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07-1522

  • [Federal Register: April 2, 2007 (Volume 72, Number 62)]

    [Proposed Rules]

    [Page 15637-15641]

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

    [DOCID:fr02ap07-11]

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    COMMODITY FUTURES TRADING COMMISSION

    17 CFR Parts 1, 3, 4, 15 and 166

    RIN 3038-AC26

    Exemption From Registration for Certain Foreign Persons

    AGENCY: Commodity Futures Trading Commission.

    ACTION: Proposed rules.

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

    proposing to amend Commission Regulation 3.10 regarding the

    registration of firms located outside the U.S. that are engaged in

    commodity interest activities with respect to trading on U.S.

    designated contract markets (``DCMs'') and U.S. derivative transaction

    execution facilities (``DTEFs'').\1\ The amended regulation would

    codify past actions of the Commission or its staff permitting certain

    foreign firms that limit their customers to foreign customers to submit

    U.S. DCM and DTEF business on behalf of those customers for clearing on

    an omnibus basis through a registered futures commission merchant

    (``FCM''), without the foreign firm having to register as an FCM

    pursuant to section 4d of the Commodity Exchange Act (``Act'').

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

    CFR Ch. I (2006). References to trading on U.S. DCMs or DTEFs shall

    include trading that is subject to the rules of such entities as

    well.

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    DATES: Comments must be received on or before May 2, 2007.

    ADDRESSES: Comments may be submitted, identified by RIN 3038-AC26, by

    any of the following methods:

    Federal eRulemaking Portal: http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov.

    Follow the instructions for submitting comments.

    E-mail: secretary@cftc.gov. Include ``Exemption from

    Registration for Certain Foreign Persons'' in the subject line of the

    message.

    Fax: 202/418-5521.

    Mail or Courier: Send to Eileen A. Donovan, Acting

    Secretary, Commodity Futures Trading Commission, Three Lafayette

    Centre, 1155 21st St., NW., Washington, DC 20581.

    All comments received will be posted without change to http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.cftc.gov

    , including any personal information provided.

    FOR FURTHER INFORMATION CONTACT: Lawrence B. Patent, Deputy Director,

    or Andrew V. Chapin, Special Counsel, at (202) 418-5430, Division of

    Clearing and Intermediary Oversight, Commodity Futures Trading

    Commission, Three Lafayette Centre, 1155 21st Street, NW., Washington,

    DC 20581. Electronic mail: 1patent@cftc.gov or achapin@cftc.gov.

    SUPPLEMENTARY INFORMATION:

    I. Background Information

    A. Registration Requirements for Commodity Interest Activities on U.S.

    Markets

    Part 3 of the Commission's regulations governs the registration of

    intermediaries engaged in the offer and sale of, and providing advice

    concerning, futures and commodity options traded on U.S. markets,

    including both DCMs and DTEFs. In particular, Regulation 3.10 sets

    forth the manner in which FCMs, introducing brokers (``IBs''),

    commodity trading advisors (``CTAs''), commodity pool operators

    (``CPOs'') and leverage transaction merchants must apply for

    registration with the Commission. Regulation 3.10(c) also provides an

    exemption from registration for certain persons. Currently, the only

    exemption from registration as an FCM is for any person trading solely

    for proprietary accounts, as defined in Regulation 1.3(y).

    With respect to registration, the Act does not distinguish between

    an intermediary located within or outside the U.S., nor does that Act

    distinguish between a firm conducting commodity interest \2\ activities

    on behalf of U.S. persons and those conducting such activities solely

    on behalf of persons located outside the U.S. For example, Section

    1a(20) of the Act defines an FCM as a person that is

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    \2\ See discussion of proposed new Regulation 1.3(yy) defining

    the term ``commodity interest,'' infra.

