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2010-21726

  • FR Doc 2010-21726[Federal Register: September 10, 2010 (Volume 75, Number 175)]

    [Notices]

    [Page 55310-55312]

    From the Federal Register Online via GPO Access [wais.access.gpo.gov]

    [DOCID:fr10se10-32]

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    COMMODITY FUTURES TRADING COMMISSION

    Performance of Registration Functions by National Futures

    Association With Respect to Retail Foreign Exchange Dealers and

    Associated Persons

    AGENCY: Commodity Futures Trading Commission

    ACTION: Notice and order

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    SUMMARY: The Commodity Futures Trading Commission (``Commission'' or

    ``CFTC'') is authorizing the National Futures Association (``NFA''),

    effective September 10, 2010, to process and grant applications for

    initial registration, renewed registration and withdrawals of retail

    foreign exchange dealers (``RFEDs'') and their associated persons

    (``APs'') and to issue temporary licenses to eligible APs; to conduct

    proceedings to deny, condition, suspend, restrict or revoke the

    registration of any RFED or AP of an RFED, or an applicant for

    registration in either category; and to maintain records regarding

    RFEDs and their APs, and to serve as the official custodian of those

    Commission records.

    DATES: Effective Date: September 10, 2010.

    FOR FURTHER INFORMATION CONTACT: For information contact: William

    Penner, Deputy Director, Division of Clearing and Intermediary

    Oversight, 1155 21st Street, NW, Washington, DC 20581. Telephone

    number: 202-418-5450; facsimile number: 202-418-5547; and electronic

    mail: wpenner@cftc.gov. Christopher Cummings, Special Counsel, Division

    of Clearing and Intermediary Oversight, 1155 21st Street, NW.,

    Washington, DC 20581. Telephone number (202) 418-5450; facsimile

    number: 202-418-5547; and electronic mail: ccummings@cftc.gov.

    SUPPLEMENTARY INFORMATION:

    I. Authority and Background

    In a separate document published elsewhere in today's Federal

    Register, the Commission is issuing final rules regarding the

    regulation of off-exchange retail foreign exchange transactions and

    intermediaries. The final rules follow the publication of proposed

    rules on January 20, 2010,\1\ and represent a comprehensive regulatory

    scheme to implement the requirements of the CFTC Reauthorization Act of

    2008 (``CRA'') with regard to off-exchange retail forex

    transactions.\2\ The

    [[Page 55311]]

    Commodity Exchange Act (``Act''),\3\ as amended by the CRA, provides

    that the Commission's jurisdiction extends to off-exchange contracts of

    sale of a commodity for future delivery (or an option on such a

    contract) or an option (other than an option executed or traded on a

    national securities exchange), and to certain off-exchange leveraged or

    margined contracts in foreign currency that are offered to or entered

    into with retail customers. Moreover, the CRA provides the Commission

    with the authority to register persons serving as intermediaries or

    counterparties to these transactions.

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    \1\ See Regulation of Off-Exchange Retail Foreign Exchange

    Transactions and Intermediaries; Proposed Rule, 75 FR 3282 (Jan. 20,

    2010).

    \2\ Food, Conservation, and Energy Act of 2008, Pub. L. 110-246,

    122 Stat. 1651, 2189-2201 (2008).

    \3\ 7 U.S.C. 1, et seq.

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    Specifically, the CRA gives the Commission the authority to require

    the registration of intermediaries who solicit retail customers to

    participate in off-exchange forex contracts, who pool customer money

    for the purpose of trading off-exchange currency contracts or who

    manage customer money for this purpose. In the final rules published

    today, the Commission has determined that these entities should be

    registered in the existing categories of introducing broker (``IB''),

    commodity pool operator (``CPO''), or commodity trading advisor

    (``CTA''), as appropriate.

    The CRA also authorizes the Commission to register entities that

    serve as counterparties to such transactions, either within the

    existing category of futures commission merchant (``FCM'') or as an

    RFED, a new category of registrant. RFEDs are counterparties not

    engaged primarily or substantially in the offer and sale of exchange-

    traded futures (as opposed to FCMs, which are).\4\ The CRA provides

    that RFEDs, their APs, and each of the other categories of registrants

    discussed above, must be members of a registered futures association

    such as the National Futures Association (``NFA'') and must register

    with the Commission subject to such terms as the Commission may

    prescribe.\5\

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    \4\ Previously, firms serving as counterparties to retail forex

    typically registered as FCMs, even though they may not have engaged

    in exchange-traded futures business. Under the CRA, either FCMs or

    RFEDs can offer to serve as counterparties to retail forex

    transactions, but the entity must register as an FCM if primarily

    and substantially engaged in on-exchange trading, or an RFED if not.

    See, 7 U.S.C. 2(c)(2)(B)(i)(II)(cc) and (gg) and 7 U.S.C.

    2(c)(2)(C)(i).

    \5\ Id.

