CFTC Staff Letters

Interpretation of Commission Regulation 1.73(a)(2)(iv).
Regulation 1.73 addresses risk management by clearing FCMs. Section (a)(2)(iv) provides that when a firm executes an order on behalf of a customer but gives it up to another firm for clearing, the clearing FCM shall establish risk-based limits and enter into an agreement in advance with the executing firm that requires the executing firm to screen orders for compliance with those limits.
Under the fact pattern you have described, ICAP would be the executing firm and the clearing firms selected by the customers would be the clearing FCMs within the meaning of Regulation 1.73(a)(2)(iv). The sponsoring FCM would be the clearing FCM for purposes of this provision only for those customers who had chosen that firm as their clearing FCM. Accordingly, the Division of Clearing and Risk (Division) can confirm that:
1. The term executing firm in Regulation 1.73(a)(2)(iv) refers to IBs or FCMs that execute orders for customers; and
2. An FCM that provides to an executing firm sponsored access to a market is not obligated under Regulation 1.73(a)(2)(iv), by virtue of the provision of such access, to conduct order screening of the executing firms customers.

Relief for Certain Swap Dealers, De Minimis Dealers, Agent Affiliates, and Associated Persons from Registration as an Introducing Broker under Section 4d or a Commodity Trading Advisor under Section 4m of the Commodity Exchange Act, and Interpretation that Certain Employees of De Minimis Dealers are not an Introducing Broker as defined in Section 1a(31) of the Commodity Exchange Act.

The Division of Swap Dealer and Intermediary Oversight issued a letter providing additional guidance to securitization vehicles regarding whether they may be excluded from the definition of commodity pool. The Division also stated that it will not recommend that the Commission take enforcement action against the commodity pool operators of securitization vehicles that have not and will not issue new securities on or after October 12, 2012. Finally, the Division stated that, for securitization vehicles that could not claim relief either under this letter or the 12-14 Letter, it would not recommend enforcement action against operators of securitization vehicles for failure to register as a commodity pool operator until March 31, 2013.

Staff Interpretation Regarding Part 22.

Division of Clearing and Risk staff issued an interpretation providing clarification that while regulation 22.2(d) prohibits an FCM from permitting a lien on Cleared Swaps Customer Collateral that it holds, regulation 22.2(d) does not prohibit a Cleared Swaps Customer from granting a lien on his or her own account at the FCM, nor does the regulation prohibit the FCM from taking action to foster the Cleared Swaps Customer’s grant of such a lien.

The Division of Swap Dealer and Intermediary Oversight issued an interpretation that a limited liability company whose members were all family members was not a commodity pool within the meaning and intent of Regulation 4.10(d)(1) and, consequently, that the managing member was not a CPO thereof.

The Division of Swap Dealer and Intermediary Oversight issued an interpretative letter that clarifies, in light of the recent vacatur of the position limits rule, the scope of the bona fide hedging exemption from the trading thresholds as applied to the operators of registered investment companies pursuant to Regulation 4.5.

Interpretations and no-action positions related to ECP status.

The Division of Swap Dealer and Intermediary Oversight issued an interpretative letter excluding certain securitization vehicles from the definition of commodity pool, subject to certain conditions.

Request for Interpretation of the Definition of “Commodity Pool” under Section 1a(10) of the Commodity Exchange Act.