    (A) Engaged in soliciting or accepting orders for the purchase

    or sale of any commodity for future delivery on or subject to the

    rules of any contract market or derivatives transaction execution

    facility; and (B) in or in connection with such solicitation or

    acceptance of orders, accepts any money, securities or property (or

    extends credit in lieu thereof) to margin, guarantee, or secure any

    trades or contracts that result or may result therefrom.\3\

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    \3\ 7 U.S.C. 1a(20) (2000). See also Regulation 1.3(p). The

    definitions of CPO, CTA and IB similarly are applicable to

    transactions entered into on U.S. markets without regard to the

    location of the intermediary. See 7 U.S.C. 1a(5), (6) and (23),

    respectively.

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    Section 4d(a) of the Act states that:

    [I]t shall be unlawful for any person to engage as [an FCM] * *

    * in soliciting or accepting orders for the purchase or sale of any

    commodity for future delivery, or involving any contracts of sale of

    any commodity for future delivery, on or subject to the rules of any

    contract market or

    [[Page 15638]]

    derivatives transaction execution facility unless

    (1) Such person shall have registered, under this Act, with the

    Commission as such [FCM] * * * and such registration shall not have

    expired nor been suspended nor revoked; * * * \4\

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    \4\ 7 U.S.C. 6d(a)(1) (2000).

    Accordingly a person located outside the U.S. engaged in FCM-type

    activity with respect to transactions entered into on a DCM or DTEF

    would be required to register as an FCM even though such person

    restricts its customer base to persons located outside of the U.S.

    B. Foreign Broker Exemption

    The term ``foreign broker'' never has been defined in the context

    of the Part 3 registration requirements. Rather, the term ``foreign

    broker'' has been defined solely in the context of the financial

    surveillance reporting requirements set forth in Parts 15 to 21 of the

    Commission's regulations. Specifically, Regulation 15.00(a)(1) defines

    ``foreign broker'' to mean ``any person located outside the U.S. or its

    territories who carries an account in commodity futures or commodity

    options on any contract market for any other person.'' In various

    contexts, the Commission has indicated that it would not require

    registration of a foreign broker that (1) limits its customers to

    foreign customers, (2) submits the trades of such foreign customers

    that are entered into on U.S. markets for clearing on an omnibus basis

    through a registered FCM, and (3) does not solicit or accept orders

    from U.S. customers for trading on U.S. markets. In contrast, the

    Commission always has maintained that any commodity interest activities

    undertaken by a foreign broker on behalf of any U.S. person for trading

    on or subject to the rules of a U.S. market would have required

    registration on the part of the foreign broker.

    The genesis of the ``foreign broker exemption'' occurred in 1938

    when the Commodity Exchange Authority (``CEA''), the Commission's

    predecessor, issued an Administrative Determination stating that the

    segregation requirements in Section 4d of the Act did not apply to

    foreign, non-clearing member firms because that provision, despite

    containing no express territorial limitation, was considered to be

    ``confined to the geographical area over which the law-making power has

    jurisdiction.'' \5\ The Commission notes that the scope of the CEA's

    determination was restricted to non-clearing activities.

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    \5\ Administrative Determination No. 51 (March 17, 1938).

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    In 1980, the Commission further addressed the participation of

    foreign persons on U.S. markets in a Federal Register release amending

    Part 15 of the Commission's regulations. The Commission stated that:

    [F]oreign entities presently comprise a significant portion of

    the traders in various commodities on domestic exchanges.

    Nevertheless by engaging in futures trading in the United States,

    foreign persons, like domestic market participants, become subject

    to the regulatory scheme of the Commodity Exchange Act * * *.'' \6\

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    \6\ 45 FR 30426 (May 8, 1980). The 1980 Federal Register release

    cited the Commission's decision in In the Matter of AWiscope, S.A.

    CFTC Docket No. 79-114 [1977-1990 Transfer Binder] Comm. Fut. L.

    Rep. (CCH) ] 20,785 at p. 23192, n. 12 (March 19, 1979), vacated on

    other grounds, 604 F.2d 764 (2d Cir. 1979). In the Wiscope division,

    the Commission stated that:

    [A] foreign broker, like any other person or entity, is required

    to place all orders to buy or sell futures contracts through a

    registered futures commission merchant. Historically, futures

    commission merchants have often carried foreign brokers' accounts as

    `omnibus accounts' in which transactions for a broker's customers

    are combined and carried in the name of the broker, rather than

    being accounted for and separately identified by the customer.

