All Letters

06-01 ; Sections 16.01 and 40.6(c)(2)(iv); No-Action
The Division of Market Oversight has issued a no-action letter that would permit designated contract markets (DCMs) to satisfy the requirement to file notifications of changes to discretionary option strike prices, pursuant to section 40.6(c)(2)(iv) of the Commission’s regulations, by complying with the daily reporting requirements of section 16.01 of the Commission’s regulations. The no-action position relieves DCMs of the burden of filing unnecessary, duplicative data regarding such discretionary option strike price listings.

06-02 ; Section 32.23 (a); No-Action
The Division of Market Oversight has issued a no-action letter that would permit a to-be-formed, wholly owned subsidiary of Cargill, Inc. to register as an agricultural trade option merchant, even though such entity might not qualify as a “producer, processor, or commercial user of, or a merchant handling” the commodity underlying the option under a strict interpretation of those terms.

06-05 ; Regulation 1.17(d)(1); Interpretation
The Division of Clearing and Intermediary Oversight (DCIO), in response to an inquiry from the designated self-regulatory organization of a futures commission merchant (FCM), issued a letter to provide guidance on a Commission rule that permits FCMs to include in their equity capital the funds borrowed under subordination agreements that meet all of the requirements specified in the rule, including that the lender be a partner or stockholder of the FCM. DCIO took the position that, consistent with the purposes of Rule 1.17(d)(1), and also consistent with NASD guidance to broker-dealers for similar equity capital requirements under Securities Exchange and Commission (SEC) regulations, the lender of the funds under such an agreement may be a company that owns 100 percent of the shares of the company that owns 100 percent of the sole shareholder of the FCM.

06-06 ; Section 2(a); No-Action
Response of CFTC to Eurex Deutschland’s request for no-action relief in connection with the offer and sale in the United States of its MDAX Futures Contracts.

06-07 ; Sections 4a, 4c(b), 4g, and 4i; Parts 15, and 17 through 19, of the Commission’s Regulations; No-Action
Commission rule 15.03(b) applies a contract reporting level of 125,000 to all HedgeStreet Products. That term is strictly defined by Commission rule 15.03(a) as a HedgeStreet contract with a maximum possible return of $10. HedgeStreet has listed for trading exclusively self-cleared and fully collateralized contracts with variable returns that can exceed $10 per contract (referred to herein as $10-plus contracts). As a result of the strict regulatory definition of HedgeStreet Products, the Commission set contract reporting level of 125,000 is not applicable to any $10-plus contract. Instead, such contracts are subject to the reporting levels codified in rule 15.03(b) for specific commodities, or the default reporting level of 25 contracts set for futures and option contracts that are derivatives of all other commodities. The codified reporting levels that would be applicable in the absence of no-action relief to HedgeStreet’s $10-plus contracts are generally designed to apply to contracts that have significantly higher notional values than the contracts presently offered by HedgeStreet. The Division believes that the application of the contract reporting levels codified in Commission rule 15.03(b) to HedgeStreet’s $10-plus contracts would not assist the Commission in conducting meaningful market and financial surveillance. Therefore, the no-action letter permits HedgeStreet, and all persons trading on HedgeStreet, to adhere to reporting levels that are determined by applying a maximum return formula to specific $10-plus contracts. The maximum return formula establishes $1,250,000, the maximum monetary value associated with a reportable position in a HedgeStreet Product, as a baseline value, and then divides that baseline value by the maximum possible return of a particular $10-plus contract to arrive at specific reporting levels for individual contracts.

06-08 ; Sections 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 Eurex members who are registered with the Commission as Commodity Pool Operators (CPOs) or Commodity Trading Advisors (CTAs), or who are exempt from such CPO or CTA registration pursuant to Commission Regulation 4.13 or 4.14, to use Eurex terminals located in the United States for the transmission of orders on behalf of U.S. pools they operate or U.S. customer accounts over which they have discretionary authority, respectively, provided that an FCM or Rule 30.10 Firm acts as clearing firm with respect to all activity conducted by such CPOs and CTAs through the submission of orders on the trading system.

