CFTC Staff Letters Archive

CFTC Staff Letters Archive provides Letters from 2007 and earlier. For Letters published 2008 or later visit the All Letters page.

There are no Advisory Letters or Other Written Communications for 2007 or earlier.

Date	PDF and Description
04/02/2004	04-12 ; Section 4m(1);; No-Action The Division of Clearing and Intermediary Oversight issued a letter granting no-action relief to permit an energy management firm to provide commodity trading advice to customers, without registering as a commodity trading advisor. The relief was based upon, among other reasons, the representation that the commodity trading advice would be limited to hedging transactions on behalf of entities that qualify as "eligible contract participants" under the Commodity Exchange Act.
03/24/2004	04-11 ; 4b(d) of the CEAct and Commission regulation 1.20;; No-Action A bank requested an interpretation that a deposit account product that the Division of Clearing and Intermediary Oversight had previously interpreted as acceptable for the deposit of customer segregated funds by futures commission merchants was similarly acceptable for the deposit of customer segregated funds by derivatives clearing organizations. Based on an analysis of account, the Division issued an interpretation that the account would be acceptable as a deposit location as the account would be properly titled and covered by appropriate acknowledgements by the bank, and the funds in the account would at all times be immediately available for withdrawal on demand.
03/22/2004	04-15 ; Section 1a(23) and Regulation 1.3 (mm);; No-Action The Division of Clearing and Intermediary Oversight issued an interpretation that a software provider is not an introducing broker, within the meaning of section 1a(23) and regulation 1.3(mm), when it markets and distributes a trading and order management software program that allows institutional customers to directly access their futures commission merchant's order entry system through the proprietary software screen. This interpretation is based on the representations that: (1) the software provider does not solicit customers or orders for an FCM or the trading of futures contracts (customer indicate to the software provider the FCM with which they have an existing relationship or with whom they wish to trade); (2) even in response to a customer inquiry, the software provider does not recommend, propose, or encourage that customers use any particular FCM, or place any orders for futures contracts; (3) the software does not provide express "buy" or "sell" signals; (4) the fees paid to the software provider by the FCM are not associated with the fees paid to the FCM for the placement of customer orders - the fee is paid by the FCM based on the number of contracts executed with the FCM, not based on the FCM's commission or the price of the contract traded; (5) the software will be licensed only to institutional customers, not to individuals; and (6) the software provider's central business activities are the collection and distribution of data services.
03/05/2004	04-10 ; Rule 1.55;; No-Action The Division of Clearing and Intermediary Oversight declined to confirm that an FCM that conducts most of its business over an Internet-based electronic trading platform could comply with the risk disclosure requirement of Rule 1.55 by including in the hard-copy account opening agreement signed by the customer a statement that the customer had visited the FCM’s website and had accessed and read the required risk disclosure statement. The Division reiterated that requirement of Rule 1.55 that where the risk discourse statement is included as a package with other materials, even in an electronic format, it must appear as the cover page or the first page and as the only material on such page.
02/20/2004	04-09 ; Section 4d of the Commodity Exchange Act;; No-Action In CFTC Letter No. 03-28; the Division of Clearing and Intermediary Oversight granted no-action relief to permit a firm exempt from registration as a futures commission merchant (FCM) pursuant to Rule 30.10 to act as an introducing broker (IB) so as to introduce institutional U.S. customers to an affiliated FCM (US FCM) for purposes of trading US exchange-traded futures and options. Today, the Division issued a letter granting no-action relief to permit the same Rule 30.10 Firm to act as an IB so as to introduce U.S. customers to any FCM for the purpose of trading U.S. exchange-traded futures and options. The relief was predicated upon, among other conditions, an acknowledgment by US FCM that it will be jointly and severally liable for any violations of the Act or the Commission’s rules committed by Rule 30.10 Firm in connection with the latter’s handling of orders for US Customers for trading of futures and options on US Exchanges, including those orders executed by Rule 30.10 Firm and given up to another FCM.
01/28/2004	04-07 ; CFTC Regulation 1.17(d);; No-Action The Division of Clearing and Intermediary Oversight (DCIO) responded to an inquiry from a designated self-regulatory organization (DSRO) relating to the definition of equity capital in Commission Regulation 1.17(d). The DSRO requested confirmation that a futures commission merchant (FCM) may include in its equity capital the proceeds from a subordinated loan agreement that satisfies all of the terms and conditions for equity capital set forth in Rule 1.17(d), and also provides for the possibility of several advancements of principal, or drawdowns, during the term of the loan agreement. In its opinion letter, DCIO stated that Rule 1.17(d) does not preclude including such advances, if and when made, in the firm’s equity capital, so long as each advance separately satisfies the requirements for equity capital under Rule 1.17(d).
01/22/2004	04-08 ; Sections 4m(1) and 4n(1);; No-Action A person does not need to register as a CPO or CTA with the Commission where: (1) it is located outside the territorial U.S.; (2) none of the participants in any pool it operates is a United States person; (3) no funds or other capital are contributed to a pool from United States sources; (4) it has not and will not establish a location in the United States; (5) no person affiliated with it has undertaken or will undertake any marketing activity for the purpose, or that could reasonably be expected to have the effect, of soliciting participations from United States persons; and (6) no marketing activities in connection with it will be conducted within the United States.
01/22/2004	04-05 ; Section 2(a);; No-Action The London International Financial Futures and Option Exchange Administration and Management’s request for No-Action relief in connection with the offer and sale of its futures contracts based on the FTSEurofirst 80 Index and the FTSEurofirst 100 Index in the United States.
01/21/2004	04-06 ; CFTC Regulations 1.32 and 1.17;; No-Action The Division of Clearing and Intermediary Oversight (DCIO) has issued a letter to Sentinel Management Group, Inc. to reaffirm the staff’s views concerning the application of the Commission’s segregation and net capital regulations to certain accounts managed by Sentinel. Specifically, staff has confirmed that an FCM client of Sentinel may include its proportionate interest in the total funds held in a certain account managed by Sentinel in performing the daily segregated funds computation required by Regulation 1.32, subject to applicable haircuts. Further, an FCM client may include its proprietary funds held in a certain account managed by Sentinel as a current asset in computing its minimum adjusted net capital pursuant to Regulation 1.17, subject to certain conditions, including upon Sentinel informing each FCM client that it should report its proportionate interest in the account as an investment on financial reports filed with the Commission and self-regulatory organizations.
01/15/2004	04-04 ; Rule 1.57(a)(1);; No-Action The Division of Clearing and Intermediary Oversight permitted a futures commission merchant (FCM), at the request of its guaranteed introducing broker’s (IB) client, to “give up” to another FCM for clearing orders placed by the client. The guaranteeing FCM was sufficiently capitalized to meet all obligations it may have to the IB’s customers, and the IB would not be compensated by the second FCM in connection with orders that the client enters with the IB and that were cleared through the second FCM.