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  • [Federal Register: December 31, 2009 (Volume 74, Number 250)]

    [Rules and Regulations]

    [Page 69279-69283]

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

    [DOCID:fr31de09-12]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Part 1

    RIN 3038-AC66

    Revised Adjusted Net Capital Requirements for Futures Commission

    Merchants and Introducing Brokers

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Final rules.

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

    amending its regulations that prescribe minimum adjusted net capital

    requirements for futures commission merchants (``FCMs'') and

    introducing brokers (``IBs''). The amendments: increase the required

    minimum dollar amount of adjusted net capital that an IB must maintain

    from $30,000 to $45,000; increase the required minimum dollar amount of

    adjusted net capital that an FCM must maintain from $250,000 to

    $1,000,000; amend the computation of an FCM's margin-based minimum

    adjusted net capital requirement to incorporate into the calculation

    customer and noncustomer positions in over-the-counter derivative

    instruments that are submitted for clearing by the FCM to derivatives

    clearing organizations (``DCOs'') or other clearing organizations

    (``cleared OTC derivative positions''); specify capital deductions for

    FCM proprietary cleared OTC derivative positions based on the

    deductions required by the Commission's regulations for FCM proprietary

    positions in exchange-traded futures contracts and options contracts;

    and amend the FCM capital computation to increase the applicable

    percentage of the total margin-based requirement for futures, options

    and cleared OTC derivative positions in noncustomer accounts to eight

    percent.

    DATES: Effective March 31, 2010.

    FOR FURTHER INFORMATION CONTACT: Thelma Diaz, Associate Director,

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

    Washington, DC 20581. Telephone number: 202-418-5137; facsimile number:

    202-418-5547; and electronic mail: <A HREF="mailto:tdiaz@cftc.gov">tdiaz@cftc.gov</A> or Mark Bretscher,

    Attorney-Advisor, Division of Clearing and Intermediary Oversight,

    Commodity Futures Trading Commission, 525 W. Monroe, Suite 1100,

    Chicago, Illinois 60661. Telephone number: 312-596-0529; facsimile

    number: 312-596-0714; and electronic mail: <A HREF="mailto:mbretscher@cftc.gov">mbretscher@cftc.gov</A>.

    SUPPLEMENTARY INFORMATION:

    I. Background

    On May 7, 2009, the Commission published in the Federal Register

    for public comment proposed amendments to the minimum financial

    requirements applicable to FCMs and IBs (``Proposing Release).\1\ As

    noted in the Proposing Release, Section 4f(b) of the Commodity Exchange

    Act (``Act'') provides that FCMs and IBs must meet such minimum

    financial requirements as the Commission may prescribe to insure that

    FCMs and IBs meet their obligations as registrants.\2\ FCMs are subject

    to greater capital requirements than IBs because the Act permits FCMs,

    but not IBs, to hold funds of customers trading on designated contract

    markets and to clear such customer positions with a DCO. CFTC

    Regulation 1.17 currently requires IBs and FCMs to maintain adjusted

    net capital of $30,000 and $250,000 respectively, or to maintain some

    greater amount as determined under other calculations required by the

    regulation.\3\

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    \1\ 74 FR 21290 (May 7, 2009). Copies of the Proposing Release

    and the comment letters received by the Commission are also

    available on the Commission's Web site at <A HREF="http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.cftc.gov">http://www.cftc.gov</A>.

    \2\ The Act is codified at 7 U.S.C. 1 et seq.

    \3\ The Commission regulations cited herein may be found at 17

    CFR Ch. I (2009).

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    Specifically, Commission Regulation 1.17(a)(1)(iii) requires that

    IBs maintain adjusted net capital in an amount that equals or exceeds

    the greatest of: $30,000; the amount of adjusted net capital required

    by a registered futures association of which the IB is a member; or, if

    the FCM is also a securities broker and dealer registered with the U.S.