06-09 ; Sections 4a and 150.2; No-Action
The Division of Market Oversight has issued a no-action letter regarding speculative position limits. A registered commodity pool operator offers to the public shares of an index-based fund composed of notional amounts of various physical commodities, including wheat and corn. The fund maintains offsetting long futures positions in the commodities that make up the index. If the fund reaches a certain size, its positions in wheat and corn futures will exceed the speculative position limits for those commodities set out in Commission Regulation 150.2. The letter states that, subject to certain conditions, the Division will not recommend that enforcement action be taken with respect to the position limits being exceeded. The conditions include: that the futures trading activity passively tracks a widely recognized commodity index; that the futures trading activity is unleveraged; that the futures trading activity does not result in price exposure to the fund (i.e., price exposure is passed on to the shareholders); and that positions in excess of the speculative limits are not carried into the spot month.

06-10 ; Regulation 166.4; Interpretation
The Division of Clearing and Intermediary Oversight confirmed that a registrant would be conducting its branch office operations in compliance with regulation 166.4, based upon certain changes to those operations that registrant represented that it would make. (Previously, by CFTC Staff Letter No. 05-17, the Division had denied the request of the registrant to operate a branch office as a separately incorporated entity.)

06-11 ; Section 2(a); No-Action
No-Action request to permit offer and sale in the United States of the Bombay Stock Exchange Limited’s futures contract based on the Bombay Stock Exchange Sensitive Index.

06-12 ; Section 4m(1) of the CEA; No-Action
The Division of Clearing and Intermediary Oversight issued a no-action letter to the co-general partner of a commodity pool granting relief from the commodity pool operator (CPO) registration requirements set forth in Section 4m(1) of the Commodity Exchange Act (Act). The Division noted that: (i) the co-general partner was structured for tax purposes to provide its principals with an ownership stake in the underlying commodity pool; (ii) the other co-general partner is a registered CPO that will have all CPO responsibilities for the commodity pool; (iii) certain principals of the registered CPO will be the principals of the no-actioned CPO; and (iv) neither co-general partner nor any principal is subject to statutory disqualification under Section 8a(2) or (3) of the Act. Among other conditions for relief, the co-general partners have submitted cross acknowledgments, agreeing to be jointly and severally liable for violations of the Act and Commission regulations in connection with the operation of the commodity pool. In addition, the no-actioned CPO confirmed that it will provide to the CPO whatever information may be necessary for the CPO to include in any Disclosure Document prepared in accordance with Part 4 of the Commission’s regulations.

06-13 ; Regulations 4.22(c) and 4.22(h); Exemption
The Division of Clearing and Intermediary Oversight (DCIO) granted an exemption to a commodity pool operator (CPO) with respect to the annual reports required by Regulations 4.22(c) for two funds that have permanently ceased trading operations and have been placed into voluntary liquidation. The Funds are constituted under the laws of a foreign jurisdiction and registered under the foreign jurisdiction’s law as exempted companies. DCIO determined to accept the Funds’ December 31, 2005 certified annual reports as final annual reports, and that commencing January 1, 2006, the CPO will not be subject to the reporting requirements of Part 4 of the Commission regulations pending the final distribution of the Funds’ assets to the participants. In addition, as the Funds’ Liquidators have assumed legal responsibility for the Funds under the prevailing foreign jurisdiction’s law, including the requirement to provide the Funds’ participants with periodic reporting on the status of the liquidation and the Funds’ assets, the CPO is relieved from the requirement that it sign the oath or affirmation that is required to be included with the Funds’ annual reports filed with NFA. DCIO also granted an extension of time to file the Funds’ annual reports.

06-14 ; Section 2(a); No-Action
Osaka Securities Exchange Co. Ltd.’s request for no-action relief in connection with the offer and sale in the United States of its Mini Futures Contract based on the Nikkei 225 Stock Average Index.

06-15 ; Rules 4.21, 4.22 and 4.23; Exemption
The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and to list for trading on a national securities exchange. As is discussed in the letter, this relief was in the nature of substituted compliance with those regulations.

