CFTC Staff Letters

The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and to list for trading on a national securities exchange. As is discussed in the letter, this relief was in the nature of substituted compliance with those regulations.

The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and to list for trading on a national securities exchange. As is discussed in the letter, this relief was in the nature of substituted compliance with those regulations.

The Division of Market Oversight issued a letter granting no-action relief to permit Nord Pool ASA (Nord Pool or the Exchange) to make its electronic trading and order matching system (ETS), as well as its Application Program Interface (API), available to Exchange members in the U.S. without obtaining contract market designation or registration as a derivatives transaction execution facility pursuant to Sections 5 and 5a of the CEAct. The relief applies to Nord Pool members in the U.S. that qualify as “Professional Clients” (as defined in the European Union Markets in Financial Derivatives Directive (MiFID)) or as “eligible contract participants” (ECP) (as defined in Section 1a(12) of the CEAct) trading for their proprietary accounts; Nord Pool members that are registered as futures commission merchants (FCM) that submit orders to ETS for execution from or on behalf of U.S. customers that qualify as Professional Clients or as ECPs; firms exempt from such registration pursuant to Commission Rule 30.10 (Rule 30.10 Firms) that accept orders through automated order routing systems for transmission to ETS from or on behalf of U.S. customers that qualify as Professional Clients or ECPs; and Nord Pool members that are registered as Commodity Pool Operators (CPO) or Commodity Trading Advisors (CTA), or exempt from such CPO or CTA registration pursuant to Commission Regulation 4.13 or 4.14, that submit orders for execution on behalf of U.S. pools they operate that qualify as Professional Clients or ECPs or accounts of U.S. customers that qualify as Professional Clients or ECPs, for which they have discretionary authority, respectively, provided that an FCM or Rule 30.10 Firm acts as clearing firm and guarantees without limitation all such trades of the CPO or CTA effected through submission of orders on ETS.

Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contracts Based on the SLI Swiss Leader Index, the Swiss Market Index Midcap, the Dow Jones Euro STOXX Select Dividend 30 Stock Index and the TecDAX Index.

The Division of Clearing and Intermediary Oversight provided an Interpretation that a software vendor would not be an introducing broker (“IB”) as defined in Commodity Exchange Act Section 1a(23) and Commission Regulation 1.3(mm) as a result of providing its customers a software application with the ability to route orders for the purchase or sale of commodity futures and options contracts to a futures commission merchant (“FCM”) or IB of their choice. This relief is subject to conditions that: (1) each customer will have established a relationship with an FCM or IB independent of its relationship with the software vendor; (2) the vendor would not recommend, propose, or encourage that customers use any particular FCM or IB, even upon request; (3) the platform would not produce express “buy” or “sell” signals; (4) the software vendor would not solicit or accept orders for any commodity futures or commodity option transaction; (5) fees charged by the vendor would not be related to any fees charged by the FCM or IB for the execution of any futures orders; and (6) the software vendor would not have a membership with trading privileges on any designated contract market (“DCM”) or derivatives transaction execution facility (“DTEF”).

Euronext Paris SAs request for no-action relief in connection with the offer and sale in the United States of its futures contracts based on the FTSE EPRA/NAREIT Europe Index and the FTSE EPRA/NAREIT Euro Zone Index.

The Division of Market Oversight issued a letter amending the no-action relief granted May 24, 2007, permitting the Dubai Mercantile Exchange (DME) to make its electronic trading and order matching system, DME Direct, available to its members and guaranteed customers in the US without obtaining designation as a DCM or registration as a DTEF pursuant to Sections 5 and 5a, respectively, of the CEA. The amendment adds additional conditions to DME’s no-action relief for contracts that it lists that settle against any price of (1) a contract listed for trading on a DCM or DTEF, or (2) a contract listed for trading on an exempt commercial market that has been determined to be a significant price discovery contract. The additional conditions are that DME set position limits or position accountability levels (including related hedge exemption provisions) on these contracts, publish daily trading information, and provide a daily report of large trader positions and a quarterly report concerning positions held that are above the set position limits.

The Division of Market Oversight issued a letter amending the no-action relief granted November 12, 1999, permitting the International Petroleum Exchange of London Limited (now ICE Futures Europe) to make its electronic trading and order matching system available to its members in the US without obtaining contract market designation pursuant to Sections 5 and 5a of the CEA. The amendment adds additional conditions to ICE Futures Europe’s no-action relief for contracts that it lists that settle against any price of (1) a contract listed for trading on a DCM or DTEF, or (2) a contract listed for trading on an exempt commercial market that has been determined to be a significant price discovery contract. The additional conditions are that ICE Futures Europe set position limits or position accountability levels (including related hedge exemption provisions) on these contracts, publish daily trading information, and provide a daily report of large trader positions and a quarterly report concerning positions held that are above the set position limits.

The Division of Clearing and Intermediary Oversight issued an interpretation that when an IB does no more than introduce a non-clearing FCM to a clearing FCM, and the non-clearing FCM then establishes an omnibus account with the clearing FCM, the requirement of Regulation 1.57(a)(1) that an IB open and carry each customer’s account with a carrying FCM on a fully-disclosed basis is not triggered, where: (1) the IB does not transmit trading orders fore the omnibus account to the clearing FCM; and (2) the IB does not accept funds from the customers whose accounts are maintained in the omnibus account.

The Division of Clearing and Intermediary Oversight issued an interpretation that a technology service provider is not an introducing broker (IB) and, therefore, is not required to register as such, as a result of providing its customers with an internet-based software application with the ability to route orders for the purchase or sale of commodity futures and options to an IB or futures commission merchant (FCM) of their choice in connection with related cash market transactions. The software application permits a customer to establish parameters for purchasing grain in the cash market based upon a plurality of delivery locations with reference to the price of a futures contract, and upon finding a matching counterparty, subsequently generates an order for a corresponding futures transaction based upon the parameters established by the customer in advance. This interpretation was based on the representations that: (1) each customer will establish a relationship with an IB or FCM of its own choosing prior to engaging in futures and options transactions using the application; (2) a customer may use the software application solely to engage in cash market transactions; (3) all customers pay the same fee to the technology service provider regardless of whether the customer engages in any futures transactions, and such fee is not related to any fees charged by the FCM or IB for the execution of any futures orders; (4) the technology service provider does not receive any compensation from any customers’ FCM or IB, nor does it have any membership with trading privileges on any designated contract market or derivatives transaction execution facility; and (5) the software application does not provide express “buy” or “sell” signals.