    As a consequence, the Commission promulgated market surveillance

    reporting rules that contemplate that a foreign broker submits its

    trades for clearing on an omnibus basis through an FCM.\7\

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    \7\ See, e.g., Regulations 15.05 and 17.04.

    In 1983, the Commission unambiguously set forth its policy

    regarding the registration of foreign brokers in a final rulemaking

    establishing the registration requirements and procedures for

    introducing brokers and other futures industry professionals. The

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    Commission stated that

    Given this agency's limited resources, it is appropriate at this

    time to focus [the Commission's] customer protection activities upon

    domestic firms and upon firms soliciting or accepting orders from

    domestic users of the futures markets and that the protection of

    foreign customers of firms confining their activities to areas

    outside this country, its territories, and possessions may best be

    for local authorities in such areas.\8\

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    \8\ 48 FR 35247, 35261 (August 3, 1983). The Commission cited to

    prior iterations of this policy concept dating back to 1980, as well

    as to a staff letter on the topic issued in 1975. 45 FR 18356, 18360

    (March 20, 1980); 45 FR 80490 (December 5, 1980); CFTC Staff Letter

    75-12 [1975-1977 Transfer Binder] Comm. Fut. L. Rep. (CCH) ] 20,099

    (October 6, 1975).

    Accordingly, the Commission concluded that ``a foreign broker would

    generally not need to register as an introducing broker.'' \9\

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    \9\ Id. An introducing broker is defined as a person engaged in

    soliciting or in accepting orders for futures and options contracts

    listed on any contract market or derivatives transaction execution

    facility that does not accept any money, securities, or property to

    margin any trades that result from such orders. See Section 1a(23)

    of the Act; see also Regulation 1.3(mm).>

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    The Commission's staff has taken action consistent with the

    Commission's policy regarding the participation of foreign persons on

    U.S. markets. For example, in CFTC Staff Letter 89-07, Commission staff

    state that

    The Commission has not required a person located outside the

    United States which engages in the conduct described in section

    2(a)(1)(A) of [the Act] for or on behalf of foreign customers

    through a U.S. FCM to register as an FCM. Specifically, the

    Commission has not required a foreign broker as that term is defined

    in rule 15.00(a)(1) to register as an FCM.\10\

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    \10\ CFTC Staff Letter 89-07, [1987-1990 Transfer Binder] Comm.

    Fut. L. Rep. (CCH) ] 24,479 at 36,096-97 (June 22, 1989); see also,

    CFTC Staff Letter 98-80, [1998-1999 Transfer Binder] Comm. Fut. L.

    Rep. (CCH) ] 27,503 (November 25, 1998); CFTC Staff Letter 93-113,

    [1992-1994 Transfer Binder] Comm. Fut. L. Rep. (CCH) ] 25,930

    (October 29, 1993); CFTC Staff Letter 92-19, [1992-1994 Transfer

    Binder] Comm. Fut. L. Rep. (CCH) ] 25,516 (October 9, 1992).

    The Commission notes that, by limiting the exemptive relief to

    activities conducted ``through a U.S. FCM,'' staff did not extend the

    exemptive relief available to a foreign broker to include the

    submission of trades executed for its customer and non-customer

    accounts directly to a clearing organization for a U.S. market.\11\

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    \11\ A non-customer account would include accounts carried for

    persons closely related to the foreign broker such as a parent or

    subsidiary company, a director or a major shareholder. See 17 CFR

    1.17(b)(4).

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    In addition, the Commission's Office of General Counsel (``OGC'')

    issued an interpretative letter in 1976 addressing the participation of

    foreign-based CPOs and CTAs on U.S. markets. In its letter, OGC stated

    that a person who operates commodity pools outside of the territorial

    U.S. is not required to register as a CPO when such a person confines

    the pool activities to areas outside the territorial U.S., none of the

    participation in the pool is a resident or citizen of the U.S., and

    none of the funds or capital contributed to the pools are from U.S.

    sources.\12\ The OGC interpretative letter also stated that a trading

    advisor located outside the territorial U.S. who provides advice as to

    the advisability of trading futures contracts on domestic and foreign

    exchanges is not required to register when such a person confines its

    advisory services to areas outside of the

    [[Page 15639]]

    territorial U.S., and none of its clients is a citizen or resident of

    the U.S.\13\

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    \12\ CFTC Staff Letter 76-21, [1975-1977 Transfer Binder] Comm.

