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
03/12/1998	98-17 ; Rule 166.4;; No-Action The Division of Trading and Markets denied the request of a registered CTA for relief from the requirement that it list the home workplace of an AP as a branch office. The CTA represented that the AP did not solicit customer accounts, open customer accounts, participate in the implementation of the CTA's discretionary trading system, or place orders for execution from his home. The CTA further represented that the individual was registered as an AP solely to permit him to: 1) assume responsibility for trading discretionary accounts in the event the other principals of the CTA became incapacitated; 2) respond to requests for instructions on how to open discretionary trading accounts and for information on the performance of CTA's trading systems in the event such inquiries arose while the AP was conducting seminars or being interviewed by the media; and 3) respond to customer inquiries regarding the mechanics of the CTA's trading systems when forwarded to his home. The Division stated that the AP's status as a registered AP was the controlling factor in determining the applicability of the branch office requirement to his home, not the nature of the business activities he conducts there. The AP could not have the imprimatur of registration without fulfilling the duties attendant to such registration. Accordingly, the CTA must list the AP's home as a branch office.
02/27/1998	98-16 ; Rule 4.7(a) - Exemptive Relief for CPOs;; No-Action The Division of Trading and Markets provided exemptive relief to a registered CPO to permit it to accept the investment of a non-QEP into a Rule 4.7 commodity pool operated by the CPO and for relief from the ten percent investment limitation of Rule 4.7(a)(1)(ii)(B)(2)(xi). The investor, a computer analyst for the CTA of the pool, implements analytical trading models for the pool. The relief was granting based upon representations that the non-QEP consent to being treated as a QEP and be given access to the books and records of the pool.
02/27/1998	98-15 ; Rule 4.7(a) - Exemptive Relief for CPOs;; No-Action The Division of Trading and Markets provided exemptive relief to a registered CPO to permit it to accept the investment of a non-QEP into a Rule 4.7 commodity pool operated by the CPO and for relief from the ten percent investment limitation of Rule 4.7(a)(1)(ii)(B)(2)(xi). The investor, a computer analyst for the CPO, implements analytical trading models for the pool. The relief was granting based upon representations that the non-QEP consent to being treated as a QEP and be given access to the books and records of the pool.
02/27/1998	98-14 ; Rule 4.7(a) - Exemptive Relief for CPO;; No-Action The Division of Trading & Markets confirmed an exemption from the requirements of Rules 4.21, 4.22(a) and (b), 4.25, and 4.26 that was previously granted to a registered CPO despite a change in the ownership composition of a pool operated by the CPO and granted an exemption to the CPO to permit the participants in a pool, some of whom do not meet the QEP criteria, to allocate a portion of their investments to a second Rule 4.7 pool operated by the CPO. The first pool was formed as a trading vehicle for the principals and employees of the CPO and its affiliates. The CPO was seeking to allow one limited partner to transfer her interest to her husband and to allow two other limited partners, one former employee and the spouse of another former employee, to maintain their investments. With respect to the second pool, the relief was granted based upon representations that all of the participants were involved in the trading or management of the pool or were related to someone who was so involved.
02/23/1998	98-11 ; Rule 4.7(a);; No-Action The Division denied the request of a registered CPO of a Rule 4.7(a) Exempt Pool to treat an individual participant as though he satisfied the QEP criteria of Rule 4.7(a). The Division stated that the participant's portfolio and net worth or annual income amounts fell short of the figures required by the rule. In addition, the Division was not presented with any other facts or circumstances that would support the CPO's request to treat the participant as though he satisfied the QEP criteria of the rule.
01/26/1998	98-06 ; Rule 4.7(a);; No-Action The Division of Trading and Markets declined to reconsider a denial of relief it previously had issued to a registered CPO who had requested that an employee be treated as a QEP for the purpose of the CPO claiming relief under Rule 4.7(a). The Division based its position upon the representations that the employee maintains no significant securities investments or sufficient margin or option premiums on deposit with a futures commission merchant, has a minimal net worth at the present time, has an annual salary of only one half the amount required by the QEP standard and is relatively inexperienced in the securities industry.
01/22/1998	98-10 ; Rule 4.7(a) - Exemptive Relief for CPOs;; No-Action The Division of Trading & Markets provided exemptive relief to an applicant for registration as a CPO that will trade commodity interest upon registration to permit it to accept the investments of several individuals who are not QEPs into two Rule 4.7 commodity pools operated by CPO. Two of the prospective investors are portfolio managers employed by a firm affiliated with the CPO by common ownership. The remaining two prospective investors include accounts established for the benefit of the children of the Chairman and CEO of the CPO and trusts established for the benefit of these children. The Division granted the relief subject to the condition that each of the non-QEP consent in writing to being treated as QEP.
01/22/1998	98-07 ; Section la(5) and 4k(3) of the Act - Registration Requirements for Entity Which Proposes to Start a Business Advising Farmers How to Hedge by Trading Futures;; No-Action The Division of Trading & Markets provided interpretative advice to an entity that is seeking to start a business advising farmers "how to hedge, through trends and using futures." The entity advertises that its services are "designed for you and your farm." The entity purposes to provide its services to clients through the use of facsimiles, seminars and face-to-face interviews. The entity claims that it will not engage in any trading itself, nor recommend specific trades, nor refer clients to specific entities or individuals for the purpose of obtaining trading advice or other services. The Division advised the entity that it is required to register as a commodity trading advisor because the registration requirements are triggered not only when specific transactions are recommended but also when, as here, advice is given as the value or advisability of trading in futures or options. The Division also advised the entity that since the entity's employees responsible for soliciting clients will have not discretionary authority over any commodity interest trading accounts, these individuals will not have to register as APs.
01/12/1998	98-05 ; Section 4d(2) of the Act; Commission Rules 1.25 and 1.31;; No-Action In CFTC Interpretative Letter No. 96-78 (f26,822), enforcement action was not recommended against FCM clearing members of a contract market based solely upon their investment of customer funds in a program involving the establishment of two limited liability company accounts that would allow clearing members to direct that customer funds and, separately, proprietary funds deposited with the clearing organization be placed in the limited liability company accounts, subject to various conditions. Further relief is now granted to permit the use of repurchase agreement (repos) to manage redemptions of investments in the program, subject to the condition that the repos in question are unwound no later than three business days after they are entered into and continued compliance with the conditions set forth in CFTC Interpretative Letter No. 96-78. The repos would be entered into by the program managers only if that was considered to be an economically superior alternative to selling securities outright and only to fund liquidity needs so that participating clearing members can satisfy settlement variation requirements in cash.
01/07/1998	98-01 ; Part 35;; No-Action The Division of Trading and Markets provided an interpretation of the availability of Part 35 relief for U.S. persons that qualify as eligible swaps participants who enter into swap agreements with non-U.S. financial institutions. The Division confirmed that as long as both the U.S. person and the non-U.S. financial institution qualify as eligible swaps participants, and all other conditions of Part 35 are met, then the swap agreement qualifies for treatment pursuant to Part 35.