCM are not associated with the fees paid to the FCM for the placement of customer orders - the fee is paid by the FCM based on the number of contracts executed with the FCM, not based on the FCM's commission or the price of the contract traded; (5) the software will be licensed only to institutional customers, not to individuals; and (6) the software provider's central business activities are the collection and distribution of data services.
06/02/2004
04-16 PDF Image; Section 2(a); No-Action
No-Action request to permit the offer and sale in the United States of futures contracts on the Taiwan Stock Exchange Capitalization Weighted Stock Index traded on the Taiwan Futures Exchange.
05/25/2004
04-17 PDF Image; Rules 4.13(a)(4) and 4.7(a)(2)(viii)(A)(5); Exemption
The Division of Clearing and Intermediary Oversight denied a request by a CPO to treat the mother-in-law of one of the CPO's principals as a QEP for the purpose of continuing to operate a pool pursuant to the CPO registration exemption to Rule 4.13(a)(4). The purpose of the CPO registration exemption of Rule 4.13(a)(4), a natural person QEP, as defined by Rule 4.7(a)(2)(viii)(A)(5), includes the spouse, child, sibling, or parent of a principal of a CPO, but does not include the principal's parent-in-law. Relief is denied in part because the CPO was unable, as a predicate of relief under Rule 4.13(a)(4), to treat the mother-in-law similarly to certain non-QEP family members of the sole shareholder of a CPO's general partner, that the Division had previously allowed to be treated as QEPs for the purpose of granting relief under Rule. 4.7. Such treatment would have included, with respect to the mother-in-law's investment, waiving any fees, waiving any applicable minimum investment requirement, waiving or relaxing any restrictions on the right to redeem, and providing the reports required by Rule 4.22.
07/08/2004
04-18 PDF Image; Rules 1.35(a-1)(5); 4.14(a); Interpretation
The Division of Clearing and Intermediary Oversight (DCIO) has issued an interpretation that an associated person (AP) of an introducing broker (IB) may allocate bunched orders on a post-trade basis in accordance with Commission rule 1.35(a-1)(5). Generally, APs are not deemed "eligible account managers" under that rule. However, where the AP in question is operating as a commodity trading advisor (CTA) that is exempt from registration under Commission rule 4.14(a)(5) and (a)(10) (a person exempt from registration as a commodity pool operator (CPO) who solely advises pools for which the person is exempt from CPO registration, and a person who advises no more than 15 persons during the preceding 12 months and does not hold himself out generally to the public as a CTA, respectively), the fact that the person is also registered as an AP does not disqualify him from acting as an eligible account manager permitted to allocate bunched orders on a post-traded basis in accordance with Commission rule 1.35(a-1)(5).
07/12/2004
04-19 PDF Image; Rule 1.31 - Maintaining required records; Interpretation
The Division of Clearing and Intermediary Oversight issued an interpretation that a registered FCM could retain daily and monthly trader statements and reports in Adobe PDF format, without being required to retain a third-party technical consultant under the following circumstances: (i) each record must be stored on the CD or DVD in format "filename.pdf" where "filename" represents the actual name given to the sorted record; (ii) the date and type of record must be easily discernible, whether from the file name, from an index or otherwise, and the information must be updated at least daily; and (iii) each record must be maintained in a consistent format in terms of size, font, and orientation on the page.
07/12/2004
04-20 PDF Image; Section 4m(1) - Requirement to register as a CPO; No-Action
The Division of Clearing and Intermediary Oversight took a no-action position with respect to the failure of a co-general partner of several commodity pools (the "Funds") to register as a CPO. Consistent with prior no-action letters, the other co-general partner was a registered CPO, and the unregistered co-general partner would not participate in: (1) solicitation, acceptance or receipt of funds or property to be used for purchasing interests in the Funds; or (2) the investment, use or disposition of funds or property of the Funds. Neither co-general partner nor any principal thereof was subject to statutory disqualification, and each co-general partner cross-acknowledged in writing joint and several liability for any violation of the CEAct or CFTC rules by the other co-general partner.
