CFTC Staff Letters

The Division of Swap Dealer and Intermediary Oversight issued an interpretation regarding the time period for which past performance is required to be disclosed by persons required to register as CTAs because they engage in off-exchange retail foreign currency transactions (“retail forex”). Such persons (“Forex CTAs”) are required to disclose performance information for the period beginning October 18, 2010, the date upon which the Commission’s regulations governing retail forex became effective. A Forex CTA that chooses to present past performance information for any period of time prior to October 18, 2010 must do so in accordance with the time period as specified in Regulation 4.35(a)(5), must include all accounts directed by the Forex CTA, must present the information in the format specified in Regulation 4.35, and must have and maintain adequate books and records to substantiate the information.

DCR, DSIO and DMO issued a no-action letter that modifies the temporary, no-action relief previously issued by DCIO and DMO from certain self-effectuating provisions of the Dodd-Frank Act and the CEA that took effect on July 16, 2011, but that require further definition and may not be eligible for the exemptive relief provided by an order issued by the Commission on July 14, 2011 pursuant to section 4(c) of the CEA (July 14 Order). The letter extends the no-action relief to, and will expire automatically upon, the earlier of: (1) the effective date of the applicable final rules defining the relevant terms or (2) July 16, 2012. The relief was issued in light of the amended order issued by the Commission on December 19, 2011 which extended the potential latest expiration date of the July 14 Order to July 16, 2012. The relief does not affect any Dodd-Frank Act implementing regulations promulgated by the Commission nor the applicability of any provision of the CEA to futures contracts or options on futures contracts or to cash markets.

The Division of Market Oversight issued a letter granting no-action relief to the Natural Gas Exchange Inc. (“NGX”) and its clearing members in connection with the reporting requirements of new part 20 of the Commission’s regulations. Pursuant to the relief, NGX can itself submit the information required of its clearing members for all cleared positions, in fulfillment of the clearing members’ reporting requirements with respect to cleared positions under regulations 20.4 and 20.5(a). In addition, pursuant to this relief certain NGX clearing members will not be required to report their uncleared positions.

No-Action Relief Request of Taiwan Futures Exchange in Connection with the Offer and Sale in the United States of its Futures Contract based on the GreTai Securities Market Capitalized Weighted Stock Index (“GTEX”).

Euronext Brussels, S.A.’s Request for No-Action Relief in Connection with the Offer and Sale in the United States of its Futures Contract Based on the BEL 20 Stock Index.

The North American Derivatives Exchange (Nadex) has requested guidance regarding its Amended Order of Registration as a Derivatives Clearing Organization (the Nadex DCO Order) and Nadex’s Amended Order as a Designated Contract Market (the Nadex DCM Order, and, together with the Nadex DCO Order, the Nadex Orders), both dated March 30, 2010. Among other things, the Nadex Orders allow intermediation of contracts traded on Nadex’s designated contract market provided that such contracts are fully collateralized. Because a futures commission merchant (FCM) customer with a fully collateralized position on Nadex may suffer losses on another exchange such that the customer would owe a balance to its FCM, Nadex sought an interpretation from the Division confirming that the position on Nadex would be considered “fully collateralized” notwithstanding such a scenario. The Division of Clearing and Intermediary Oversight has concluded that an intermediated contract traded on Nadex, on behalf of the intermediary’s customer, remains “fully collateralized,” as contemplated by the Nadex Orders, notwithstanding subsequent balances owed by that customer to the intermediary due to losses suffered on other exchanges, as long as Nadex holds, at all times, sufficient funds of such customer to cover the maximum possible loss that may be sustained by such customer upon liquidation of any or all Nadex contracts.

DCIO and DMO issued a no-action letter that provides temporary, no-action relief from certain self-effectuating provisions of the Dodd-Frank Act and the CEA that otherwise would take effect on July 16, 2011, but that require further definition and may not be eligible for the exemptive relief provided by the order issued by the Commission on July 14, 2011 pursuant to section 4(c) of the CEA. The no-action relief will expire automatically upon the earlier of the effective date of the applicable final rules defining the relevant terms or December 31, 2011 and does not affect any Dodd-Frank Act implementing regulations promulgated by the Commission or the applicability of any provision of the CEA to futures contracts or options on futures contracts or to cash markets.

No-Action Relief Request of Bursa Malaysia Derivatives Berhad in Connection with the Offer and Sale in the United States of its Futures Contract based on the FTSE Kuala Lumpur Composite Index.

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.