2010-21726

FR Doc 2010-21726[Federal Register: September 10, 2010 (Volume 75, Number 175)]

[Notices]

[Page 55310-55312]

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

[DOCID:fr10se10-32]

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COMMODITY FUTURES TRADING COMMISSION

Performance of Registration Functions by National Futures

Association With Respect to Retail Foreign Exchange Dealers and

Associated Persons

AGENCY: Commodity Futures Trading Commission

ACTION: Notice and order

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or

``CFTC'') is authorizing the National Futures Association (``NFA''),

effective September 10, 2010, to process and grant applications for

initial registration, renewed registration and withdrawals of retail

foreign exchange dealers (``RFEDs'') and their associated persons

(``APs'') and to issue temporary licenses to eligible APs; to conduct

proceedings to deny, condition, suspend, restrict or revoke the

registration of any RFED or AP of an RFED, or an applicant for

registration in either category; and to maintain records regarding

RFEDs and their APs, and to serve as the official custodian of those

Commission records.

DATES: Effective Date: September 10, 2010.

FOR FURTHER INFORMATION CONTACT: For information contact: William

Penner, Deputy Director, Division of Clearing and Intermediary

Oversight, 1155 21st Street, NW, Washington, DC 20581. Telephone

number: 202-418-5450; facsimile number: 202-418-5547; and electronic

mail: [email protected] Christopher Cummings, Special Counsel, Division

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

Washington, DC 20581. Telephone number (202) 418-5450; facsimile

number: 202-418-5547; and electronic mail: [email protected]

SUPPLEMENTARY INFORMATION:

I. Authority and Background

In a separate document published elsewhere in today's Federal

Register, the Commission is issuing final rules regarding the

regulation of off-exchange retail foreign exchange transactions and

intermediaries. The final rules follow the publication of proposed

rules on January 20, 2010,\1\ and represent a comprehensive regulatory

scheme to implement the requirements of the CFTC Reauthorization Act of

2008 (``CRA'') with regard to off-exchange retail forex

transactions.\2\ The

[[Page 55311]]

Commodity Exchange Act (``Act''),\3\ as amended by the CRA, provides

that the Commission's jurisdiction extends to off-exchange contracts of

sale of a commodity for future delivery (or an option on such a

contract) or an option (other than an option executed or traded on a

national securities exchange), and to certain off-exchange leveraged or

margined contracts in foreign currency that are offered to or entered

into with retail customers. Moreover, the CRA provides the Commission

with the authority to register persons serving as intermediaries or

counterparties to these transactions.

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\1\ See Regulation of Off-Exchange Retail Foreign Exchange

Transactions and Intermediaries; Proposed Rule, 75 FR 3282 (Jan. 20,

2010).

\2\ Food, Conservation, and Energy Act of 2008, Pub. L. 110-246,

122 Stat. 1651, 2189-2201 (2008).

\3\ 7 U.S.C. 1, et seq.

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Specifically, the CRA gives the Commission the authority to require

the registration of intermediaries who solicit retail customers to

participate in off-exchange forex contracts, who pool customer money

for the purpose of trading off-exchange currency contracts or who

manage customer money for this purpose. In the final rules published

today, the Commission has determined that these entities should be

registered in the existing categories of introducing broker (``IB''),

commodity pool operator (``CPO''), or commodity trading advisor

(``CTA''), as appropriate.

The CRA also authorizes the Commission to register entities that

serve as counterparties to such transactions, either within the

existing category of futures commission merchant (``FCM'') or as an

RFED, a new category of registrant. RFEDs are counterparties not

engaged primarily or substantially in the offer and sale of exchange-

traded futures (as opposed to FCMs, which are).\4\ The CRA provides

that RFEDs, their APs, and each of the other categories of registrants

discussed above, must be members of a registered futures association

such as the National Futures Association (``NFA'') and must register

with the Commission subject to such terms as the Commission may

prescribe.\5\

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\4\ Previously, firms serving as counterparties to retail forex

typically registered as FCMs, even though they may not have engaged

in exchange-traded futures business. Under the CRA, either FCMs or

RFEDs can offer to serve as counterparties to retail forex

transactions, but the entity must register as an FCM if primarily

and substantially engaged in on-exchange trading, or an RFED if not.

See, 7 U.S.C. 2(c)(2)(B)(i)(II)(cc) and (gg) and 7 U.S.C.

2(c)(2)(C)(i).

\5\ Id.