08/16/2004
04-21 PDF Image; Regulations 1.10 and 1.17; No-Action
the Joint Audit Committee requested that DCIO take a temporary no-action position with respect to the reclassification of mandatorily redeemable equity of non-public futures commission merchants as debt under Statement of Financial Accounting Standard No. 150 (FSA 150), as the same had been taken by the SEC with respect to non-public broker dealers. Based on an analysis that non-public futures commission merchants may be similarly affected by FAS 150, the Division issued a no-action position for the year commencing December 15, 2003, in order to provide such futures commission merchants additional time to restructure any such interests desired on order to avoid the reclassification for net capital and debt-equity ratios.
08/17/2004
04-22 PDF Image; Rule 4.23; Exemption
The Division of Clearing and Intermediary Oversight exempted a CPO from the requirement of Rule 4.23 that the CPO maintain certain books and records at its main business address.The exemption is subject to the conditions that: (1) the CPO will notify the Division if the location of any original books and records changes; (2) the CPO remains responsible for ensuring that all books and records required by Rule 4.23 are maintained in accordance with Rule 1.31 and for assuring their availability to the Commission, NFA, or any other agency authorized to review such books and records in accordance with the Commission's regulations; (3) within 48 hours after a request by a representative of the foregoing, the CPO will obtain the original books and records and provide them for inspection at its main business address if the representative chooses to inspect them there; (4) the CPO discloses in its Disclosure Document where all books and records required by Rule 4.23 are kept; and (5) the CPO remains fully responsible for compliance with Rule 4.23, other than with respect to the rule's location requirement.
08/25/2004
04-23 PDF Image; Rule 4.10(d); Interpretation
The Division of Clearing and Intermediary Oversight declined to confirm that non-natural person bank account holders (Family Entities) formed by, or for the direct or indirect benefit of, wealthy family members, and in some cases long-term employees and advisers of the family members, are not pools. Requester failed to specify eligibility criteria for participants of Family Entities when asked to do so by Division staff.
08/30/2004
04-24 PDF Image; Section 2(a); No-Action
Request for no-action relief in connection with the offer and sale in the United States of the S&P/MIB Index Futures Contract and miniFutures Contract traded on the Mercato Italino dei Derivati.
09/07/2004
04-25 PDF Image; Sections 4d and 4k(1) of the CEAct; Interpretation
The Division of Clearing and Intermediary Oversight issued an interpretation that because a consulting firm and its sole member are not engaged in soliciting or accepting customer orders, the firm and its sole member are not required to be registered as an IB or AP, respectively. The Division's opinion is based primarily on representations that: (1) the firm would be compensated for its various consulting services and not for referring clients to any FCM; (2) the firm would not be in any way involved with order flow; and (3) the firm would not be compensated on a per-order basis or by a referral fee.
10/01/2004
04-26 PDF Image; 4d(b) of the CEAct & Regulation 1.20; No-Action
Two futures commission merchants requested that they be permitted to deduct bank fees for customer-segregated bank accounts directly from such accounts in which customer funds were held. Bank fees for the maintenance of such accounts are expenses of the futures commission merchant and not of its customers. Section 4d(b) of the Commodity Exchange Act prohibits any person, including any depository, that has received money, securities or property in a segregated account from holding, disposing of or using any such money, securities or property as belonging to the depositing futures commission merchant or any person other than the customers of such futures commission merchant. Based on the Division's determination that the fees in questions were de minimus, that the futures commission merchants in question maintained excess funds in segregation and had residual interests in the funds in segregated accounts greater than such fees, and that the administrative burden upon such futures commission merchants to pay such fees separately from other non-segregated accounts therefore appeared unnecessary, the Division issued two no-actions letters to the respective futures commission merchants with respect to the payment of such fees directly from the customer-segregated bank accounts upon the conditions specified therein.