    Securities and Exchange Commission (``SEC''), the amount of net capital

    required by SEC Rule 15c3-1(a), 17 CFR Sec. 240.15c3-1(a). Regulation

    1.17(a)(1)(i) requires FCMs to maintain adjusted net capital equal to

    or in excess of the greatest of: $250,000; the FCM's margin-based or

    ``risk-based'' capital requirement, which is determined by adding

    together eight percent of the total risk margin requirement for

    positions in customer accounts, plus four percent of the total risk

    margin requirement for positions carried in noncustomer accounts; the

    amount of adjusted net capital required by a registered futures

    association of which the FCM is a member; or, for an FCM also

    registered with the SEC as securities broker and dealer, the amount of

    net capital required by SEC Rule 15c3-1(a).

    As described in the Proposing Release, the Commission proposed

    several amendments to Regulation 1.17(a) that generally would increase

    the adjusted net capital requirements of FCMs and IBs. The comment

    period closed 60 days after publication in the Federal Register of the

    Proposing Release, during which nine comment letters were received.

    Responses were submitted by Mindy Yost (``Yost''), an individual non-

    registrant; Newedge USA, LLC (``Newedge''), an FCM/broker-dealer; MF

    Global, Inc. (``MF Global''), an FCM; R.J. O'Brien & Associates, LLC

    (``RJO''), an FCM; FCStone, LLC (``FC Stone''), an FCM; the Securities

    Industry and Financial Markets Association (``SIFMA''); CME Group, Inc.

    (``CME''); the Futures Industry Association (``FIA''); and the National

    Futures Association (``NFA''). The concerns and suggestions of each of

    the commenters are addressed below, in connection with the description

    of the amendments being adopted by the Commission.\4\

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    \4\ The Proposing Release also included a query soliciting

    comment on a topic for which no amendments to Commission regulations

    have yet been proposed. Specifically, the Commission asked for

    comment on the advisability of expanding ANC requirements for FCMs

    that are also securities brokers and dealers, by increasing their

    ANC by the amount of net capital required by SEC Rule 15c3-1(a). No

    commenter supported this potential revision of FCM/BD capital

    requirements.

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    [[Page 69280]]

    II. Required Minimum Dollar Amount of Adjusted Net Capital for IBs and

    FCMs

    As noted above, Regulation 1.17(a) includes the capital

    requirements established by registered futures associations when

    determining the level of adjusted net capital that FCM and IBs must

    maintain. On July 31, 2006, the NFA, the sole registered futures

    association, adopted minimum dollar amount requirements of $45,000 for

    IBs and $500,000 for FCMs. These same amounts therefore were

    effectively applied in 2006 as adjusted net capital requirements for

    IBs and FCMs under CFTC Regulation 1.17(a).

    The Proposing Release proposed amending Regulation 1.17(a)(1) to

    revise the specified dollar amounts in CFTC Regulation 1.17(a)(1) from

    $30,000 to $45,000 for IBs and from $250,000 to $1 million for FCMs. In

    light of existing NFA requirements, only the proposal to increase the

    minimum dollar amount requirement for FCMs would result in an actual

    change in adjusted net capital requirements. The effect of such a

    change also would be minimized because, as of September 30, 2009, all

    but two FCMs holding customer funds already maintain adjusted net

    capital of $1 million or more.

    As noted in the Proposing Release, the adjusted net capital

    requirements adopted in 1996 of $30,000 for IBs and $250,000 for FCMs

    do not reflect inflation and generally are no longer consistent with

    the regulatory objective of requiring registrants to maintain a minimum

    base of liquid capital from which to meet their financial obligations,

    including their obligations to customers. Comparing certain aspects of

    the industry then and now, the Commission noted that as of August 31,

    1995, there were 255 FCMs, which in total were required to hold

    approximately $30 billion of segregated and secured amount funds for

    their customers. By June 30, 2009, the total amount of such funds had

    escalated to approximately $175 billion, which 132 FCMs were required

    to hold for their customers. Thus, not only has there been a dramatic

    increase in the amounts that FCMs must hold for their customers, but

    those funds have become concentrated among far fewer FCMs. As an

    additional measure to ensure the sound financial strength of FCMs and

    IBs, the Commission therefore proposed revising the minimum dollar

    amount requirements for FCMs and IBs in CFTC Regulation 1.17(a).

