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No-Action Letters

Date
No-Action Letters
01/06/2000
00-10 PDF Image; Section 4m(1) -- No Action Position from CPO Registration; No-Action
The Division of Trading and Markets provided a no-action position to a University's cooperative extension service, its agents and employees permitting them to offer seminar courses to certain students who have completed a specific undergraduate course sequence that would allow those students to trade commodity interests through participation in a Trading Club.
11/07/2000
00-101 PDF Image; Section 4f(b) of the CEAct and Commission Regulation 1.17(c)(5)(x); No-Action
The Division of Trading and Markets took a "no-action" position with respect to futures commission merchants (FCMs) or introducing brokers (IBs) that, in computing their respective adjusted net capital, do not take full capital charges, as set forth in Regulation 1.17(c)(5)(x), on open futures positions that are part of certain inter-exchange spread transactions involving futures contracts listed on the Cantor Financial Futures Exchange (Cantor). To be eligible for the relief, the inter-exchange spread must satisfy certain conditions, including that the Cantor and non-Cantor futures contracts have substantially similar terms and conditions and are based on the same underlying financial instruments.
11/13/2000
00-103 PDF Image; Section 2(a); No-Action
The Office of the General Counsel (OGC) issued a no-action letter that will permit the offer and sale in the U.S. of the SPI 200 futures contract based on the Standard & Poors/Australian Stock Exchange 200 Index traded on the Sydney Futures Exchange, Limited.
11/16/2000
00-104 PDF Image; Section 5 and 5a of the CEA; No-Action
The Division of Trading and Markets (Division) issued a letter granting no-action relief to permit Eurex Zurich Ltd. (Eurex CH) to make its electronic trading and order matching system, known as the System, available to its members in the U.S. without obtaining contract market designation pursuant to Section 5 and 5a of the CEA. Specially, the Division agreed not to recommend that the Commission institute enforcement action against Eurex CH or its members if Eurex CH makes the System available to its members: 1) who wish to trade for their proprietary accounts through the System in the Unites States; 2) who are registered futures commission merchants (FCMs) or who are exempt from registration pursuant to Rule 30.10 (Rule 30.10 Firms) and who wish to submit orders from U.S. customers for transmission to the System; and/or 3) who are registered FCMs or Rule 30.10 Firms who wish to accept orders from U.S. customers through automated order routing systems for submission to the System. The Division's no-action position is limited to contracts specifically delineated in the letter and is subject to compliance with the terms and conditions set forth therein.
11/15/2000
00-105 PDF Image; Section 4d(1); No-Action
The Division of Trading and Markets issued a no-action position, for failing to register as an IB, to an online company that provides an electronic trading platform where elevators and producers can negotiate to buy and sell cash grain, and as part of the platform the company offers an integration tool permitting elevators to be linked to their chosen FCM. The Division took this position based upon the company's representations that: 1) without this tool, elevators might not be willing to undertake the risks presented by purchasing cash grain through the trading platform; 2) this tool will facilitate as reasonable business purpose, i.e., the hedging of cash purchases by elevators; 3) the company has no involvement in selecting the FCMs that any elevator uses; and 4) the company does not receive any direct compensation from such FCMs.
12/04/2000
00-108 PDF Image; Part 35 of the Commission's rules; No-Action
On December 4, 2000, the Division of Trading and Markets issued a letter granting no-action relief in connection with the operation of U.K.-based electronic trading platform for the trading of certain agreements on physical commodities for which there is no futures contract traded on any exchange in the U.S. or any other member country of the Organisation for Economic Co-Operation and Development. The platform will utilize an electronic trading and matching system that can be accessed through the Internet, and it will be available only to approved participants and authorized brokers entering orders on their behalf. Participants will be limited to commercial entities that qualify as "eligible participants" under specified provisions of Part 35 of the Commission's rules. The operation of the platform is subjected to oversight by U.K. authorities.
02/29/2000
00-21 PDF Image; Section 2(a); No-Action
No-Action letter allowing the MONEP Exchange's futures contracts based on the Dow Jones STOXX 50 Index and the Dow Jones EURO STOXX 50 Index to be offered or sold in the United States.
03/10/2000
00-27 PDF Image; Section 2(a); No-Action
No-Action letter allowing the London International Financial Futures and Options Exchange futures contract based on the FTSE International Limited Eurotop 100 Index to be offered or sold in the United States.
