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
01/08/2002	02-04 ; Section 2(c) of the Act;; No-Action The Division of Trading and Markets responded to an inquiry about the regulation of the foreign currency market by the operator of an investment club that limits its activities to the trading of foreign currency on an off-exchange basis. The Division indicated that the Commodity Futures Modernization Act of 2000 had amended the Commodity Exchange Act to make clear that the offering of off-exchange foreign currency futures and options contracts to retail customers is unlawful unless the counterparty is a regulated entity enumerated in the Commodity Exchange Act, such as a registered FCM. The Division noted that, generally, an investment trust, syndicate, or similar enterprise operated for the purpose of trading commodity interests is a "pool" and a person who operates a "pool" is a CPO and must register as such. However, with respect to a person that operates a "pool" that limits its trading activities to off-exchange foreign currency with a registered FCM acting as a counterparty under Section 2(c)(2)(B)(ii) of the Act, the person is not required to register with the Commission as a CPO, but may voluntarily do so.
12/20/2001	02-03 ; Section 4m(1);; No-Action The Division of Trading and Markets took a CPO and CTA registration no-action position with respect to an SEC-registration investment adviser operating a limited liability company (the Company) to pool an invest assets of ERISA pension and profit sharing plans and government plans. The Company would invest in limited liability vehicles, some of which may trade commodity interests. The Division considered the requester's investment adviser registration and the fact that it would be managing and advising the Company in essentially the same way that would be permitted for an individual plan that was qualifying entity under Rule 4.5 (except that the requester intended to restrict its commodity interest trading advice to bona fide hedging transactions). The no-action position was conditioned upon the requester maintaining all books and records prepared in connection with operating and advising the Company, and making such books and records available in accordance with the provisions of Rule 1.31.
12/20/2001	02-02 ; Rules 4.24(l) and 4.34(k);; No-Action The Division of Trading and Markets denied a CPO/CTA's request for exemption from the requirement to disclose material self-regulatory organization (SRO) actions involving the CPO/CTA and concluded within the preceding five years. The request asserted that, but for unnecessary delay by the SRO in responding to a request for hearing, the SRO action in questions would have been concluded more than five years prior to the date of the exemption request. The Division found that the SRO action was material, and that the CPO/CTA had not made the required showing that the requested exemption wad not contrary to the public interest and the purposes of the provisions from which the exemption was sought.
12/12/2001	01-91 ; Section 2(c) of the Act;; No-Action The Division of Trading and Markets responded to an inquiry about the regulation of the foreign currency market by a company that offers to exercise discretionary trading authority over a customer's account for trading in foreign currency on an off-exchange basis. The Division indicated that the Commodity Futures Modernization Act of 2000 had amended the Commodity Exchange Act to make clear that the offering of off-exchange foreign currency futures and options contracts to retail customers is unlawful unless the counterparty is a regulated entity enumerated in the Commodity Exchange Act, such as a registered FCM. The Division noted that, generally, a firm that, for compensation or profit, exercises discretionary trading authority over a customer's account for trading in futures or options contracts is a CTA and must register as such. However, with respect to a firm that manages the funds of retail customers that are held by a registered FCM acting as a counterparty under Section 2(c)(2)(B)(ii) of the Act for the purposes of off-exchange foreign currency trading, the firm is not required to register with the Commission as a CTA, but may voluntarily do so.
12/11/2001	02-01 ; Section 1a, 4d, 4e, 4k, 4m, 5a and 5b;; No-Action The Division of Trading and Markets issued an interpretation that a staff and employee leasing company was not required to register with the Commission under the Act, where the leasing company does not control, supervise or participate in the client/employer's commodity interest trading activities or those of the employees it leases to the client/employer. The leasing company would not be holding itself out in any way as being involved in activities subject to regulation under the Act. Although the leasing company's compensation would be a percentage of the gross wages paid to the leased employee (including employees who receive commissions), that compensation would not be directly related to commodity interest trading activity on the part of the client/employer.