    The comments received by the Commission generally supported the

    revised minimum dollar amounts or offered no comment regarding such

    amounts.\5\ RJO, CME and the NFA expressly supported the proposal to

    increase the minimum dollar amount capital requirement for FCMs and

    IBs. FIA also supported the increase in the minimum dollar amount for

    FCM capital requirements, and noted that IBs were already required by

    the NFA to maintain adjusted net capital of at least $45,000. SIFMA's

    comment was that it lacked sufficient information, either from the CFTC

    or derived on its own, on which to base a comment, while the letters

    from FC Stone and Newedge were silent on the proposed amendments to

    revise the specified dollar amounts in CFTC Regulation 1.17(a)(1). For

    the reasons described above, the Commission has determined to adopt the

    revised minimum dollar amounts as proposed in the Proposing Release.

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    \5\ The objections in Yost's letter were directed primarily to

    the requirement for her to register as an IB.

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    III. Cleared OTC Positions in FCM Capital Calculations

    In 2004, the Commission amended Regulation 1.17(a)(1)(i)(B) to

    include a ``risk-based'' capital computation based on margin, or

    performance bond, requirements applicable to positions carried by the

    FCM for its customers and noncustomers.\6\ Specifically, Commission

    Regulation 1.17(a)(1)(i)(B) was amended to require an FCM to compute

    its risk-based capital requirement as the sum of: (1) Eight percent of

    the total risk margin \7\ requirement for positions carried by the FCM

    in customer accounts and (2) four percent of the total risk margin

    requirement for positions carried by the FCM in noncustomer accounts.

    The Commission did not revise its regulations with respect to

    proprietary futures and granted options positions of FCMs, as such

    positions were already subject to capital deductions under Commission

    Regulation 1.17(c)(5)(x).\8\

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    \6\ The term noncustomer refers generally to affiliated persons

    of the FCM, including certain officers and other employees.

    \7\ The term ``risk margin'' is defined at Commission Regulation

    1.17(b)(8).

    \8\ In general, an FCM's proprietary futures and granted options

    positions are subject to a deduction equal to 100 percent of the

    maintenance margin requirement for positions that are cleared by

    clearing organizations of which the FCM is a clearing member, and

    150 percent of the maintenance margin requirement for positions that

    are cleared by clearing organizations of which the FCM is not a

    clearing member.

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    The Proposing Release noted that the risk-based calculations of

    FCMs include margin requirements for positions in cleared OTC

    derivative instruments \9\ held in customer segregated accounts

    governed by Section 4d of the Act and Commission regulations. Various

    DCOs, as part of their increasing efforts to clear OTC derivative

    instruments, have requested Commission orders authorizing their

    clearing FCMs to commingle customers' money, securities, and other

    property margining OTC-cleared derivative positions with the money,

    securities, and other property deposited by said customers to margin

    futures and options positions in segregated accounts established

    pursuant to Section 4d of the Act.\10\ Therefore, the risk exposure of

    clearing OTC derivative instruments extends not only to the FCM, but

    also to the segregated funds of its OTC, futures and options customers.

    Where OTC customer funds are commingled with the funds of futures and

    options customers, the Commission has deemed it necessary to include

    OTC customer positions in the definition of ``customer

    [[Page 69281]]

    accounts'' for purposes of computing an FCM's risk-based capital

    requirement.

