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e8-15606

  • COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 30

    Limited Marketing Activities From a United States Location by

    Certain Firms and Their Employees or Other Representatives Exempted

    Under Commodity Futures Trading Commission Regulation 30.10

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Order.

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    SUMMARY: The Commodity Futures Trading Commission (``Commission'') is

    confirming that designated members of the Taiwan Futures Exchange

    (``TAIFEX'') may engage in limited marketing conduct with respect to

    foreign futures or options contracts within the U.S. through their

    employees or representatives consistent with prior Commission orders.

    This order is issued pursuant to Commission Regulation 30.10, which

    permits persons to file a petition with the Commission for exemption

    from the application of certain of the Regulations set forth in Part 30

    and authorizes the Commission to grant such an exemption if such action

    would not be otherwise contrary to the public interest or to the

    purposes of the provision from which exemption is sought.

    DATES: Effective Date: July 9, 2008.

    FOR FURTHER INFORMATION CONTACT: Andrew Chapin, Special Counsel,

    Division of Clearing and Intermediary Oversight, at (202) 418-5430

    Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st

    Street, NW., Washington, DC 20581. Electronic mail: achapin@cftc.gov.

    SUPPLEMENTARY INFORMATION: The Commission has issued the following

    Order:

    Order Issued Pursuant to Regulation 30.10 Confirming That Designated

    Members of TAIFEX May Engage in Limited Marketing Conduct With Respect

    to Foreign Futures and Options Contracts Within the United States

    Through Their Employees or Other Representatives.

    Commission regulations governing the offer and sale of commodity

    futures and option contracts traded on or subject to the regulations of

    a foreign board of trade to customers located in the U.S. are contained

    in Part 30 of the Commission's regulations.\1\ These regulations

    include requirements for intermediaries with respect to registration,

    disclosure, capital adequacy, protection of customer funds,

    recordkeeping and reporting, and sales practice and compliance

    procedures that are generally comparable to those applicable to

    transactions on U.S. markets.

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    \1\ Commission regulations referred to herein are found at 17

    CFR Ch. I (2007). Appendix A to Part 30, ``Interpretative Statement

    With Respect to the Commission's Exemptive Authority Under Sec.

    30.10 of Its Rules'' generally sets forth the elements the

    Commission will evaluate in determining whether a particular

    regulatory program may be found to be comparable for purposes of

    exemptive relief pursuant to Regulation 30.10. 52 FR 28990, 29001

    (Aug. 5, 1987).

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    In formulating a regulatory program to govern the offer and sale of

    foreign futures and option products to customers located in the U.S.,

    the Commission, among other things, considered the desirability of

    ameliorating the potential extraterritorial impact of such a program

    and avoiding duplicative regulation of firms engaged in international

    business. Based upon these considerations, the Commission determined to

    permit persons located outside the U.S. and subject to a comparable

    regulatory structure in the jurisdiction in which they were located to

    seek an exemption from certain of the requirements under Part 30 of the

    Commission's regulations based upon substituted compliance with the

    regulatory requirements of the foreign jurisdiction (``Regulation 30.10

    relief'').

    On October 28, 1992, the Commission issued an order to permit firms

    that have obtained confirmation of Regulation 30.10 relief to engage in

    limited marketing conduct with respect to foreign futures or options

    contracts within the U.S. through their employees or representatives

    without prior notification to the Commission.\2\ The Commission stated

    that

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    \2\ 57 FR 49644 (Nov. 3, 1992).

    the success of the [Regulation] 30.10 program as well as the

    existence of working relationships established under that program

    with foreign regulatory and self-regulatory authorities provide

    assurances that the conduct of [Regulation] 30.10 exempted firms

    through their employees or other representatives located in the

    United States, if of a limited duration and subject to proper

    supervisory controls, will not be inconsistent with the Commission's

    obligations under the [Commodity Exchange Act] to ensure appropriate

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    customer protection.