06-16 ; Rules 4.21, 4.22 and 4.23; Exemption
The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and to list for trading on a national securities exchange. As is discussed in the letter, this relief was in the nature of substituted compliance with those regulations.

06-17 ; Section 2(a); No-Action
No-Action request to permit the offer and sale in the United States of the Sydney Futures Exchange Corporation Limited’s 1-Day Option Contract based on the CBOT Mini-Sized Dow futures Contract.

06-18 ; Section 2(a); No-Action
Mercado Mexicano de Derivados, S.A. de C.V.’s request for no-action relief in connection with the offer and sale in the United States of its futures contract based on the Mexican Stock Exchange’s Price and Quotation Index.

06-19 ; CEAct Section 4a, Regulation 150.2; No-Action
The Division of Market Oversight has issued a no-action letter regarding speculative position limits. A registered commodity pool operator and commodity trading advisor offers to the public investments in a proprietary commodity investment program based on an index of a diversified group of various physical commodities, including wheat, soybeans and corn. The program maintains offsetting long futures positions in the commodities that make up the index. If the program reaches a certain size, its positions in wheat, soybeans and corn futures will exceed the speculative position limits for those commodities set out in Commission Regulation 150.2. The letter states that, subject to certain conditions, the Division will not recommend that enforcement action be taken with respect to the position limits being exceeded. The conditions include: that the futures trading activity passively tracks the program’s strategy; that the program’s strategy continues to reflect a broadly diversified basket of tangible commodities, calculated and rebalanced based on an objective, predetermined mathematical formula, as described in the no-action request; that the futures trading activity is unleveraged; that the futures trading activity does not result in price exposure for the program’s sponsor/offeror (i.e., price exposure is passed on to the investors); and that positions in excess of the speculative limits are not carried into the spot month.

06-20 ; Sections 4d, 4f, 4g, 4k and 4p of the CEAct and Parts 1, 30 and 180; No-Action
The Division of Clearing and Intermediary Oversight extended relief previously granted (Staff Letter 02-22) to permit institutional customers to trade certain proprietary electronically-traded broad-based-index futures contracts (the contracts) in a securities account with a registered broker-dealer notice-registered as a limited-purpose FCM (for purposes of accepting and executing orders for the contracts). The relief consisted of substitution of compliance with applicable securities law regulatory requirements for compliance with various otherwise applicable requirements under the CEAct and Commissions rules.

06-21 ; Sections 5 and 5a of the Act; No-Action
The Division of Market Oversight issued a letter amending the no-action relief granted December 17, 1999, to the Singapore International Monetary Exchange Limited (SIMEX), now the Singapore Exchange Derivatives Trading Ltd (SGX), permitting SIMEX to make its electronic trading and order matching system, SIMEX ETS, available to members in the U.S. without obtaining contract market designation pursuant to Sections 5 and 5a of the CEA. The amendment, among other things, acknowledges the reorganization of exchanges in Singapore, recognizes that SGX QUEST has replaced SIMEX ETS as the trading engine on SGX for financial futures and options on futures contracts, and extends the relief to the Joint Asian Derivatives Exchange (JADE), a joint venture of SGX and CBOT Holdings Inc. that operates as a division of SGX. The CBOT’s electronic trading and order matching system known as the e-cbot trading platform powered by LIFFE CONNECT (e-cbot System) is the trading engine for the JADE market, which lists futures and options on futures contracts on physical commodities based in Asia. The amendment also extends the no-action relief to include non-registration as a derivatives transaction execution facility pursuant to Section 5a of the CEA.

06-22 ; Sections 2(a); No-Action
Hong Kong Futures Exchange Limited’s Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contracts Based on the FTSE/Xinhua China 25 Index and the Hang Seng China Enterprises Index.