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    \9\ OTC derivative instrument is defined by Section 408(2) of

    the Federal Deposit Insurance Corporation Improvement Act, 12

    U.S.C.A. Sec. 4421. As defined there, the term ``over-the-counter

    derivative instrument'' includes ``(A) any agreement, contract, or

    transaction, including the terms and conditions incorporated by

    reference in any such agreement, contract, or transaction, which is

    an interest rate swap, option, or forward agreement, including a

    rate floor, rate cap, rate collar, cross-currency rate swap, basis

    swap, and forward rate agreement; a same day-tomorrow, tomorrow-

    next, forward, or other foreign exchange or precious metals

    agreement; a currency swap, option, or forward agreement; an equity

    index or equity swap, option, or forward agreement; a debt index or

    debt swap, option, or forward agreement; a credit spread or credit

    swap, option, or forward agreement; a commodity index or commodity

    swap, option, or forward agreement; and a weather swap, weather

    derivative, or weather option; (B) any agreement, contract or

    transaction similar to any other agreement, contract, or transaction

    referred to in this clause that is presently, or in the future

    becomes, regularly entered into by parties that participate in swap

    transactions (including terms and conditions incorporated by

    reference in the agreement) and that is a forward, swap, or option

    on one or more occurrences of any event, rates, currencies,

    commodities, equity securities or other equity instruments, debt

    securities or other debt instruments, economic or other indices or

    measures of economic or other risk or value; (C) any agreement,

    contract, or transaction excluded from the Commodity Exchange Act

    under section 2(c), 2(d), 2(f), or 2(g) of such Act, or exempted

    under section 2(h) or 4(c) of such Act; and (D) any option to enter

    into any, or any combination of, agreements, contracts or

    transactions referred to in this subparagraph.''

    \10\ Examples of Commission orders under Section 4d of the Act

    related to OTC clearing by DCOs include an Order dated May 30, 2002

    regarding Treatment of Funds Held in Connection with the Clearing of

    Over-the-Counter Products by the New York Mercantile Exchange, and

    also Orders dated March 3, 2006 and September 26, 2008 regarding

    Treatment of Funds Held in Connection with the Clearing of Over-the-

    Counter Products by Chicago Mercantile Exchange, Inc.

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    FCMs may also, however, clear OTC derivative instruments for which

    the margin received from customers is not held in segregated accounts

    under Section 4d of the Act. The Proposing Release therefore included

    amendments to enhance and update the provisions of Regulation 1.17 to

    reflect the increase in clearing by FCMs of OTC derivative instruments.

    Under the proposed amendments to paragraphs (b) and (c) of Regulation

    1.17, the capital treatment for all cleared OTC derivative instrument

    positions would be similar to the capital treatment applicable to

    exchange-traded futures and options positions that are carried by the

    FCM for itself, its customers, or its noncustomers.

    Five commenters (RJO, MF Global, CME, FIA and the NFA) supported

    the Commission's proposal to require FCMs to account for all cleared

    OTC derivative positions carried for customers and noncustomers in

    their risk-based capital calculations. They also supported the

    Commission's proposal to require FCMs to take proprietary capital

    deductions for their cleared OTC derivative positions similar to the

    capital deductions required for their proprietary futures and options

    positions. Yost, FC Stone and Newedge made no comments regarding either

    proposal, and SIFMA stated that it was unable to offer a definitive

    view on the appropriateness of the proposed changes and suggested that

    the Commission refrain from taking action pending further analysis of

    the issue. SIFMA also expressed concern that the capital requirements

    for cleared OTC positions be coordinated among regulators to prevent

    regulatory arbitrage or capital disincentives to clear such

    transactions.

    The adoption of the proposed amendments will neither prohibit nor

    inhibit the existing interaction among Commission staff and the staff

    members of other regulators of financial institutions regarding matters

    of common interest and concern. To the extent that new developments

    related to clearing suggest that further modification of the

    Commission's capital regulations may be appropriate, the Commission may

    proceed, as applicable, by issuing appropriate interpretive guidance to

    FCMs or by requesting notice and comment on other proposed amendments

    to its regulations.\11\

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    \11\ Included in such continued review and analysis is the

    possible revision of the definition of ``cover'' in 1.17(j) with

    respect to cleared OTC derivative instruments, for which the

    Commission requested comment but did not propose any specific

    amendments in the Proposing Release. Only the CME and NFA commented

    on this question, and both agreed with the general proposition that

    the definition should be revised to reflect that proprietary

    positions in cleared OTC derivatives instruments may be covered by

    positions that would qualify as cover for proprietary futures and

    option positions.