    [[Page 39227]]

    To provide the appropriate level of customer protection, the relief was

    limited to conduct directed towards certain institutions and

    governmental entities as described in Regulation 4.7.\3\ In addition,

    the Commission stated that any person who established a fixed location

    in the U.S. for the solicitation or acceptance of business, or whose

    marketing activities involved long or repeated periods within the U.S.

    that can be characterized as a de facto fixed presence, would be

    disqualified from Regulation 30.10 relief and would be required to

    register with the Commission. On August 4, 1994, the Commission issued

    an order expanding the category of persons to whom designated firms may

    direct limited marketing conduct to include all ``accredited

    investors,'' as that term is defined in section 230.501(a) of

    Securities and Exchange Commission Regulation D issued pursuant to the

    Securities Act of 1933.\4\ The orders issued by the Commission in 1992

    and 1994 are collectively known as the Limited Marketing Orders.

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    \3\ The order limited the relief to marketing conduct directed

    towards persons whose description in terms of sophistication and

    assets was derived generally from the definition of ``qualified

    eligible participant'' (``QEP''), as defined in Regulation

    4.7(a)(1)(ii). In 2000, the Commission streamlined Regulation 4.7 by

    combining into a single definition those persons formerly defined as

    QEPs and ``qualified eligible clients'' (``QECs''). As a result of

    the revision, both QEPs and QECs are termed ``qualified eligible

    persons.'' 65 FR 47848, 47849-50 (Aug. 4, 2000).

    \4\ 59 FR 42156 (Aug. 17, 1994).

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    Pursuant to the terms set forth therein, a foreign regulatory or

    self-regulatory organization must obtain a written confirmation from

    the Commission that the Limited Marketing Orders apply to firms in its

    jurisdiction with confirmed Regulation 30.10 relief. On March 23, 2007,

    the Commission issued an order granting relief under Regulation 30.10

    authorizing designated members of TAIFEX to solicit and accept orders

    from customers located in the U.S. for otherwise permitted transactions

    on TAIFEX.\5\ By letter dated April 16, 2008, counsel for TAIFEX

    petitioned the Commission to confirm that designated TAIFEX members may

    engage in limited marketing conduct with respect to foreign futures or

    options contracts within the U.S. through their employees or other

    representatives, as set forth in the Limited Marketing Orders.

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    \5\ 72 FR 14413 (Mar. 28, 2007) (``TAIFEX Order'').

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    As previously stated, the Commission believes that certain contacts

    between firms with confirmed Regulation 30.10 relief and certain

    sophisticated customers located in the U.S., who have a high degree of

    sophistication and financial resources, would not be contrary to the

    public interest. Accordingly, the Commission has determined to issue

    this order permitting designated TAIFEX members to engage in limited

    marketing conduct with respect to foreign futures or option contracts

    within the U.S. through their employees or other representatives, as

    set forth in the Limited Marketing Orders.

    Prior to engaging in any marketing activity in the U.S., a TAIFEX

    member must obtain confirmation of Regulation 30.10 relief from the

    National Futures Association (``NFA'').\6\ Any TAIFEX member operating

    pursuant to this order will remain subject to all of the terms and

    conditions set forth in the Limited Marketing Orders and the TAIFEX

    Order. In particular, the Commission notes that every order granting

    Regulation 30.10 relief has required a firm seeking relief under such

    an order to consent to jurisdiction in the U.S. under the Commodity

    Exchange Act and file with NFA a valid and binding appointment of an

    agent in the U.S. for service of process.

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    \6\ The Commission has delegated to NFA certain

    responsibilities, including the responsibility to receive requests

    for confirmation of Regulation 30.10 relief on behalf of particular

    firms, to verify such firms' fitness and compliance with the

    conditions of the appropriate Regulation 30.10 Order and to grant

    exemptive relief from registration to qualifying firms. 62 FR 47792,

    47793 (Sept. 11, 1997).

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    Dated: July 3, 2008.

    By the Commission

    David Stawick,

    Secretary of the Commission.

    [FR Doc. E8-15606 Filed 7-8-08; 8:45 am]

    BILLING CODE 6351-01-P

    Last Updated: July 9, 2008



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