02/23/2000
00-30 PDF Image; Rule 1.46; No-Action
The Division of Trading and Markets provided no-action relief to registered FCMs carrying the accounts of members of the Chicago Mercantile Exchange participating in "market marker" programs sponsored by the Exchange for particular contract markets. To administer the programs, the Exchange will require participants to maintain separate accounts for market-making and regular trades, in which positions might be held that would otherwise be required to be offset by operation of Commission Rule 1.46.
03/14/2000
00-41 PDF Image; Section 5 and 5a of the Act; No-Action
The Division of Trading and Markets (Division) issued a letter to LIFFE Administration and Management (LIFFE) extending the no-action relief that it granted LIFFE by letter dated July 23, 1999, (July 23 Letter) to the FTSE International ? Stars Index (FTSE ? Stars Index) futures contract. The relief is subject to compliance with the terms and conditions of the July 23 Letter and will not become effective until LIFFE receives a no-action position from the Office of General Counsel that permits the offer and sale of a foreign futures contract on the FTSE ? Stars Index in the U.S.
03/31/2000
00-44 PDF Image; Section 4d(1); No-Action
The Division of Trading and Markets (Division) issued an IB registration no-action position to a United States bank whose foreign branches wish to refer foreign customers to a registered FCM. The Division's position was based upon the bank's representations, among others, that: (1) the bank is a national banking association regulated by the OCC; (2) the bank's offices in the United States will not engage in any activities subject to regulation by the Commission; (3) the bank will identify to the Commission the foreign branches that will engage in the above-described conduct; (4) the registered FCM will be jointly and severally liable with the bank for any violations of the CEA or regulations issued thereunder arising from or relating to the foreign branches' referral activities; (5) the foreign branches will do no more than refer foreign customers who want to enter into futures transactions on United States markets to the FCM, and the FCM will be responsible for the transactions; and (6) the foreign branches are subject to regulation by the relevant regulatory authorities in the countries in which they are located.
03/24/2000
00-49 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets took a CPO registration "no-action" position with respect to a real estate investment trust that intended to use commodity interest trading solely for bona fide hedging transactions, that would commit no more than 0.5% of the fair market value of its assets to commodity interest trading, and that would limit income derived from commodity interest trading to 5% of its gross income. The Division also took a CTA registration no-action position with respect to the closely-affiliated advisory entity, on the condition that it does not provide commodity interest trading advice to any other person.
03/24/2000
00-50 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets took a CPO registration "no-action" position with respect to a real estate investment trust that intended to use commodity interest trading solely for bona fide hedging transactions, that would commit no more than 1% of the fair market value of its assets to commodity interest trading, and that would limit income derived from commodity interest trading to 5% of its gross income. The Division also took a CTA registration no-action position with respect to the closely-affiliated advisory entity, on the condition that it does not provide commodity interest trading advice to any other person.
04/06/2000
00-51 PDF Image; Section 2(a); No-Action
No-Action request to permit the offer and sale in the U.S. of futures contracts on the Morgan Stanley Capital International Incorporated Pan-Euro Index and the Morgan Stanley Capital International Incorporated Euro Index traded on the London International Financial Futures and Options Exchange.
04/06/2000
00-52 PDF Image; Section 2(a); No-Action
No-Action request to permit the offer and sale in the U.S. of futures contracts on the Dow Jones STOXX 50 Index and the Dow Jones EURO STOXX 50 Index traded on the Eurex Deutschland.
03/24/2000
00-53 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets took a CPO registration "no-action" position with respect to the directors of a real estate investment trust (REIT) formed to invest primarily in single-family non-conforming mortgage securities and loans. This position was based upon representations, among others, that the REIT: intended to use commodity interest trading solely for bona fide hedging transactions; would commit no more than 1% of the fair market value of its assets to commodity interest trading; and would limit income derived from commodity interest trading to 5% of its gross income. The Division also took a CTA registration no-action position with respect to the two executives of the REIT who will provide it commodity interest trading advice, on the condition that the executives do not provide such trading advice to any other person.
04/05/2000
00-55 PDF Image; Section 2(a); No-Action
No-Action letter allowing the London International Financial Futures and Options Exchange futures contracts based on the FTSE International Limited Eurobloc 100 Index, the FTSE International Limited Eurotop 300 Index, and the FTSE International Limited Eurotop 300 (Ex. U.K.) Index to be offered or sold in the United States.