06-23 ; Sections 5 and 5a of the Act; No-Action
The Division of Market Oversight issued a letter granting no-action relief to permit the MexDer, Mercado Mexicano de Derivados, S.A. de C.V. (“MexDer”) to make its electronic trading and order matching systems, S/MART and SENTRA DERIVADOS (the “System”), as well as its application programming interface (“MexFix API”), available to MexDer members 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 CEAct. The relief applies to: (1) MexDer members located in the U.S. that trade on the System for their proprietary accounts (as defined in CFTC Rule 1.3(y)); (2) MexDer members that are registered as futures commission merchants (“FCMs”), or that are exempt from such registration pursuant to CFTC Rule 30.10 (“Rule 30.10 Firms”), who submit orders from or on behalf of U.S. customers directly to the System for execution (through the MexFix API or otherwise); and (3) MexDer members that are FCMs or Rule 30.10 Firms who transmit orders from or on behalf of U.S. customers via an automated order routing system (“AORS”) for execution on the System.

06-24 ; Sections 5 and 5a of the Act; No-Action
The Division of Market Oversight issued a letter amending the no-action relief granted August 10, 1999, permitting ParisbourseSBF (now Euronext Paris N.V.) to make its electronic trading and order matching system, the Nouveau Systeme de Cotation (replaced by LIFFE CONNECT®), available to MATIF and MONEP members in the U.S. without obtaining contract market designation pursuant to Sections 5 and 5a of the CEA. The amendment permits Euronext Paris members who are registered with the Commission as Commodity Pool Operators (CPO) or Commodity Trading Advisors (CTA), or who are exempt from such CPO or CTA registration pursuant to Commission Regulation 4.13 or 4.14, to enter orders directly into LIFFE CONNECT® through terminals located in the United States on behalf of the pools which they operate or the customer accounts over which they exercise trading discretion, respectively, provided that all such trading activity is cleared through a registered FCM or a firm that is exempt from registration by the Commission pursuant to Rule 30.10.

06-25 ; Sections 5 and 5a of the Act; No-Action
The Division of Market Oversight issued a letter amending the no-action relief granted July 23, 1999, permitting LIFFE to make its electronic trading and order matching system, LIFFE CONNECT®, available to members in the U.S. without obtaining contract market designation pursuant to Sections 5 and 5a of the CEA. The amendment permits LIFFE members who are registered with the Commission as Commodity Pool Operators (CPO) or Commodity Trading Advisors (CTA), or who are exempt from such CPO or CTA registration pursuant to Commission Regulation 4.13 or 4.14, to enter orders directly into LIFFE CONNECT® through terminals located in the United States on behalf of the pools which they operate or the customer accounts over which they exercise trading discretion, respectively, provided that all such trading activity is cleared through a registered FCM or a firm that is exempt from registration by the Commission pursuant to Rule 30.10.

06-26 ; Rules 4.21, 4.22 and 4.23 – CPO disclosure, recordkeeping and reporting requirements; Exemption
The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and to list for trading on a national securities exchange. As is discussed in the letter, this relief was in the nature of substituted compliance with those regulations.

06-27 ; Rules 4.21, 4.22 and 4.23 – CPO disclosure, recordkeeping and reporting requirements; Exemption
The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and to list for trading on a national securities exchange. As is discussed in the letter, this relief was in the nature of substituted compliance with those regulations.

06-28 ; Section 2(a); No-Action
Taiwan Futures Exchange’s Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contract Based on the MSCI Taiwan Index.

06-29 ; Section 1a(23); Regulation 1.3(mm); Interpretation
The Division of Clearing and Intermediary Oversight issued an interpretation that a software vendor is not an introducing broker, and is not required to register as such, in connection with its marketing of a software program with the ability to route orders to a designated contract market (“DCM”) or derivatives transaction execution facility (“DTEF”) on behalf of the futures commission merchant ("FCM") of the customers’ choice. This interpretation was based on the representations that: (1) the software vendor does not have a membership with or trading privileges on any DCM or DTEF that uses the order routing software; (2) the software does not provide express “buy” or “sell” signals; (3) customers have pre-existing relationships with their FCMs and will negotiate any and all fees for executing trades between themselves and the FCM; (4) the software provider will not solicit orders for, or recommend, propose, or encourage customers to use, any particular FCM; (4) the software will reside on customers’ computers and the orders will go directly from the end user to the DCM or DTEF without passing through the FCM’s order entry system; and (5) the software provider will be compensated by fees that are paid to it by the customer, and are not related to the fees charged by the FCM for the placement of customer orders.