CFTC Staff Letters

The CPO of four pools organized as Delaware Series Limited Liability Companies requested an interpretation of the use of the term “pool” in Part 4 of the Commission’s regulations to include the individual series of a series limited liability company. The CPO also requested relief to use a tripartite disclosure document that limited certain disclosures to the offered series. DCIO declined to expand the definition of the term “pool” to include a series of a series limited liability company. DCIO did, however, grant exemptive relief and permitted the CPO to file and distribute a disclosure document that provided disclosures regarding the pool as a whole in the first part and disclosures only with respect to the offered series in a second part. DCIO required the CPO to disclose the manner of organization of the pool and the fact that series other than the offered series existed and that information regarding other series was available upon request. Additionally, DCIO required the CPO to make certain representations to NFA prior to filing such disclosure document and to ensure that both parts of the disclosure document be distributed to prospective participants together. DCIO further required the CPO to comply with the prescribed risk disclosure statement set forth in Regulation 4.24 and to present the required information in the forepart of the first part of the document, but permitted customization.

The CPO of a pool that had previously received exemptive relief to provide a 14-month certified Annual Report for the period from the inception of trading in November 2009 through December 31, 2010 requested relief from the certification requirement of Regulation 4.22 with respect to the pool’s final Annual Report. Because the CPO’s prior relief was conditioned upon the provision of a certified Annual Report, the CPO was required to seek exemptive relief where it otherwise would not be necessary. The CPO attached waivers from the pool’s participants evidencing their consent to the provision of an uncertified final Annual Report. DCIO determined that the granting of relief was not inconsistent with the purposes of Part 4 or the public interest and therefore granted the relief requested.

The CPOs of two pools requested an extension of time for the filing of the pools’ 2009 annual reports 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.

The Division of Market Oversight issued a no-action letter to the IntercontinentalExchange, Inc. (ICE) confirming that the Division will not recommend that the Commission initiate enforcement action against ICE for failure to provide a written demonstration of compliance with the significant price discovery contracts (SPDC) core principle regime within 30 days of issuance of the Commission’s order deeming the Mid-C, PJM, and SP-15 contracts as SPDCs if ICE provides a written demonstration of compliance with the core principle regime for the three contracts by August 18, 2010.

The Division of Clearing and Intermediary Oversight issued an interpretation that a limited liability company and a trust operated by the limited liability company are not commodity pools where all participants are close family members.

The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of two commodity pools, whose shares the CPO intended to publicly offer and list for trading on a national securities exchange. As is discussed in the letter, this relief was in the nature of substituted compliance with those regulations.

The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of a commodity pool, whose shares the CPO intended to publicly offer and list for trading on a national securities exchange. As is discussed in the letter, this relief was in the nature of substituted compliance with those regulations. Exemptive relief was also provided with respect to future commodity pools with the same structural and operational features as the CPO’s existing pool.

The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of two commodity pools, whose shares the CPO intended to publicly offer and list for trading on a national securities exchange. As is discussed in the letter, this relief was in the nature of substituted compliance with those regulations.

Securities and Exchange Commission (SEC) rule 22e-3 (Rule 22e-3), adopted by the SEC February 23, 2010 and effective May 5, 2010, allows a money market mutual fund (MMMF or fund) to suspend redemptions and postpone payment of redemption proceeds to facilitate an orderly liquidation of the fund. The Division of Clearing and Intermediary Oversight (the Division) received a letter from the Joint Audit Committee requesting an interpretation of the impact, if any, of Rule 22e-3 on Reg. 1.25. In its response, the Division provided an overview of the Reg. 1.25 treatment of MMMFs, outlined Rule 22e-3, and discussed the interplay of Reg. 1.25 and Rule 22e-3. The Division concluded that Rule 22e-3 falls within the parameters of Reg. 1.25(c)(5)(ii)(D) and therefore the status of an MMMF that otherwise qualifies as a Reg. 1.25 permitted investment would not change as a result of the new rule.

The Division of Market Oversight issued a letter granting no-action relief to permit the International Maritime Exchange ASA (Imarex or the Exchange) to make its electronic trading and order matching system (Trayport), and its Application Program Interface (API), available via direct access to Exchange trading members 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 Imarex trading members in the U.S. that qualify as “eligible contract participants” (ECP) (as defined in Section 1a(12) of the CEAct) trading for their proprietary accounts; Imarex trading members that are registered as futures commission merchants (FCM) that submit orders to Trayport for execution from or on behalf of U.S. customers that qualify as ECPs; firms exempt from such registration pursuant to Commission Rule 30.10 (Rule 30.10 Firms) that accept orders through automated order routing systems for transmission to Trayport from or on behalf of U.S. customers that qualify as ECPs; and Imarex trading members that are registered as Commodity Pool Operators (CPO) or Commodity Trading Advisors (CTA), or exempt from such CPO or CTA registration pursuant to Commission Regulation 4.13 or 4.14, that submit orders for execution on behalf of U.S. pools they operate that qualify as ECPs or accounts of U.S. customers that qualify as ECPs, 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 Trayport.