05/02/2000
00-59 PDF Image; Section 4d(2) of the Commodity Exchange Act and Commission Regulation 1.32; No-Action
The Division of Trading and Markets took a "no-action" position with respect to a futures commission merchant (FCM) that requested to use customer-owned debt securities issued by The Federal National Mortgage Association (Fannie Mae) or The Federal Home Loan Mortgage Corporation (Freddie Mac) to offset net liquidating deficits in customers' accounts when the FCM computes its segregation requirement under Section 4d(2) of the Commodity Exchange Act and Commission Regulation 1.32.
05/12/2000
00-61 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets granted relief from the commodity trading advisor registration requirement of Section 4m(1) to the investment adviser of the manager of a family of funds based upon, among other things, representations that: (1) the investment adviser is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940; (2) the funds and the manager of the funds are organized outside of the United States; (3) no United States person will participate directly or indirectly in the funds; and (4) the investment adviser will comply with all applicable requirements of Rule 4.14(a)(8), including the manner in which it provides commodity interest trading advice to the funds.
05/08/2000
00-64 PDF Image; Part 35 of the Commission's rules; No-Action
The Division of Trading and Markets and Economic Analysis provided no-action relief to a proposed electronic trading platform for the trading of physical commodities and derivatives products. The no-action letter notes that the terms and conditions of the letter and the operation of the platform might need to be modified to reflect any applicable rules that the Commission might adopt in this area.
05/26/2000
00-67 PDF Image; Rule 4.7(a) and 4.7(a)(1)(ii)(B)(2)(xi); No-Action
The Division of Trading and Markets confirmed effectiveness of prior no-action positions where a CPO operating investment vehicles for the benefit of its parent company's employees proposed to expand eligibility for participation in those investment vehicles to include employees who were not accredited investors. Confirmation was made subject to compliance with the following conditions and undertakings. Non-accredited investors would be required: (1) to have a combination of graduate or undergraduate degree and relevant professional experience; (2) to have income of $100,000 in most recent year and prospects to receive $140,000 in each subsequent year; and (3) to limit investment to no more than 15% of the investor's income. CPO undertook otherwise to comply with the terms of the prior no-action letters, to cause the investment vehicles to issue audited annual reports and an offering memorandum to participants and to provide the CFTC with a copy of the amended Order to be issued by the Securities and Exchange Commission under Section 6(b) of the Investment Company Act of 1940.
05/25/2000
00-73 PDF Image; Section 2(a); No-Action
No-Action letter allowing the OM Exchange Limited standardized and flexible futures contracts and the OM Stockholm standardized futures contract on the OMXCAP Index to be offered and sold in the United States.
06/09/2000
00-75 PDF Image; Section 5 and 5a of the Act; No-Action
The Division of Trading and Markets (Division) issued a letter granting no-action relief to permit Hong Kong Futures Exchange Limited (HKFE) to make its electronic trading and order matching system, known as Hong Kong Automated Trading System (HKATS), available to Exchange Participants in the US without obtaining contract market designation pursuant to Sections 5 and 5a of the CEA.
06/21/2000
00-77 PDF Image; Section 2(a); No-Action
No-Action letter allowing the Singapore Exchange Derivatives Trading, Limited futures contract based on the Morgan Stanley Capital International Incorporated Singapore Free Stock Index to be offered or sold in the United States.
06/30/2000
00-79 PDF Image; Section 4f(b) of the CEAct and Commission Regulation 1.17(c)(5)(x); No-Action
The Division of Trading and Markets took a "no-action" position with respect to a futures commission merchant (FCM) that, in computing its adjusted net capital, takes less than the full capital charge on open futures positions associated with its market making activities in the Goldman Sachs Commodity Index (GSCI) futures contract. As part of its market making activities, the FCM generally holds a core short position in the GSCI futures contract. The FCM manages the risk associated with the short GSCI position by going long in each of the futures contracts that comprise the GSCI. The no-action letter provides that the Division would not recommend enforcement action to the Commission if, in computing its adjusted net capital, the FCM did not take the full capital charges set forth in Regulation 1.17(c)(5)(x) on the futures contracts hedging the open GSCI futures positions.
06/30/2000
00-80 PDF Image; Part 35 of the Commission's rules; No-Action
On June 30, 2000, the Division of Trading and Markets issued a letter granting no-action relief in connection with the operation of a proposed electronic trading platform for the trading of physical commodities and derivative products relating to crude oil, heating oil, unleaded gasoline and jet kerosene. The platform will utilize an electronic trading and matching system that can be accessed through the Internet or dedicated communication lines, and it will be available only to approved participants and authorized brokers entering orders on their behalf. Participants will be limited to commercial entities that qualifying as "eligible swap participants" under specified provisions of Part 35 of the Commission rules.