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    The Commission has therefore adopted the amendments to 1.17(b) and

    (c) as proposed in the Proposing Release. As hereby amended, the terms

    proprietary account, noncustomer account, and customer account, as

    defined in Regulations 1.17(b)(3), (b)(4), and (b)(7), are expanded to

    include ``cleared OTC derivative positions'', which are defined in

    Regulation 1.17(b)(9) as the over the counter derivative instrument

    positions of any person \12\ in accounts carried on the books of the

    FCM and cleared by any organization permitted to clear such instruments

    under the laws of the relevant jurisdiction. Additionally, the term

    ``cleared OTC customers'' is defined in paragraph (b)(10), and such

    customers have been included among the FCM customers listed in

    paragraph (b)(2) of Regulation 1.17. Finally, the Commission has

    amended Regulation 1.17(c)(5)(x) to require FCMs to take proprietary

    capital deductions for their cleared OTC derivative positions similar

    to the capital deductions required for their proprietary futures and

    options positions.

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    \12\ The term ``person'' is defined in CFTC Regulation 1.3(u).

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    III. Increasing Risk Margin Percentage for Noncustomer Positions

    The Commission also proposed amending Regulation 1.17 so that an

    FCM's risk-based capital requirement would be ten percent of the total

    risk margin requirement for positions carried by the FCM in both

    customer accounts and noncustomer accounts. The proposed increase

    represented a more significant increase with respect to noncustomer

    accounts, as the FCM's risk-based capital calculations currently

    includes a lower required percentage of risk maintenance margin for

    noncustomer positions (four percent) than the required percentage for

    the same positions in customer accounts (eight percent).

    The Commission received no comments supporting the general increase

    for all margin-based capital calculations to ten percent. The reasons

    cited for this lack of support varied among the commenters, but the

    Commission is mindful that a common underlying theme was that such an

    indiscriminate, broad-brush approach may be inconsistent with the

    current financial environment's continuing shifts and alterations. In

    contrast, the majority of commenters (RJO, MF Global, CME, FIA and the

    NFA) endorsed the Commission's proposed amendment to increase from four

    percent to eight percent the required percentage applicable to

    noncustomer accounts in the risk-based capital calculations of FCMs. In

    proposing this amendment, the Commission had noted that when the lower

    risk margin percentage for noncustomer positions had been adopted in

    2004, the Commission and the self-regulatory organizations believed

    that noncustomers' accounts reflected less credit risk to FCMs and the

    clearing system because they were guaranteed by a parent organization

    or other affiliated entity. However, the majority of the commenters

    agreed with the Commission's conclusion in the Proposing Release that

    recent events had demonstrated that the risk associated with

    noncustomer accounts may not necessarily be less than the risk

    associated with customer accounts. The Commission has therefore adopted

    as proposed the amendment to Regulation 1.17(a) that requires the

    application of the same percentage with respect to the noncustomer and

    customer risk margin requirements, thus requiring the FCM's total risk

    margin requirement to be multiplied by eight percent.

    IV. Effective Date

    The Commission stated in the Proposing Release that it was

    contemplating an effective date of sixty days after publication in the

    Federal Register of any of the amendments adopted as final by the

    Commission. The Commission received comments from both the FIA and NFA

    on this topic, each of whom urged a longer period of time before the

    effective date, in order to avoid a potential undue burden as a result

    of the increased capital requirements being adopted for FCMs. FIA

    suggested a period of 120 days after publication before the effective

    date, while NFA stated only that the period should be longer than 60

    days. Taking into consideration these comments and the purposes of the

    capital requirements adopted by this final rulemaking, the amendments

    adopted herein will be effective as of the date 90 days after their

    publication in the Federal Register.

