Release: #4625-02
For Release: March 21, 2002

Commodity Futures Trading Commission's Division of Trading and Markets Issues Advisory Concerning Foreign Currency Trading by Retail Customers

Washington, D.C. – The Commodity Futures Trading Commission’s (Commission) Division of Trading and Markets (Division) today issued an advisory concerning foreign currency futures and options trading by retail customers. The Commodity Futures Modernization Act (CFMA), enacted in December 2000, amended the Commodity Exchange Act (Act) to clarify the jurisdiction of the Commission in the area of foreign currency futures and options trading. Generally, offering foreign currency futures and options contracts to retail customers on an "off-exchange" basis, i.e., where the contracts are not executed or traded on an organized exchange, is unlawful unless the counterparty is a regulated entity listed in the Act.

Since enactment of the CFMA, the Division has received numerous inquiries regarding off-exchange foreign currency futures and options trading by retail customers. In the advisory issued today, the Division brings together, in one document, several positions that it has previously taken in response to these inquiries.

Among other things, the advisory addresses issues of:

The Division indicated that, when undertaken in the manner discussed in the advisory, such activities do not require registration under the Act. The Division also indicated that registration as an FCM is not sufficient to permit the operation of a trading platform that functions as a matching system, where retail customers may trade directly with one another. Operation of this type of trading platform violates the requirement that the counterparty to a retail customer be one of the regulated entities listed in the Act.

Copies of the advisory can be obtained by contacting the Office of the Secretariat, Three Lafayette Centre, 1155, 21st Street, N.W., Washington, DC 20581, (202) 418-5100 or by accessing the Commodity Futures Trading Commission website.