07/05/2000
00-82 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets granted relief from the commodity pool operator registration requirement of Section 4m(1) to the co-general partner of a commodity pool partnership based upon, among other things, representations that: (1) the other general partner is registered as a CPO; (2) the other general partner is the president and a ninety percent shareholder of the co-general partner; (3) the other general partner is the managing general partner of the partnership and, as such, will undertake all CPO responsibilities in connection with the partnership, including performing all activities subject to regulation by the Commission; and (4) both general partners acknowledged that they will be jointly and severally liable for any violations of the Act or the Commission's regulations committed by the other in connection with the operation of the partnership.
07/05/2000
00-83 PDF Image; Section 4m; No-Action
The Division of Trading and Markets: (1) confirmed continued effectiveness of previously-taken CTA and CPO registration no-action positions with respect to the operation of, and the providing of commodity interest trading advice to, a group of Puerto Rican investment companies (and similar investment companies yet to be formed), notwithstanding the substitution of an affiliated trust company for one of the two joint managing entities; and (2) took a CPO and CTA registration no-action position with respect to the trust company. The Division replied, in part, upon representation that: (1) 75% or more of the directors of each investment company are Puerto Rico residents; (2) shares will be sold exclusively to persons having principal residences or places of business in Puerto Rico; (3) each investment company will be registered as such under Puerto Rico law; (4) Rule 4.5(c)(2) trading restrictions will be observed; and (5) the trust company will comply with Rule 4.14(a)(8) in advising the investment companies. These positions were conditioned upon submission by the trust company to special calls.
09/13/2000
00-91 PDF Image; Rule 1.46; No-Action
The Division of Trading and Markets took a "no-action" position permitting a registered CPO and CTA to use a combination of separate trading programs to trade the accounts of several commodity pools (including pools that it operated as well as pool's operated by unaffiliated registered CPOs), without requiring the FCMs handling any such pools account(s) to close out offsetting positions generated by operation of the combined trading programs of a particular pool client. The no-action position was taken even though the CPO/CTA did not clearly demonstrate that it separately marketed the trading programs involved, and the Division imposed conditions including, inter alia, maintenance of records of offsetting positions, no participation by the CPO/CTA in round turn brokerage fees generated by offsetting positions, prior written permission from unaffiliated CPOs or trading managers to maintain offsetting positions, and inclusion in CPO Disclosure Documents of a risk factor explaining that offsetting positions may be generated and the potential for incurring extra costs to be borne by the pool.
09/21/2000
00-93 PDF Image; Section 5 and 5a of the Act; No-Action
The Division of Trading and Markets (Division) issued a letter granting no-action relief to permit OM London Exchange Limited (OM London) to make its electronic trading and order matching system, known as the OM Click Exchange System (OM Click), and its electronic clearing system, known as OM SECUR Clearing System (OM SECUR), available to exchange participants in the U.S. without obtaining contract market designation pursuant to Sections 5 and 5a of the CEA.
09/27/2000
00-94 PDF Image; Rule 1.57(a)(1) and Rule 30.10; No-Action
The Division of Trading and Markets permitted the New York branch of a French bank to register in the U.S. as an introducing broker, to be guaranteed by a registered U.S. FCM that is subsidiary of the same bank, and to introduce business to the London branch of the same bank. The letter stated that the Division will not recommend enforcement action: (1) against the bank or its New York branch based solely upon their failure to register as FCMs in accordance with Section 4d(1) of the CEAct and Commission Rule 3.10, or (2) against the U.S. FCM or the bank for failure of the New York branch to introduce all customer accounts to the guaranteeing FCM, as required by Rule 1.57(a)(1). This letter was issued in connection with confirmation by the Commission of Rule 30.10 relief for the London branch, which permits it to solicit and accept orders and funds from U.S. customers for trades on boards of trade located outside the U.S. without registration as an FCM. The New York branch was treated essentially as an affiliate or subsidiary rather than a branch so that the Rule 30.10 relief would be available to the London branch.