    V. Related Matters

    A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601 et seq.,

    requires

    [[Page 69282]]

    that agencies, in amending their rules, consider the impact of those

    amendments on small businesses. The Commission has previously

    determined that, based upon the fiduciary nature of FCM/customer

    relationships, as well as the requirement that FCMs meet minimum

    financial requirements, FCMs should be excluded from the definition of

    small entity.\13\ With respect to IBs, the amendment to the minimum

    adjusted net capital requirement for an IB merely conforms the

    Commission's requirement to that of the NFA and, therefore, should have

    no impact on an IB's financial operations. Thus, the proposal has no

    significant economic impact on IBs. Accordingly, the Chairman, on

    behalf of the Commission, hereby certifies, pursuant to 5 U.S.C. Sec.

    605(b), that the action it is taking herein will not have a significant

    economic impact on a substantial number of small entities.

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    \13\ See 47 FR 18618, 18619 (Apr. 30, 1982).

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    B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995, (``PRA'') 44 U.S.C. 3501 et

    seq., imposes certain requirements on Federal agencies (including the

    Commission) in connection with their conducting or sponsoring any

    collection of information as defined by the PRA. This rulemaking does

    not include any increase in information collection requirements. The

    increase in the percentage requirements applicable to risk margin

    requirements for customer and noncustomer positions included in risk-

    based capital calculation constitutes a minor change to line item 22 of

    the Form 1-FR-FCM, as does the minor change to Line 16 to include OTC-

    cleared products, but neither change would alter the related reporting

    burden. The above analysis was included in the proposing release, and

    as required by the PRA, the Commission submitted a copy of this section

    to the Office of Management and Budget (``OMB'') for its review. No

    comments were received in response to the Commission's invitation in

    the notice of proposed rulemaking \14\ to comment on any change in the

    potential paperwork burden associated with these rule amendments.

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    \14\ 74 FR 21293 (May 7, 2009).

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    C. Cost-Benefit Analysis

    Section 15(a) of the Act, as amended by Section 119 of the

    Commodity Futures Modernization Act,\15\ requires the Commission to

    consider the costs and benefits of its action before issuing a new

    regulation under the Act. By its terms, Section 15(a) as amended does

    not require the Commission to quantify the costs and benefits of a new

    regulation or to determine whether the benefits of the proposed

    regulation outweigh its costs. Rather, Section 15(a) simply requires

    the Commission to ``consider the costs and benefits'' of its action.

    ---------------------------------------------------------------------------

    \15\ 7 U.S.C. 19(a).

    ---------------------------------------------------------------------------

    Section 15(a) further specifies that costs and benefits shall be

    evaluated in light of five broad areas of market and public concern:

    protection of market participants and the public; efficiency,

    competitiveness, and financial integrity of futures markets; price

    discovery; sound risk management practices; and other public interest

    considerations. The Commission, in its discretion, can choose to give

    greater weight to any one of the five enumerated areas and determine

    that, notwithstanding its costs, a particular regulation is necessary

    or appropriate to protect the public interest or to effectuate any of

    the provisions or to accomplish any of the purposes of the Act.

    The Commission has considered the costs and benefits of the

    proposed amendments and determined that the amendments will result in

    additional protection of market participants and the public,

    enhancements to sound risk management practices, enhanced financial

    integrity of futures markets and other public interest considerations

    and should have minimal or no effect on the following areas:

    efficiency, competitiveness or price discovery. After considering these

    factors, the Commission has determined to adopt the amendments to

    Regulation 1.17 as discussed herein.

    List of Subjects in 17 CFR Part 1

    Brokers, Commodity futures, Minimum financial requirements,

    Reporting and recordkeeping requirements.

