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
06/15/2006	06-12 ; Section 4m(1) of the CEA;; No-Action The Division of Clearing and Intermediary Oversight issued a no-action letter to the co-general partner of a commodity pool granting relief from the commodity pool operator (CPO) registration requirements set forth in Section 4m(1) of the Commodity Exchange Act (Act). The Division noted that: (i) the co-general partner was structured for tax purposes to provide its principals with an ownership stake in the underlying commodity pool; (ii) the other co-general partner is a registered CPO that will have all CPO responsibilities for the commodity pool; (iii) certain principals of the registered CPO will be the principals of the no-actioned CPO; and (iv) neither co-general partner nor any principal is subject to statutory disqualification under Section 8a(2) or (3) of the Act. Among other conditions for relief, the co-general partners have submitted cross acknowledgments, agreeing to be jointly and severally liable for violations of the Act and Commission regulations in connection with the operation of the commodity pool. In addition, the no-actioned CPO confirmed that it will provide to the CPO whatever information may be necessary for the CPO to include in any Disclosure Document prepared in accordance with Part 4 of the Commission’s regulations.
06/14/2006	06-11 ; Section 2(a);; No-Action No-Action request to permit offer and sale in the United States of the Bombay Stock Exchange Limited’s futures contract based on the Bombay Stock Exchange Sensitive Index.
05/17/2006	06-10 ; Regulation 166.4;; No-Action The Division of Clearing and Intermediary Oversight confirmed that a registrant would be conducting its branch office operations in compliance with regulation 166.4, based upon certain changes to those operations that registrant represented that it would make. (Previously, by CFTC Staff Letter No. 05-17, the Division had denied the request of the registrant to operate a branch office as a separately incorporated entity.)
05/05/2006	06-09 ; Sections 4a and 150.2;; No-Action The Division of Market Oversight has issued a no-action letter regarding speculative position limits. A registered commodity pool operator offers to the public shares of an index-based fund composed of notional amounts of various physical commodities, including wheat and corn. The fund maintains offsetting long futures positions in the commodities that make up the index. If the fund reaches a certain size, its positions in wheat and corn futures will exceed the speculative position limits for those commodities set out in Commission Regulation 150.2. The letter states that, subject to certain conditions, the Division will not recommend that enforcement action be taken with respect to the position limits being exceeded. The conditions include: that the futures trading activity passively tracks a widely recognized commodity index; that the futures trading activity is unleveraged; that the futures trading activity does not result in price exposure to the fund (i.e., price exposure is passed on to the shareholders); and that positions in excess of the speculative limits are not carried into the spot month.
04/28/2006	06-13 ; Regulations 4.22(c) and 4.22(h);; No-Action The Division of Clearing and Intermediary Oversight (DCIO) granted an exemption to a commodity pool operator (CPO) with respect to the annual reports required by Regulations 4.22(c) for two funds that have permanently ceased trading operations and have been placed into voluntary liquidation. The Funds are constituted under the laws of a foreign jurisdiction and registered under the foreign jurisdiction’s law as exempted companies. DCIO determined to accept the Funds’ December 31, 2005 certified annual reports as final annual reports, and that commencing January 1, 2006, the CPO will not be subject to the reporting requirements of Part 4 of the Commission regulations pending the final distribution of the Funds’ assets to the participants. In addition, as the Funds’ Liquidators have assumed legal responsibility for the Funds under the prevailing foreign jurisdiction’s law, including the requirement to provide the Funds’ participants with periodic reporting on the status of the liquidation and the Funds’ assets, the CPO is relieved from the requirement that it sign the oath or affirmation that is required to be included with the Funds’ annual reports filed with NFA. DCIO also granted an extension of time to file the Funds’ annual reports.
