CFTC Staff Letters

The Division of Clearing and Intermediary Oversight issued an interpretation that when an IB does no more than introduce a non-clearing FCM to a clearing FCM, and the non-clearing FCM then establishes an omnibus account with the clearing FCM, the requirement of Regulation 1.57(a)(1) that an IB open and carry each customer’s account with a carrying FCM on a fully-disclosed basis is not triggered, where: (1) the IB does not transmit trading orders fore the omnibus account to the clearing FCM; and (2) the IB does not accept funds from the customers whose accounts are maintained in the omnibus account.

The Division of Clearing and Intermediary Oversight issued an interpretation that a technology service provider is not an introducing broker (IB) and, therefore, is not required to register as such, as a result of providing its customers with an internet-based software application with the ability to route orders for the purchase or sale of commodity futures and options to an IB or futures commission merchant (FCM) of their choice in connection with related cash market transactions. The software application permits a customer to establish parameters for purchasing grain in the cash market based upon a plurality of delivery locations with reference to the price of a futures contract, and upon finding a matching counterparty, subsequently generates an order for a corresponding futures transaction based upon the parameters established by the customer in advance. This interpretation was based on the representations that: (1) each customer will establish a relationship with an IB or FCM of its own choosing prior to engaging in futures and options transactions using the application; (2) a customer may use the software application solely to engage in cash market transactions; (3) all customers pay the same fee to the technology service provider regardless of whether the customer engages in any futures transactions, and such fee is not related to any fees charged by the FCM or IB for the execution of any futures orders; (4) the technology service provider does not receive any compensation from any customers’ FCM or IB, nor does it have any membership with trading privileges on any designated contract market or derivatives transaction execution facility; and (5) the software application does not provide express “buy” or “sell” signals.

Taiwan Futures Exchanges Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contract Based on the Taiwan Stock Exchange Non-Finance Non-Electronic Sub-Index.

Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contract Based on the RDXxt USD-RDX Extended Index.

The Division of Clearing and Intermediary Oversight granted exemptive relief from the books and records location requirement of Regulations 4.7 and 4.23. This exemption was conditioned upon: (1) the contractual obligation of the alternative recordkeepers to retain books and records of the CPO for the period required in Commission regulations and to make them available as required in Commission regulations; (2) availability within 48 hours (72 hours for offshore locations) of original books and records at the CPO’s main business office); (3) the CPO remaining responsible for ensuring compliance with Regulations 1.31, 4.7 and 4.23, and for availability of books and records to CFTC and NFA; (4) disclosure of the location of required books and records on the CPO’s pool Disclosure Documents; and (5) notification to the Division if the location of required books and records changes.

Eurex Deutschlands Request for No-Action Relief in Connection with the Offer and Sale in the United States of Eight Futures Contracts Based on Security Indices Derived from the Dow Jones STOXX 600 Index.

The Division of Clearing and Intermediary Oversight granted exemptive relief from certain of the Part 4 regulations to the registered CPO of three commodity pools, whose shares had been publicly offered and listed for trading on a national securities exchange. Prior to issuance of the Division’s letter, the pools had been operated in compliance with Part 4. As is discussed in the letter, relief granted by the Division was in the nature of substituted compliance with the regulations from which relief was sought. Exemptive relief was also provided with respect to future commodity pools with the same structural and operational features as the CPO’s existing pools.

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 to 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.