Sections 4a, 4c(b), 4g, and 4i; Parts 15, and 17 through 19, of the Commission’s Regulations;
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.