    Fut. L. Rep. (CCH) ] 20,222 (August 15, 1976). OGC further noted

    that ``[t]he pools trade through the London office of your company,

    which is a futures commission merchant registered with the

    Commission.'' Id.

    \13\ Id.

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    The Commission believes that it is appropriate at this time to

    codify the ``foreign broker exemption'' as a means to provide greater

    legal certainty with respect to the commodity interest activities

    undertaken by those persons located outside the U.S. on U.S. markets.

    Accordingly, the Commission is proposing to amend Regulation 3.10(c) to

    exempt from registration as an FCM any person that (1) limits its

    customers to customers located outside the U.S.\14\ (2) confines its

    commodity interest activities to areas outside the U.S. and (3) submits

    its trades for clearing on an omnibus basis through a registered FCM.

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    \14\ The limitation applies to solicitation as well as

    acceptance of orders. Accordingly, if a person located outside of

    the U.S. were to solicit prospective customers located in the U.S.

    as well as outside the U.S., this exemption would not be available,

    even if the only customers resulting from the efforts were located

    outside of the U.S.

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    II. Proposed Regulations

    The Commission proposes to amend Regulation 3.10(c) to provide a

    limited exemption from registration to certain persons located outside

    the U.S. that engage in brokerage activities on domestic markets on

    behalf of customers located outside the U.S. Specifically, the

    Commission proposes to codify the ``foreign broker exemption''

    previously articulated by the Commission and its staff by amending

    Regulation 1.3 to include a new definition of ``foreign broker.'' The

    existing definition of ``foreign broker'' in Regulation 15.00(g) is

    limited in context to the market surveillance reporting requirements

    set forth in Parts 15 to 21 of the Commission's regulations. Proposed

    Regulation 1.3(xx) would define ``foreign broker'' as a person located

    outside the U.S.\15\ who acts in the capacity of an FCM, as described

    in Regulation 1.3(p), and who solicits or accepts orders for execution

    on or subject to the rules of U.S. markets from persons outside the

    U.S. Unlike the Regulation 15.00(g) definition, the application of

    Proposed Regulation 1.3(xx) would not be restricted to a particular

    part of the Commission's regulations. In conjunction with the

    provisions to Regulation 3.10(c) described below, the new definition of

    ``foreign broker'' would clarify that the commodity interest activities

    undertaken on U.S. markets by a person located outside the U.S. are

    subject to general Commission oversight, and not limited to the market

    surveillance activities described in Parts 15 to 21 of the Commission's

    regulations.

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    \15\ Consistent with existing Commission regulations, the

    proposed regulations refer to the United States, its territories and

    possessions.

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    The Commission also is proposing to amend Regulation 1.3 to add new

    paragraph (yy) to provide a definition of the term ``commodity

    interest.'' Regulation 4.10(a)(1) currently defines ``commodity

    interest'' to mean: (1) any contract for the purchase or sale of a

    commodity for future delivery; and (2) any contract, agreement or

    transaction subject to Commission regulation under Section 4c or 19 of

    the Act. This definition of ``commodity interest.'' includes not only

    futures contracts, but options on futures and cash commodities traded

    on U.S. markets. Regulation 4.10(a)(1), however, applies only to Part 4

    of the Commission's regulations governing CPOs and CTAs. Rather than

    address the commodity interest activities of foreign brokers and other

    persons located outside the U.S. by reference to Regulation 4.10(a)(1),

    the Commission is proposing to promulgate new Regulation 1.3(yy) to

    clarify that these activities are subject to the Commission's general

    oversight, including the registration requirements set forth in Part 3

    of the Commission's regulations. In order to eliminate any confusion

    resulting from duplicate regulations, the Commission proposes further

    to remove the existing definition of ``foreign broker'' from Regulation

    15.00(g), and the existing definitions of ``commodity interest'' from

    1.56(a), 3.1(f), 4.10(a), and 166.1(a), respectively.