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The CFTC has previously authorized NFA to perform the full range of

registration functions with regard to FCMs, IBs, CTAs, CPOs and their

respective APs, including granting applications for initial

registration and renewed registration; enabling withdrawals and issuing

temporary licenses to eligible APs; and conducting proceedings to deny,

condition, suspend, restrict or revoke the registration of existing

registrants or applicants for registration in each category.\6\ By

today's order the Commission authorizes NFA to perform these functions

with regard to RFEDs and their APs.

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\6\ See 48 FR 15940 (Apr. 13, 1983); 48 FR 35158 (Aug. 3, 1983);

48 FR 51809 (Nov. 14, 1983); 49 FR 8226 (Mar. 5, 1984); 49 FR 39593

(Oct. 9, 1984); and 50 FR 34885 (Aug. 28, 1985).

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As proposed and adopted, Commission Regulations 5.3(a)(4) and (6)

require all those who meet the definition of an RFED, and any such

associated persons of RFEDs to register with the Commission in

accordance with part 3 of the Commission's Regulations. (17 CFR 3.1, et

seq.) Commission Regulation 3.2 provides that the registration

functions of the Commission are to be performed by the National Futures

Association. Upon consideration, the Commission has determined to

authorize NFA, effective September 10, 2010, to perform registration

functions with regard to RFEDs and their APs as set forth in part 3 of

the Commission's Regulations. Moreover, Section 17(o)(2) of the Act

provides that the Commission may authorize a registered futures

association, such as NFA, to perform Commission registration functions,

to deny, condition, suspend, restrict or revoke any registration,

subject to Commission review.\7\ The Commission is therefore also

authorizing NFA to take such actions with regard to RFED and AP

applicants as well as existing registrants in each of these categories.

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\7\ 7 U.S.C. 21(o)(2).

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The Commission further notes that it has, by prior orders,

authorized NFA to maintain various Commission registration records, and

has certified NFA as the official custodian of such records for the

Commission.\8\ The Commission has determined, in accordance with its

authority under section 8a(10) of the Act, to authorize NFA to maintain

and serve as official custodian of the Commission's registration

records with respect to RFEDs and their APs.

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\8\ See 49 FR 39593 (Oct. 9, 1984) and 66 FR 43227 (Aug. 17,

2001).

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In maintaining the Commission's registration records pursuant to

this Order, NFA shall be subject to all other requirements and

obligations imposed upon it by the Commission in existing or future

Orders or regulations. In this regard, NFA shall also implement such

additional procedures (or modify existing procedures) as are necessary

to ensure the security and integrity of these records as may be

acceptable to the Commission; to facilitate prompt access to these

records by the Commission and its staff; to facilitate disclosure of

public or nonpublic information in those records when permitted by

Commission Orders or rules, and to keep logs as required by the

Commission concerning disclosures of nonpublic information; and

otherwise to safeguard the confidentiality of the records.

II. Conclusion and Order

The Commission has determined, in accordance with the provisions of

Sections 2(c)(2)(B), 2(c)(2)(C), and 8a(10) of the Act, to authorize

NFA, effective September 10, 2010 to perform the following registration

functions:

(1) To process and grant applications for initial registration,

renewed registration and withdrawals from registration of retail

foreign exchange dealers (``RFEDs'') and their associated persons

(``APs'') and to issue temporary licenses to eligible APs;

(2) To conduct proceedings to deny, condition, suspend, restrict or

revoke the registration of any RFED or AP of an RFED, or any applicant

for registration in either category; and

(3) To maintain records regarding RFEDs and their APs, and to serve

as the official custodian of those Commission records.

NFA shall perform these functions in accordance with the standards

established by the Act and the regulations promulgated thereunder. NFA

shall follow the same procedures with respect to recordkeeping,

disclosure and tracking of fitness investigations and adverse action

proceedings concerning RFEDs and their APs as it must follow in cases

involving FCMs, IBs, CPOs, CTAs, and their respective APs.

These determinations are based upon the Congressional intent

expressed in sections 2(c)(2)(B), 2(c)(2)(C), 8a(10) and 17(o) of the

Act. This Order does not, however, authorize NFA to accept or act upon

requests for exemption from registration, or to render ``no-action'' or

interpretive letters with respect to applicable registration

requirements.

Nothing in this Order, or in sections 2(c)(2)(B), 2(c)(2)(C),

8a(10) and 17(o) of the Act, shall affect the Commission's authority to

review the performance by NFA of Commission registration functions.\9\

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\9\ See also section 17(o)(3) of the Act, 7 U.S.C. 21(o)(3).

[[Page 55312]]

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Issued in Washington, DC, on August 26, 2010.

David A. Stawick,

Secretary of the Commission.

[FR Doc. 2010-21726 Filed 9-9-10; 8:45 am]

BILLING CODE P

Last Updated: September 10, 2010