12/11/2001	01-92 ; Section 4m(1); Rule 4.14(a)(6); NFA Bylaw 1101;; No-Action The Division of Trading and Markets responded to an inquiry regarding a registered CTA becoming an NFA member. The Division indicated that NFA Bylaw 1101 provides that an NFA member may not accept an order or handle a transaction for or on behalf of any non-Member of NFA that is required to be registered with the Commission. Accordingly, before a registered CTA could direct client accounts it must be a member of NFA. The CTA indicated that it was contemplating becoming a principal of an IB that is a member of NFA. The Division noted that if the IB were provided with a power of attorney to direct trading in client accounts, its NFA membership would be sufficient for purposes of satisfying NFA Bylaw 1101. However, the IB would fall within the definition of a CTA and, absent an exemption, the IB also would be required to register with the Commission as a CTA. If, however, the customer, instead of giving the power of attorney to the IB, gives it to the CTA directly, the IB would be acting solely as an IB and would not also be required to register as a CTA. However, the IB's NFA membership would not be sufficient as to the CTA for purposes of NFA Bylaw 1101, even though the CTA was a principal of the IB.
12/11/2001	01-90 ; Rule 4.7;; No-Action The CPO of a 4.7 pool requested permission to file monthly periodic reports to participants, which is more frequent than the quarterly periodic reports required by Rule 4.7(b)(2), but the CPO requested permission to file those reports 45 days after the end of the month. The exemption was granted based on the fact that, on balance, the participants would receive the majority of the financial information earlier than if the CPO were filing quarterly information.
12/03/2001	01-88 ; Rule 1.31 - Books and records, keeping and inspection;; No-Action The Division of Trading and Markets responded to a request for clarification whether, in view of the possibility that required records stored electronically in the .pdf format may be altered in the process of conversion from text file format to .pdf format, it is sufficient to document how the information was obtained and the process used to convert it into .pdf format for storage. The Division stated that the fact that alteration may occur during this conversion process is part of the reason that the Commission continues to require that original trading cards and customer order tickets be retained in hard copy form. With respect to other required records, so long as the registrant insures that the information has been retained and carried over from one format to the other with substantial accuracy and integrity, the fact that some minor level of alteration may occur as part of the conversion process does not in itself constitute failure to comply with Rule 1.31.
11/21/2001	01-86 ; Regulations 4.7(b)(2) and 4.7(b)(3);; No-Action The Division of Trading and Markets provided emptive relief to a registered CPO from the periodic and annual reporting requirements of Rules 4.7(b)(2) and 4.7(b)(3) in connection with its operation of master funds that have as their sole participant one of two feeder funds that are also operated by the CPO. The relief is subject to the conditions that: (i) the CPO remain the CPO of the Master Funds and the Feeder Funds; (ii) participation in the Master Funds is limited to the two Feeder Funds; and (iii) the annual reports of the Feeder Funds contain financial statements that include, among other information, the fees associated with the operation of the Master Funds.
11/21/2001	01-85 ; Regulations 4.21 and 4.22;; No-Action The Division of Trading and Markets provided exemptive relief to a registered CPO (CPO X) from the disclosure, periodic, and annual reporting requirements of Rules 4.21 and 4.22 in connection with its operation of a master fund that has as its sole participants two feeder funds. CPO X serves as the CPO of one of the feeder funds and CPO Y serves as the CPO of the other feeder fund. Both CPOs share the same managing members. Accordingly, the Division reasoned that requiring CPO X to provide a disclosure document and periodic and annual reports would, in the one instance, be requiring it to provide information to itself, and in the second instance, effectively be requiring it to provide information to itself since both CPOs have the same managing members. Relief is subject to the conditions that: (i) CPO X and CPO Y remain the CPOs of the respective funds, and the managing members of CPO X and CPO Y remain the same; (ii) participation in the Master Fund is limited to the two feeder funds; and (iii) the annual reports of the feeder funds contain financial statement that include, among other information, the fees associated with the operation of the Master Fund.