10/01/2004
04-27 PDF Image; 4d(b) of the CEAct & Regulation 1.20; No-Action
Two futures commission merchants requested that they be permitted to deduct bank fees for customer-segregated bank accounts directly from such accounts in which customer funds were held. Bank fees for the maintenance of such accounts are expenses of the futures commission merchant and not of its customers. Section 4d(b) of the Commodity Exchange Act prohibits any person, including any depository, that has received money, securities or property in a segregated account from holding, disposing of or using any such money, securities or property as belonging to the depositing futures commission merchant or any person other than the customers of such futures commission merchant. Based on the Division's determination that the fees in questions were de minimus, that the futures commission merchants in question maintained excess funds in segregation and had residual interests in the funds in segregated accounts greater than such fees, and that the administrative burden upon such futures commission merchants to pay such fees separately from other non-segregated accounts therefore appeared unnecessary, the Division issued two no-actions letters to the respective futures commission merchants with respect to the payment of such fees directly from the customer-segregated bank accounts upon the conditions specified therein.
10/15/2004
04-28 PDF Image; Rule 3.12(g); Exemption
The Division of Clearing and Intermediary Oversight denied a request by a registered CTA for relief from the requirement that persons who solicit accounts on behalf of the CTA be registered as APs of the CTA. Because the CTA places orders on behalf of certain of its clients pursuant to a power of attorney, which grants the CTA full authority to effect commodity interest transactions on its clients' behalf, the CTA is engaged in the solicitation of discretionary accounts as contemplated by Section 4k(3) of the Act and rule 1.3(aa)(4). Consequently, notwithstanding the fact that the CTA may confirm each trade before placing any orders on its clients' behalf, persons who solicit accounts on behalf of the CTA must be registered as APs of the CTA.
10/01/2004
04-29 PDF Image; Section 17 - Registered Futures Associations: Application Procedures; Other Written Communication
The Division of Clearing and Intermediary Oversight declined to remove information about employment with a disciplined firm from an associated person's (AP's) registration record. The AP argued that he had not actually accepted employment or started working for the disciplined firm. In refusing the AP's request, the Division noted that the NFA registration file information was factually correct, would not prevent the AP from working as an AP, and could be accompanied by an explanatory statement submitted by the AP.
10/22/2004
04-30 PDF Image; Rule 4.23; Exemption
The Division of Clearing and Intermediary Oversight exempted a CPO from the requirement of rule 4.23 that the CPO maintain certain books and records at its main business address. The exemption is subject to the conditions that: (1) the CPO will notify the Division if the location of any original books and records changes; (2) the CPO remains responsible for ensuring that all books and records required by rule 4.23 are maintained in accordance with rule 1.31 and for assuring their availability to the Commission, NFA, or any other agency authorized to review such books and records in accordance with the Commission's regulations; (3) within 48 hours after a request by a representative of the foregoing, the CPO will obtain the original books and records and provide them for inspection at its main business address if the representative chooses to inspect them there; (4) the CPO discloses in its Disclosure Document where all books and records required by rule 4.23 are kept; and (5) the CPO remains fully responsible for compliance with rule 4.23, other than with respect to the rule's location requirement.
10/25/2004
04-31 PDF Image; Section 5 and 5a of the CEA; No-Action
The Division of Market Oversight issued a letter amending the no-action relief granted August 10, 1999, permitting Eurex Deutschland (Eurex) members to install additional electronic trading terminals in the U.S., to list certain new contracts for trading from Eurex terminals in the U.S., and to authorize the use of automated order routing systems without obtaining contract market designation pursuant to sections 5 and 5a of the CEA. The amendment permits participants of the Clearing Corporation (CCorp) to carry positions in Eurex products pursuant to the Euro-link agreement between CCorp and Eurex Clearing AG without Eurex obtaining contract market designation or registration as a derivatives transaction execution facility pursuant to sections 5 and 5a of the CEA.