    In addition to the proposed changes to Part 1 of the Commission's

    regulations, the Commission proposes to amend Regulation 3.10(c) to

    exempt from FCM registration any foreign broker, as defined in new

    Regulation 1.3(xx), that submits customer or proprietary trades

    executed on or subject to the rules of U.S. markets for clearing on an

    omnibus basis through a fully registered FCM. Any foreign broker

    eligible for such relief would be required to continue to comply with

    all other provisions of the Act and of the rules, regulations and

    orders thereunder, including the reporting requirements set forth in

    Parts 15 to 21 of the Commission's regulations.

    The Commission has not proposed to extend the exemption from FCM

    registration to permit a foreign broker to become a remote clearing

    member of a derivatives clearing organization (``DCO'') without having

    to register as an FCM. A firm routinely submitting customer positions

    for clearing by a DCO is not confining its activities to areas located

    outside this country.\16\ As a result, the proposal would require the

    foreign broker to submit all of its trades, both customer and

    proprietary, for clearing through a registered FCM. In addition, the

    Commission notes that it always has been concerned about oversight of

    clearing member firms because of the potential for systemic risk.

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    \16\ See Quill Corp. v. North Dakota, 504 U.S. 298, 307-308

    (1992) (holding that if a foreign corporation purposefully avails

    itself of the benefits of an economic market in the forum State, it

    may subject itself to the in personam jurisdictiion even if it has

    no physical presence in the State); Burger King Corp. v. Rudzewicz,

    471 U.S. 462, 476 (1985) (``it is an inescapable fact of modern

    commercial life that a substantial amount of business is transacted

    solely by mail and wire communications across state lines, thus

    obviating the need for physical presence within a State in which

    business is conducted.'').

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    The Commission also believes that remote clearing raises material

    policy issues with respect to both the financial integrity of the

    markets and customer protection. For example, FCM registrants are

    subject to requirements concerning fitness, capital, treatment of

    funds, recordkeeping, and ongoing reporting, and FCM compliance and

    these standards are monitored by the Commission, and the relevant self-

    regulatory organization. Exemption from registration would relinquish

    those safeguards.\17\

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    \17\ The Commission is not aware that this type of arrangement

    has caused hardship for registered FCMs located in the U.S., such as

    any requirement imposed upon them by foreign regulators because they

    submit for clearing by a DCO transactions for persons located

    outside of the U.S. The Commission similarly permits a firm located

    outside of the U.S. whose only contact with U.S. customers consists

    of acting as the clearing firm for transactions executed on or

    subject to the rules of a foreign board of trade on an omnibus basis

    to do so without being registered as an FCM. 17 CFR 30.4(a).

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    Comments regarding the proposed amendment to Regulation 3.10(c) and

    the corresponding amendments to related regulations should not be

    limited to the areas cited above, but rather should address all aspects

    of the Commission's regulatory program, including its goals to protect

    investors and the public interest; to promote fair competition, market

    efficiency, innovation and the expansion of investment opportunities;

    and to maintain fair and orderly markets.

    III. Related Matters

    A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-611,

    requires that agencies, in proposing regulations, consider the impact

    of those regulations on small businesses. The Commission has previously

    established certain definition of ``small entities'' to be used

    [[Page 15640]]

    by the Commission in evaluating the impact of its regulations on such

    entities in accordance with the RFA.\18\ The Commission previously has

    determined that registered FCMs are not small entities for the purpose

    of the RFA because each FCM has an underlying fiduciary relationship

    with its customers, regardless of the size of the FCM.\19\ The

    Commission notes that the foreign persons affected by the proposed

    changes to the Commission's regulations would be registered as FCMs if

    not for the exemption provided therein and, as such, would maintain a

    fiduciary relationship with customers similar to the relationship

    maintained by each registered FCM. Therefore, the Chairman, on behalf

    of the Commission, hereby certifies, pursuant to 5 U.S.C. 605(b), that

    these proposed regulations will not have a significant economic impact

    on a substantial number of small entities. Nonetheless, the Commission

    specifically requests comment on the impact these proposed rules may

    have on small entities.