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    The CFTC has previously authorized NFA to perform the full range of

    registration functions with regard to FCMs, IBs, CTAs, CPOs and their

    respective APs, including granting applications for initial

    registration and renewed registration; enabling withdrawals and issuing

    temporary licenses to eligible APs; and conducting proceedings to deny,

    condition, suspend, restrict or revoke the registration of existing

    registrants or applicants for registration in each category.\6\ By

    today's order the Commission authorizes NFA to perform these functions

    with regard to RFEDs and their APs.

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    \6\ See 48 FR 15940 (Apr. 13, 1983); 48 FR 35158 (Aug. 3, 1983);

    48 FR 51809 (Nov. 14, 1983); 49 FR 8226 (Mar. 5, 1984); 49 FR 39593

    (Oct. 9, 1984); and 50 FR 34885 (Aug. 28, 1985).

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    As proposed and adopted, Commission Regulations 5.3(a)(4) and (6)

    require all those who meet the definition of an RFED, and any such

    associated persons of RFEDs to register with the Commission in

    accordance with part 3 of the Commission's Regulations. (17 CFR 3.1, et

    seq.) Commission Regulation 3.2 provides that the registration

    functions of the Commission are to be performed by the National Futures

    Association. Upon consideration, the Commission has determined to

    authorize NFA, effective September 10, 2010, to perform registration

    functions with regard to RFEDs and their APs as set forth in part 3 of

    the Commission's Regulations. Moreover, Section 17(o)(2) of the Act

    provides that the Commission may authorize a registered futures

    association, such as NFA, to perform Commission registration functions,

    to deny, condition, suspend, restrict or revoke any registration,

    subject to Commission review.\7\ The Commission is therefore also

    authorizing NFA to take such actions with regard to RFED and AP

    applicants as well as existing registrants in each of these categories.

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    \7\ 7 U.S.C. 21(o)(2).

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    The Commission further notes that it has, by prior orders,

    authorized NFA to maintain various Commission registration records, and

    has certified NFA as the official custodian of such records for the

    Commission.\8\ The Commission has determined, in accordance with its

    authority under section 8a(10) of the Act, to authorize NFA to maintain

    and serve as official custodian of the Commission's registration

    records with respect to RFEDs and their APs.

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    \8\ See 49 FR 39593 (Oct. 9, 1984) and 66 FR 43227 (Aug. 17,

    2001).

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    In maintaining the Commission's registration records pursuant to

    this Order, NFA shall be subject to all other requirements and

    obligations imposed upon it by the Commission in existing or future

    Orders or regulations. In this regard, NFA shall also implement such

    additional procedures (or modify existing procedures) as are necessary

    to ensure the security and integrity of these records as may be

    acceptable to the Commission; to facilitate prompt access to these

    records by the Commission and its staff; to facilitate disclosure of

    public or nonpublic information in those records when permitted by

    Commission Orders or rules, and to keep logs as required by the

    Commission concerning disclosures of nonpublic information; and

    otherwise to safeguard the confidentiality of the records.

    II. Conclusion and Order

    The Commission has determined, in accordance with the provisions of

    Sections 2(c)(2)(B), 2(c)(2)(C), and 8a(10) of the Act, to authorize

    NFA, effective September 10, 2010 to perform the following registration

    functions:

    (1) To process and grant applications for initial registration,

    renewed registration and withdrawals from registration of retail

    foreign exchange dealers (``RFEDs'') and their associated persons

    (``APs'') and to issue temporary licenses to eligible APs;

    (2) To conduct proceedings to deny, condition, suspend, restrict or

    revoke the registration of any RFED or AP of an RFED, or any applicant

    for registration in either category; and

    (3) To maintain records regarding RFEDs and their APs, and to serve

    as the official custodian of those Commission records.

    NFA shall perform these functions in accordance with the standards

    established by the Act and the regulations promulgated thereunder. NFA

    shall follow the same procedures with respect to recordkeeping,

    disclosure and tracking of fitness investigations and adverse action

    proceedings concerning RFEDs and their APs as it must follow in cases

    involving FCMs, IBs, CPOs, CTAs, and their respective APs.

    These determinations are based upon the Congressional intent

    expressed in sections 2(c)(2)(B), 2(c)(2)(C), 8a(10) and 17(o) of the

    Act. This Order does not, however, authorize NFA to accept or act upon

    requests for exemption from registration, or to render ``no-action'' or

    interpretive letters with respect to applicable registration

    requirements.

    Nothing in this Order, or in sections 2(c)(2)(B), 2(c)(2)(C),

    8a(10) and 17(o) of the Act, shall affect the Commission's authority to

    review the performance by NFA of Commission registration functions.\9\

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    \9\ See also section 17(o)(3) of the Act, 7 U.S.C. 21(o)(3).

    [[Page 55312]]

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    Issued in Washington, DC, on August 26, 2010.

    David A. Stawick,

    Secretary of the Commission.

    [FR Doc. 2010-21726 Filed 9-9-10; 8:45 am]

    BILLING CODE P

    Last Updated: September 10, 2010



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