10/25/2004
04-32 PDF Image; Sections 5 and 5a of the CEA; No-Action
The Division of Market Oversight issued a letter amending the no-action relief granted August 11, 1999, permitting the Sydney Futures Exchange Limited (SFE) to make its electronic trading and order matching system, known as SYCOM?, available to its members in the U.S. without obtaining contract market designation pursuant to sections 5 and 5a of the CEA. The amendment permits SFE to make SYCOM? available to non-Exchange Participants in the U.S. without obtaining contract market designation or registration as a derivatives transaction execution facility pursuant to sections 5 and 5a of the CEA.
10/25/2004
04-33 PDF Image; Sections 5 and 5a of the CEA; No-Action
The Division of Market Oversight issued a letter granting no-action relief to permit the European Energy Exchange (EEX), and its operator European Energy Exchange AG, to make its electronic trading and order matching system available to EEX trading participants in the U.S. without obtaining contract market designation or registration as a derivatives transaction execution facility pursuant to sections 5 and 5a of the CEA.
09/16/2004
04-34 PDF Image; Section 1a(23); Regulation 1.3(mm); No-Action
The Division of Clearing and Intermediary Oversight confirmed that it would not recommend that the Commission commence an enforcement action against a software vendor based on its failure to register as an introducing broker in connection with its marketing of a software program with the ability to access the order-entry system of the futures commission merchant (FCM) or introducing broker (IB) of the end users' choice. This relief is subject to the conditions that: (1) the data feeds containing market information are provided by unaffiliated third parties who do not give compensation to, or receive compensation from, the software provider or its affiliate for providing market data to customers; (2) the software does not provide express "buy" or "sell" signals; (3) customers' will select their own FCMs or IBs and negotiate any and all fees for executing trades between themselves and the FCM or IB; (4) the software provider will not solicit orders for, or recommend, propose, or encourage customers to use, any particular FCM or IB; (4) the software will reside on customers' computers and the orders will go directly from the end user to the executing FCM or IB without the software provider seeing details of an individual order; and (5) the software provider will be compensated by fees that are paid to it by the customer, and are not associated with the fees charged by the FCM or IB for the placement of customer orders.
12/15/2004
04-35 PDF Image; Section 5 and 5a of the CEAct; No-Action
The Division of Market Oversight issued a letter granting no-action relief to permit the Winnipeg Commodity Exchange, Inc. (WCE) to make its electronic trading and order matching system, known as the e-cbot? trading platform powered by LIFFE CONNECT?, available to WCE participants in the U.S. without obtaining contract market designation or registering as a derivatives transaction execution facility pursuant to Sections 5 and 5a of the CEAct.
07/26/2004
04-36 PDF Image; Sections 4a, 4c(b), 4g, and 4i of the Act; part 15 and parts 17 to 19 of the Commission's Regulations; No-Action
The no-action relief permits compliance with an alternate reporting level for low notional value HedgeStreet contracts.
12/10/2004
05-02 PDF Image; Rule 30.4(a) and 30.1(e); No-Action
The Division of Clearing and Intermediary Oversight issued a letter granting no-action relief to permit the U.S. affiliate of a futures commission merchant (FCM) to execute and clear foreign futures and foreign options transactions for the foreign futures and options customer omnibus accounts of the FCM without the affiliate having to register as an FCM pursuant to Rule 30.4(a). Rule 30.4(a) provides that a foreign futures and options broker (FFOB), as defined in Rule 30.1(e), is not required to register with the Commission as an FCM if, among other things, the FFOB solely accepts orders or carries an FCM's foreign futures and options customer omnibus account(s). Although the affiliate conducts no brokerage or trading activities in the U.S. and is a member of a foreign board of trade and subject to regulation in the jurisdiction in which the foreign board of trade is located, the affiliate does not satisfy the Rule 30.1(e) definition of FFOB because it is not a "non-U.S. person" by virtue of its incorporation in the U.S. Absent relief, the affiliate would be precluded from operating pursuant to Rule 30.4(a) without obtaining registration as an FCM. Among other things, the relief is conditioned upon the FCM's acknowledgment that it will be jointly and severally liable for any violations of the Act or the Commission's rules committed by the foreign affiliate in connection with those activities.

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