    0

    Accordingly, 17 CFR Chapter I is amended as follows:

    PART 1--GENERAL REGULATIONS UNDER THE COMMODITY EXCHANGE ACT

    0

    1. The authority citation for Part 1 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 5, 6, 6a, 6b, 6c, 6d, 6e, 6f, 6g,

    6h, 6i, 6j, 6k, 6l, 6m, 6n, 6o, 6p, 7, 7a, 7b, 8, 9, 12, 12a, 12c,

    13a, 13a-1, 16, 16a, 19, 21, 23 and 24, as amended by the Commodity

    Futures Modernization Act of 2000, appendix E of Pub. L. 106-554,

    114 Stat. 2763 (2000).

    0

    2. Section 1.17 is amended by:

    0

    a. Revising paragraphs (a)(1)(i)(A), (a)(1)(i)(B), and (a)(1)(iii)(A);

    0

    b. Revising paragraphs (b)(2), (b)(3), introductory text of (b)(4),

    introductory text of (b)(7) and introductory text of (b)(8);

    0

    c. Adding new paragraphs (b)(9) and (b)(10); and

    0

    d. Revising the introductory text of paragraph (c)(5)(x) to read as

    follows:

    Sec. 1.17 Minimum financial requirements for futures commission

    merchants and introducing brokers.

    (a)(1)(i) * * *

    (A) $1,000,000;

    (B) The futures commission merchant's risk-based capital

    requirement, computed as eight percent of the total risk margin

    requirement for positions carried by the futures commission merchant in

    customer accounts and noncustomer accounts.

    * * * * *

    (iii) * * *

    (A) $45,000;

    * * * * *

    (b) * * *

    (1) * * *

    (2) Customer means customer (as defined in Sec. 1.3(k)), option

    customer (as defined in Sec. 1.3(jj) and in Sec. 32.1(c) of this

    chapter), cleared over the counter customer (as defined in Sec.

    1.17(b)(10)), and includes a foreign futures, foreign options customer

    (as defined in Sec. 30.1(c) of this chapter).

    (3) Proprietary account means an account in which commodity

    futures, options or cleared over the counter derivative positions are

    carried on the books of the applicant or registrant for the applicant

    or registrant itself, or for general partners in the applicant or

    registrant.

    (4) Noncustomer account means an account in which commodity

    futures, options or cleared over the counter derivative positions are

    carried on the books of the applicant or registrant which is either:

    * * * * *

    (7) Customer account means an account in which commodity futures,

    options or cleared over the counter derivative positions are carried on

    the books of the applicant or registrant which is either:

    * * * * *

    (8) Risk margin for an account means the level of maintenance

    margin or performance bond required for the customer or noncustomer

    positions by the applicable exchanges or clearing organizations, and,

    where margin or performance bond is required only for accounts at the

    clearing organization, for purposes of the FCM's risk-based capital

    calculations applying the same margin or performance bond requirements

    to

    [[Page 69283]]

    customer and noncustomer positions in accounts carried by the FCM,

    subject to the following.

    * * * * *

    (9) Cleared over the counter derivative positions means ``over the

    counter derivative instrument'' (as defined in 12 U.S.C. 4421)

    positions of any person in accounts carried on the books of the futures

    commission merchant and cleared by any organization permitted to clear

    such instruments under the laws of the relevant jurisdiction.

    (10) Cleared over the counter customer means any person that is not

    a proprietary person as defined in Sec. 1.3(y) and for whom the

    futures commission merchant carries on its books one or more accounts

    for the over the counter-cleared derivative positions of such person.

    (c) * * *

    (5) * * *

    (x) In the case of open futures contracts or cleared OTC derivative

    positions and granted (sold) commodity options held in proprietary

    accounts carried by the applicant or registrant which are not covered

    by a position held by the applicant or registrant or which are not the

    result of a ``changer trade'' made in accordance with the rules of a

    contract market:

    * * * * *

    Issued in Washington, DC, on December 24, 2009, by the

    Commission.

    David A. Stawick,

    Secretary of the Commission.

    [FR Doc. E9-31058 Filed 12-30-09; 8:45 am]

    Last Updated: December 31, 2009



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