Foreign Products Available to U.S. Customers
Foreign Futures and Options Contracts
The CFTC receives many inquiries regarding what foreign futures and options contracts may be offered or sold to customers located in the U.S. and what registration requirements are applicable to intermediaries who offer and sell those products.
Approval of Products
In general, the Commodity Exchange Act (CEA) and CFTC regulations do not restrict the offer or sale of foreign exchange-traded futures and commodity option products to customers located in the U.S. (61 Fed. Reg.10891). Special procedures do apply, however, to the offer or sale of security index and foreign government debt products. These procedures are outlined below. Please note that these procedures do not apply to foreign exchange-traded security futures products, including futures or futures options on narrow-based security indices, as defined in Section 1a(35) of the CEA. Foreign exchange-traded security futures products generally may only be offered or sold to certain sophisticated customers located in the U.S. pursuant to an Order issued by the U.S. Securities and Exchange Commission (SEC) and an Advisory issued by the CFTC’s Division of Clearing and Intermediary Oversight (DCIO). (See CEA Section 2(a)(1)(E) and CEA Section 2(a)(1)(F)).
Registration of Intermediaries
Please note that the offer and sale of any foreign futures or options contract to a customer located in the U.S., including those products subject to the special procedures described below, is subject to the requirements applicable to intermediaries set forth in Part 30 of the CFTC's regulations. In particular, CFTC Regulation 30.4 requires an intermediary seeking to act on behalf of a U.S. customer for the purpose of trading foreign futures or options to register in the appropriate capacity with the CFTC (i.e., FCM, IB, CTA or CPO), or apply for an exemption from registration. This registration requirement applies to all intermediaries, regardless of where they are located. So, for example, a foreign firm that clears foreign futures trades on a fully-disclosed basis on behalf of a customer located in the U.S., must register as an FCM or obtain an exemption from FCM registration pursuant to CFTC Regulation 30.10. Any firm located outside the U.S. acting in the capacity of an IB, CTA or CPO may apply for an exemption pursuant to CFTC Regulation 30.5. For more information on the registration exemptions available under Part 30 of the CFTC’s regulations, see Offer and Sale of Foreign Products to U.S. Customers.
Applicability of Foreign Law
Notwithstanding the foregoing product-based and intermediaries-based requirements, the offer and sale of foreign futures and options to customers located in the U.S., including those products subject to the special procedures described below, remains subject to the applicable laws and regulations in the foreign jurisdiction in which the listing exchange is located. Although U.S. customers may be permitted under the CEA to buy or sell a particular product, foreign law or regulations may not permit such activity to occur. For example, the law of a particular foreign jurisdiction may not allow a U.S. FCM either to become a clearing member on the foreign exchange or establish an omnibus account with a clearing member on that exchange. In these circumstances, a U.S. customer would not be able to buy or sell the foreign product, unless appropriate relief has been granted to the foreign regulator or the exchange pursuant to CFTC Regulation 30.10.
- Foreign exchange-traded broad-based security index futures contracts (and options thereon): The CFTC must first certify that foreign exchange-traded broad-based security index futures contract (or option thereon) meets the requirements of section 2(a)(1)(C)(ii) of the Commodity Exchange Act. If a futures contract has been certified by the Commission, then the option on that particular contract (the futures option) may also be offered or sold in the United States, without any further regulatory action from the Commission. The procedure for requesting a CFTC certification of a broad-based security index future traded on a foreign board of trade is described in CFTC Regulation 30.13. Prior to October 2011, the CFTC’s Office of the General Counsel must have first issued a no-action letter to allow the offer or sale of a foreign exchange-traded, broad-based security index futures contract in the United States. That no-action procedure was replaced by the Commission certification process.
- Foreign Security Index Futures and Futures Options Contracts for Which Commission Certification or No-Action Relief Has Been Granted and Which are Under Review
- Indexes Underlying Contracts of Foreign Boards of Trade Authorized by the CFTC Pre-CFMA
- Filing Requirements for Foreign Security Index Exemptions
Foreign exchange-traded security futures products (futures or futures options on narrow-based security indices or single securities): Foreign exchange-traded security futures products may be offered or sold in the United States subject to certain conditions set out in the SEC Order and the DCIO Advisory.
Foreign government debt obligations: Debt obligations of a foreign government must be designated as an exempted security by the U.S. Securities and Exchange Commission under SEC Rule 3a12-8 before a futures contract or option thereon can be offered or sold in the United States. Government debt instruments issued by the following countries have been designated by the SEC as exempted securities: United Kingdom, Canada, Japan, Australia, France, New Zealand, Austria, Denmark, Finland, the Netherlands, Switzerland, Germany, Italy, Ireland, Spain, Mexico, Brazil, Argentina, Venezuela, Belgium, and Sweden. See 17 CFR 240.3a12-8. Please contact the SEC’s Division of Trading and Markets at 202-551-5777 or [email protected] for further information.
Exception for sales to customers located outside the United States: The product requirements and restrictions may not apply to registered futures commission merchants (FCMs), introducing brokers (IBs), and commodity trading advisors (CTAs) in offering and selling (or providing advice with respect to) certain foreign exchange-traded products to customers located outside the United States.
- For a more detailed description of the terms and conditions of this exception for broad-based security indices and foreign government debt, see Offer and Sale of Foreign Exchange-Traded Options, and Foreign Exchange-Traded Futures Contracts Based on Foreign Stock Indexes and Foreign Government Debt, to Persons Located Outside the United States (57 FR 36369, Aug. 13, 1992).
- With regard to foreign exchange-traded security futures products, CEA Section 2(a)(1)(F)(i), 7 USC 2(a)(1)(F)(i), provides that nothing in the CEA “is intended to prohibit a futures commission merchant from carrying security futures products traded on or subject to the rules of a foreign board of trade in the accounts of persons located outside of the United States.” Although no comparable exceptive provision is provided for in the securities laws, the SEC’s Division of Trading and Markets has issued interim no-action relief to FCMs that are dually registered (including through notice registration) as FCMs and Broker/Dealers to clear and carry positions with respect to certain non-U.S. security futures (foreign exchange-traded futures, but not options, on a single non-U.S. security or on a narrow-based security index that has no more than 10 percent of the securities underlying the index issued by a U.S. issuer or issuers) held in futures accounts for customers who are not U.S. persons, subject to certain conditions. This relief is effective until the SEC and the CFTC issue final regulations concerning these products.
For information on foreign security index or sovereign debt products not covered here and on how to qualify such contracts or products for sale in the United States, contact the CFTC’s Division of Market Oversight.