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    \18\ 47 FR 18618-18621 (April 30, 1982).

    \19\ 47 FR 18619-18620.

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    B. Paperwork Reduction Act

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

    seq. (Supp. I 1995)) 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.

    While the proposed rule discussed herein has no burden, the group

    of rules (3038-0023, Rules, Regulations and Forms for Domestic and

    Foreign Futures and Options Related to Registration with the

    Commission) of which it is a part has the following burden:

    Average Burden Hours Per Response: 18.11

    Number of Respondents: 76,750.

    Frequency of Response: Annually and On Occasion.

    The Office of Management and Budget (``OMB'') approved the collection

    of information associated with the group of rules on August 17, 2004.

    Copies of the OMB-approved information collection submission are

    available from the CFTC Clearance Officer, 1155 21st Street, NW.,

    Washington, DC, 20581 (202) 418-5160.

    C. Costs and Benefits of the Proposed Rules

    Section 15(a) of the Act requires the Commission to consider the

    costs and benefits of its actions before issuing new regulations under

    the Act. By its terms, Section 15(a) does not require the Commission to

    quantify the costs and benefits of new regulations or to determine

    whether the benefits of the proposed regulations outweigh their costs.

    Rather, Section 15(a) requires the Commission to ``consider the cost

    and benefits'' of the subject regulations.

    Section 15(a) further specifies that the costs and benefits of the

    proposed regulations shall be evaluated in light of five broad areas of

    market and public concern: (1) Protection of market participants and

    the public; (2) efficiency, competitiveness, and financial integrity of

    futures markets; (3) price discovery; (4) sound risk management

    practices; and (5) other public interest considerations. The Commission

    may, in its discretion, give greater weight to any one of the five

    enumerated areas of concern and may, in its discretion, 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 proposed regulations should foster the protection of market

    participants and the public by providing greater legal certainty to the

    commodity interest activities of persons located outside the U.S. As

    the activity set forth in the proposed regulations presently is

    permitted under staff interpretation and no-action, the proposed

    regulations should have no material impact from the standpoint of

    imposing costs or creating benefits, on efficiency, competitiveness and

    financial integrity of financial markets, price discovery, sound risk

    management practices, or any other public interest considerations.

    List of Subjects

    17 CFR Part 1

    Definitions, Registration, Minimum financial and reported

    requirements, Prohibited transactions in commodity options, Customers'

    money, securities and property, Miscellaneous.

    17 CFR Part 3

    Definitions, Foreign futures, Consumer protection, Foreign options,

    Registration requirements.

    17 CFR Part 4

    Advertising, Commodity futures, Consumer Protection, Recordkeeping

    and reporting requirements.

    17 CFR Part 5

    Brokers, Reporting and recordkeeping requirements.

    17 CFR Part 166

    Authorization to trade, Customer protection.

    In consideration of the foregoing, and pursuant to the authority

    contained in the Commodity Exchange Act and, in particular, Sections

    2(a)(1), 4(b), 4c and 8a thereof, 7 U.S.C. 2, 6(b), 6c and 12a (1982),

    and pursuant to the authority contained in 5 U.S.C. 552 and 552b

    (1982), the Commission hereby proposes to amend Chapter I of Title 17

    of the Code of Federal Regulations as follows:

    PART 1--DEFINITIONS

    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, unless otherwise noted.

    2. Section 1.3 is amended by adding paragraphs (xx) and (yy) to

    read as follows:

    Sec. 1.3 Definitions.

    * * * * *

    (xx) Foreign Broker. This term means any person located outside the

    United States, its territories or possessions who is engaged in

    soliciting or in accepting orders only from persons located outside the

    United States, its territories or possessions for the purchase or sale

    of any commodity interest transaction on or subject to the rules of any

    designated contract market or derivatives transaction execution

    facility and that, in or in connection with such solicitation or

    acceptance of orders, accepts any money, securities or property (or

    extends credit in lieu thereof) to margin, guarantee, or secure any

    trades or contracts that result or may result therefrom.