04/21/2006	06-08 ; Sections 5 and 5a of the CEA;; No-Action The Division of Market Oversight issued a letter amending the no-action relief granted August 10, 1999, permitting Eurex Deutschland (Eurex) members to install additional electronic trading terminals in the U.S., to list certain new contracts for trading from Eurex terminals in the U.S., and to authorize the use of automated order routing systems without obtaining contract market designation pursuant to Sections 5 and 5a of the CEA. The amendment permits Eurex members who are registered with the Commission as Commodity Pool Operators (CPOs) or Commodity Trading Advisors (CTAs), or who are exempt from such CPO or CTA registration pursuant to Commission Regulation 4.13 or 4.14, to use Eurex terminals located in the United States for the transmission of orders on behalf of U.S. pools they operate or U.S. customer accounts over which they have discretionary authority, respectively, provided that an FCM or Rule 30.10 Firm acts as clearing firm with respect to all activity conducted by such CPOs and CTAs through the submission of orders on the trading system.
03/22/2006	06-07 ; Sections 4a, 4c(b), 4g, and 4i; Parts 15, and 17 through 19, of the Commission’s Regulations;; No-Action Commission rule 15.03(b) applies a contract reporting level of 125,000 to all HedgeStreet Products. That term is strictly defined by Commission rule 15.03(a) as a HedgeStreet contract with a maximum possible return of $10. HedgeStreet has listed for trading exclusively self-cleared and fully collateralized contracts with variable returns that can exceed $10 per contract (referred to herein as $10-plus contracts). As a result of the strict regulatory definition of HedgeStreet Products, the Commission set contract reporting level of 125,000 is not applicable to any $10-plus contract. Instead, such contracts are subject to the reporting levels codified in rule 15.03(b) for specific commodities, or the default reporting level of 25 contracts set for futures and option contracts that are derivatives of all other commodities. The codified reporting levels that would be applicable in the absence of no-action relief to HedgeStreet’s $10-plus contracts are generally designed to apply to contracts that have significantly higher notional values than the contracts presently offered by HedgeStreet. The Division believes that the application of the contract reporting levels codified in Commission rule 15.03(b) to HedgeStreet’s $10-plus contracts would not assist the Commission in conducting meaningful market and financial surveillance. Therefore, the no-action letter permits HedgeStreet, and all persons trading on HedgeStreet, to adhere to reporting levels that are determined by applying a maximum return formula to specific $10-plus contracts. The maximum return formula establishes $1,250,000, the maximum monetary value associated with a reportable position in a HedgeStreet Product, as a baseline value, and then divides that baseline value by the maximum possible return of a particular $10-plus contract to arrive at specific reporting levels for individual contracts.
03/14/2006	06-06 ; Section 2(a);; No-Action Response of CFTC to Eurex Deutschland’s request for no-action relief in connection with the offer and sale in the United States of its MDAX Futures Contracts.
01/18/2006	06-05 ; Regulation 1.17(d)(1);; No-Action The Division of Clearing and Intermediary Oversight (DCIO), in response to an inquiry from the designated self-regulatory organization of a futures commission merchant (FCM), issued a letter to provide guidance on a Commission rule that permits FCMs to include in their equity capital the funds borrowed under subordination agreements that meet all of the requirements specified in the rule, including that the lender be a partner or stockholder of the FCM. DCIO took the position that, consistent with the purposes of Rule 1.17(d)(1), and also consistent with NASD guidance to broker-dealers for similar equity capital requirements under Securities Exchange and Commission (SEC) regulations, the lender of the funds under such an agreement may be a company that owns 100 percent of the shares of the company that owns 100 percent of the sole shareholder of the FCM.
01/11/2006	06-02 ; Section 32.23 (a);; No-Action The Division of Market Oversight has issued a no-action letter that would permit a to-be-formed, wholly owned subsidiary of Cargill, Inc. to register as an agricultural trade option merchant, even though such entity might not qualify as a “producer, processor, or commercial user of, or a merchant handling” the commodity underlying the option under a strict interpretation of those terms.