10/03/2000
00-95 PDF Image; Section 4m(1) of the CEAct and CFTC Rules 4.5 and 4.14(a)(8); No-Action
The Division of Trading and Markets issued a no-action position to an investment company incorporated outside the U.S. to permit it to operate certain commodity pools organized outside the U.S. without registering as a CPO, despite the fact that the company has several U.S. persons serving as directors. This Division took this position because, among other things: 1) no U.S. person will participate in the pools, except that a U.S. affiliate of the foreign investment company and certain management employees will have voting rights for a particular pool and the U.S. affiliate has contributed a small amount of seed capital to some of the other pools; 2) no marketing of the pools to U.S. persons or from within the U.S. has been undertaken; 3) the pools will be operated in a manner consistent with Commission Rule 4.5(c)(2); and 4) the U.S. Directors will not engage in any other activities that would require registration under the Commodity Exchange Act. The Division also provided no-action relief to the U.S. affiliates of the foreign investment company that furnish commodity interest advisory services to pools because, among other things, the affiliates are registered securities investment advisers and will provide advisory services in accordance with Commission Rule 4.14(a)(8).
10/04/2000
00-96 PDF Image; Section 4m(1) - CPO and CTA Registration; No-Action
The Division of Trading and Markets issued a CPO registration no-action position to the management company of an offshore fund, notwithstanding the fact that the management company is owned by U.S. persons, based upon, among others, representations that: 1) neither the fund nor the management company was organized offshore to avoid CPO registration requirements; 2) no U.S. person will participate in the fund; 3) no marketing activities will be conducted from the U.S.; and 4) the Fund will be operated in a manner consistent with Rule 4.5(c)(2). The Division issued a CTA registration no-action position to the U.S.-based advisor of the fund based upon, among others, the foregoing representations and additionally that: 1) the CTA is registered as an investment adviser, and 2) it will comply with Rule 4.14(a)(8) in advising the fund.
09/25/2000
00-97 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets extended a previously-taken "no-action" position relieving a state-regulated insurance company and two trust companies from CPO and CTA registration requirements in connection with an estate planning device consisting of insurance contracts held in trust, the premium payments for which are invested in an insurance company separate account, a sub-account of which may invest in commodity pools. The no-action position was extended to include a second state-regulated insurance company under the same terms and conditions applicable to the insurance company involved in the original letter.
10/17/2000
00-99 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets took a CPO registration "no-action" position with respect to one of two co-managing members of four investor pools in a master-feeder fund structure based upon, among others, representations that: (1) the unregistered co-managing member would be excluded from commodity interest trading; (2) all CPO functions would be performed by the other (CPO-registered) co-managing members; (3) the unregistered co-managing member is not subject to statutory disqualification; and (4) cross acknowledgments were made by both co-managing members of joint and several liability for each other's CEA and/or Commission rule violations. All commodity interest trading activity would take place at the investee pool (master fund) level, for which the registered co-managing member is the CPO, and the investee pools would be advised by a CTA-registered affiliate of the registered co-managing member.
12/01/2000
01-02 PDF Image; Section 4d(2) of the Act -- No-Action Position from FCM Registration; No-Action
The Division of Trading and Markets confirmed the continuation of an FCM registration no-action position to a registered IB (IB1) that had acquired the commodity interest trading business of another now-defunct IB (IB2). The FCM registration no-action position permits IB1, just as it had permitted IB2, to affect the transfer of funds via check from customers' securities to commodity interest accounts upon oral request. The no-action additionally permits IB1 to affect the transfer of funds via wire transfer from customers' securities to commodity interest accounts and to use an armored courier for the retrieval and delivery of checks. The relief was granted based upon representations made by IB1 that: 1) customers have provided pre-authorization in writing permitting the transfer of funds both ways between their commodity interest and securities accounts; 2) less than one percent of IB1's total revenue is derived from commodity interest-related activity; and 3) IB1 is not advertising its commodity interest-related activity but instead is offering these services to existing securities customers merely as a courtesy. The relief was granted on condition that IB1 adopt specified procedures designed to safeguard those customer funds required to be segregated, including detailed recordkeeping requirements concerning any transfers of funds.
08/11/2000
01-08 PDF Image; Section 4m(1); No-Action
The Division of Trading and Markets took CPO and CTA no-action positions permitting a registered investment adviser to manage and advise a pension plan group trust for employees of the adviser's parent or corporate affiliates, the general account of an insurance company subsidiary of the adviser's parent, a trust holding pension plan assets for employees of a spun-off subsidiary of the adviser's parent, two pension plans for Canadian employees of the adviser's corporate affiliates, and a United Kingdom pension plan trust for employees of the adviser's parent and affiliates. The Division declined to extend the no-action position to permit the entities managed or advised by the adviser to accept pension plan assets from entities unaffiliated with the adviser's parent.

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