Number: 22-96
For Release: May 2, 1996
On February 28, 1996, the Division of Trading and Markets ("Division")
of the Commodity Futures Trading Commission ("Commission") issued Interpretative Letter 96-18 permitting, subject to certain conditions, a registered
futures commission merchant ("FCM") to fulfill its obligations under Commis-
sion Rule 1.33(b)by sending daily confirmation statements via facsimile to
institutional customers, without mailing such statements in hard copy form.
By this Advisory, the Division confirms that other FCMs may transmit daily
confirmation statements solely by facsimile transmission to customers who are
either: (1) "eligible swap participants," as defined by Commission Rule
35.1(b)(2), or (2) "institutional customers," as currently defined by Federal
Reserve Board ("FRB") Rule 225.2(g),subject to the following conditions.
FCMs intending to provide confirmation statements to eligible customers by
means of facsimile must obtain the written, hard copy, revocable consent of
such eligible customers to receipt of delivery of daily confirmation state-
ments solely by facsimile transmission. Further, the FCM must continue to
furnish monthly account statements to such customers in hard copy form and
must maintain the confirmation statements in accordance with the standards set
forth in Commission Rule 1.31.
Eligible customers, for purposes of this Advisory, include eligible swap
participants, as defined by Commission Rule 35.1(b)(2), and institutional
customers, as defined by FRB Rule 225.2(g). In general, eligible swap
participants under Commission Rule 35.1(b)(2) include:
(1) a bank or trust company (acting on its own behalf or on behalf of
another eligible swap participant);
(2) a savings association or credit union;
(3) an insurance company;
(4) an investment company subject to regulation under the Investment
Company Act of 1940 or a foreign person performing a similar role
or function subject as such to foreign regulation;
(5) a commodity pool, formed and operated by a person subject to
regulation under the Commodity Exchange Act ("Act") or a foreign
person performing a similar role or function subject as such to
foreign regulation, that has assets exceeding $5,000,000;
(6) a corporation, partnership, proprietorship, organization, trust or
other entity (a) with assets exceeding $10,000,000, (b) with a net
worth of $1,000,000 that enters into the swap agreement in connec-
tion with its business, or (c) whose obligations under the swap
agreement are guaranteed by another eligible swap participant
listed above or under item (8) below;
(7) an employee benefit plan subject to the Employee Retirement Income
Security Act of 1974 or a foreign person performing a similar role
or function subject as such to foreign regulation, with assets
exceeding $5,000,000, or whose investment decisions are made by a
bank, trust or insurance company, or investment adviser or commodity trading advisor subject to regulation;
(8) any governmental entity or political subdivision thereof, or any
multinational or supranational entity, or any instrumentality,
agency or department of any of the foregoing;
(9) a broker-dealer subject to regulation under the Securities Exchange Act of 1934 or a foreign person performing a similar role
or function subject as such to foreign regulation;
(10) an FCM, floor broker or floor trader subject to regulation under
the Act or a foreign person performing a similar role or function
subject as such to foreign regulation; or
(11) a natural person with assets exceeding $10,000,000.
Institutional customers under FRB Rule 225.2(g) include:
(1) a bank (acting in an individual or fiduciary capacity), savings
and loan association, insurance company, registered investment
company, or corporation, partnership, proprietorship, organization
or institutional entity with a net worth exceeding $1,000,000;
(2) an employee benefit plan with assets exceeding $1,000,000, or
whose investment decisions are made by
a bank, insurance company or registered investment adviser;
(3) a natural person whose net worth (or joint net worth with a
spouse) exceeds $1,000,000;
(4) a broker-dealer or option trader registered under the Securities
Exchange Act of 1934, or other securities, investment or banking
professional; or
(5) an entity whose equity owners are institutional
customers.
By this Advisory, the Division also confirms that FCMs may fulfill their
obligations under Rule 1.33(d) with respect to furnishing confirmation and
purchase-and-sale statements to account controllers by transmitting such
statements solely by facsimile, subject to the following conditions. FCMs
intending to provide such statements to account controllers by means of
facsimile must continue to furnish monthly account statements to the account
controllers in hard copy form and must obtain the account controllers'
written, hard copy, revocable consent to receive confirmation and purchase-and-sale statements solely by facsimile transmission. Further, the account
controllers must maintain the confirmation and purchase-and-sale statements in
accordance with the standards set forth in Commission Rule 1.31. FCMs may
furnish confirmation and purchase-and-sale statements to account controllers
under Rule 1.33(d) by facsimile irrespective of whether the customer meets the
criteria set forth herein as an institutional customer or eligible swap
participant, or has elected to receive daily confirmations by facsimile.