    (yy) Commodity Interest. This term means: (1) Any contract for the

    purchase or sale of a commodity for future delivery; and (2) any

    contract, agreement or transaction subject to Commission regulation

    under section 4c or 19 of the Act.

    Sec. 1.56 [Amended]

    Section 1.56 is amended by removing and reserving paragraph (a).

    PART 3--REGISTRATION

    4. The authority citation for part 3 continues to read as follows:

    Authority: 5 U.S.C. 522, 522b; 7 U.S.C. 1a, 2, 4, 6, 6a, 6b, 6c,

    6d, 6e, 6f, 6g, 6h, 6i, 6k, 6m, 6n, 6o, 6p, 8, 9, 9a, 12, 12a, 13b,

    13c, 16a, 18, 19, 21, 23, unless otherwise noted.

    Sec. 3.1 [Amended]

    5. Section 3.1 is amended by removing and reserving paragraph (f).

    6. Section 3.10 is amended by revising paragraph (c) to read as

    follows:

    [[Page 15641]]

    Sec. 3.10 Registration of futures commission merchants, introducing

    brokers, commodity trading advisors, commodity pool operators and

    leverage transaction merchants.

    * * * * *

    (c) Exemption from registration for certain persons. (1) A person

    trading solely for proprietary accounts, as defined in Sec. 1.3(y) of

    this chapter, is not required to register as a futures commission

    merchant: Provided, that such a person remains subject to all other

    provisions of the Act and of the rules, regulations and orders

    thereunder.

    (2)(i) A foreign broker, as defined in Sec. 1.3(xx) of this

    chapter, is not required to register as a futures commission merchant

    if it submits any commodity interest transactions executed on or

    subject to the rules of designated contract market or derivatives

    transaction execution facility for clearing on an omnibus basis through

    a futures commission merchant registered in accordance with section 4d

    of the Act.

    (ii) A foreign broker acting in accordance with paragraph (c)(2)(i)

    of this section remains subject to all other provisions of the Act and

    of the rules, regulations and orders thereunder.

    PART 4--COMMODITY POOL OPERATORS AND COMMODITY TRADING ADVISORS

    7. The authority citation for part 4 continues to read as follows:

    Authority: 7 U.S.C. 1a, 2, 4, 6(c), 6b, 6c, 6l, 6m, 6n, 6o, 12a

    and 23.

    Sec. 4.10 [Amended]

    8. Section 4.10 is amended by removing and reserving paragraph (a).

    PART 15--REPORTS--GENERAL PROVISIONS

    9. The authority citation for part 15 continues to read as follows:

    Authority: 7 U.S.C. 2, 5, 6(c), 6a, 6c(a)-(d), 6f, 6g, 6i, 6k,

    6m, 6n, 7, 9, 12a, 19 and 21, as amended by the Commodity Futures

    Modernization Act of 2000, Appendix E of Pub. L. 106-554, 114 Stat.

    2763 (2000).

    Sec. 15.00 [Amended]

    10. Section 15.00 is amended by removing and reserving paragraph

    (g).

    PART 166--CUSTOMER PROTECTION RULES

    11. The authority citation for part 166 continues to read as

    follows:

    Authority: 7 U.S.C. 1a, 2, 6b, 6c, 6d, 6g, 6h, 6k, 6l, 6o, 7,

    12a, 21, and 23, as amended by the Commodity Futures Modernization

    Act of 2000, Appendix E of Pub. L. 106-554, 114 Stat. 2763 (2000).

    Sec. 166.1 [Amended]

    12. Section 166.1 is amended by removing and reserving paragraph

    (b).

    Dated: March 23, 2007.

    By the Commission.

    Eileen A. Donovan,

    Acting Secretary of the Commission.

    [FR Doc. 07-1522 Filed 3-30-07; 8:45 am]

    BILLING CODE 6351-01-M

    Last Updated: June 27, 2007



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