CFTC Staff Letters

The Division of Market Oversight issued a letter granting no-action relief to permit the Osaka Securities Exchange Co., Ltd. (OSE), to make its electronic trading and order matching system, the OSE Trading System (OSE-TS or J-GATE), available to OSE Transaction Participants (TP or Remote TP) in the U.S. without obtaining contract market designation or registration as a derivatives transaction execution facility pursuant to Sections 5 and 5a of the CEAct. The relief applies to OSE TPs trading for their own accounts; OSE TPs who are registered as futures commission merchants (FCMs) or who are exempt from such registration pursuant to CFTC Rule 30.10 (Rule 30.10 Firms) submitting orders from or on behalf of U.S. customers to the OSE-TS for execution or accepting orders for U.S. customers transmitted via automated order routing systems for transmission to the OSE-TS; and OSE TPs who are registered as Commodity Pool Operators (CPO) or Commodity Trading Advisors (CTA), or who are exempt from such CPO or CTA registration pursuant to Commission Regulation 4.13 or 4.14, submitting orders to the OSE-TS on behalf of U.S. pools they operate or U.S. customer accounts for which they have discretionary authority, respectively, provided that an FCM or Rule 30.10 Firm acts as clearing firm and guarantees without limitation all such trades of the CPO or CTA effected through submission of orders on the OSE-TS.

The Division of Clearing and Intermediary Oversight provided no-action relief to the general partners of two commodity pools from registering as CPOs under Section 4m(1) of the Commodity Exchange Act, and allowed an affiliated, registered CPO (“designee”) to serve as the CPO of the pools instead, where, among other things: (1) the general partners and the designee are under common ownership and control; (2) the general partners have delegated all of their management authority to the designee; (3) the general partners do not engage in the solicitation of investors for the pool and do not manage property of the pool; and (4) each general partner and the designee executed and submitted to the Division a written acknowledgement of joint and several liability for any violation by either of them of the Act or the Commission’s regulations in connection with the operation of their respective pools.

The Division of Clearing and Intermediary Oversight provided exemptive relief to a registered CPO and CTA from the books and records location requirements of Rules 4.23 and 4.33 such that the CPO/CTA may maintain its books and records at a branch office (also the main business office of an affiliated company) that provides operational support to the CPO/CTA.

The Division confirmed that under the specific facts represented to it, a firm that was required to be registered as an IB, and was so registered, would not also be required to register as a CTA in connection with providing certain services to its retail foreign exchange customers.

This letter withdraws relief previously granted in staff letters 02-22, 02-90 and 06-20. The previous letters provided “no-action” relief to registered securities broker-dealers and their registered representatives in connection with their offer and sale of certain futures contracts. The Division determined to withdraw the relief on a prospective basis based primarily on consumer protection issues including the uncertain treatment of customer funds in the event of insolvency of a broker.

The Division of Clearing and Intermediary Oversight provided no-action relief to the general partner of a commodity pool from registering as a CPO under Section 4m(1) of the Commodity Exchange Act, and allowed an affiliated, registered CPO (“designee”) to serve as the CPO of the pool instead, where, among other things: (1) the general partner and the designee are under common ownership and control; (2) the general partner has delegated all of its management authority to the designee; (3) the general partner does not engage in the solicitation of investors for the pool and does not manage property of the pool; and (4) the general partner and designee executed and submitted to the Division a written acknowledgement of joint and several liability for any violation by either of them of the Act or the Commission’s regulations.

The Division of Clearing and Intermediary Oversight provided no-action relief to the general partner of a commodity pool from registering as a CPO under Section 4m(1) of the Commodity Exchange Act, and allowed an affiliated, registered CPO (“designee”) to serve as the CPO of the pool instead, where, among other things: (1) the general partner and the designee are under common ownership and control; (2) the general partner has delegated all of its management authority to the designee; (3) the general partner does not engage in the solicitation of investors for the pool and does not manage property of the pool; and (4) the general partner and designee executed and submitted to the Division a written acknowledgement of joint and several liability for any violation by either of them of the Act or the Commission’s regulations in connection with the operation of the pool.

No-Action Relief Request of Turkish Derivatives Exchange in Connection with the Offer and Sale in the United States of its Futures Contract Based on the ISE-30 Stock Index.

The CPO of a pool that had previously been granted relief from the certification requirement for fiscal year 2009 informed DCIO that the pool had ceased operations subsequent to the issuance of relief and requested relief from the certification requirement for the pool’s final annual report. Because the facts were substantially identical to those that formed the basis for the issuance of the prior relief and the CPO submitted waivers from the pool’s two participants, DCIO granted the relief requested.

The CPOs of a pool requested an extension of time for the filing of the pool’s 2009 annual report beyond June 29, 2010, due to a delay in the receipt of financial statements from investee pools. DCIO determined that the interests of participants in receiving timely information outweighed the CPOs’ hardship and DENIED the request.