[Federal Register: August 26, 1999 (Volume 64, Number 165)]
[Proposed Rules]
[Page 46613-46618]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26au99-15]
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COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 30
Foreign Futures and Foreign Options Transactions
AGENCY: Commodity Futures Trading Commission.
ACTION: Proposed rules.
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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC'') is proposing to amend the Commission's regulations to clarify
when foreign futures and options brokers who are members of a foreign
board of trade must register or obtain an exemption from registration.
The Commission proposes to modify Rule 30.4(a) by clarifying that
foreign futures and options brokers, including those with U.S. bank
branches, are not required to register as futures commission merchants
(FCMs) pursuant to Rule 30.4, or seek Rule 30.10 relief, if they fall
generally into the following categories: those that carry customer
omnibus accounts for U.S. FCMs; those that carry U.S. affiliate
accounts which are proprietary to the foreign futures and options
broker; and those that carry U.S. accounts which are proprietary to a
U.S. FCM. In addition, proposed Rule 30.10(a) will specify
representations that must be made by a foreign futures and options
broker that has U.S. bank branches in order to obtain a Rule 30.10
comparability exemption or to come within the registration exception of
Rule 30.4.
DATES: Comments must be received by October 25, 1999.
ADDRESSES: Interested persons should submit their views and comments to
Jean A. Webb, Secretary of the Commission, Commodity Futures Trading
Commission, 1155 21st Street, N.W., Washington, D.C. 20581. In
addition, comments may be sent by facsimile transmission to facsimile
number (202) 418-5521, or by electronic mail to [email protected].
Reference should be made to ``Commission Rules 30.1, 30.4 and 30.10--
Registration and Exemption.''.
FOR FURTHER INFORMATION CONTACT:
Laurie Plessala Duperier, Special Counsel, or Susan A. Elliott, Staff
Attorney, Division of Trading and Markets, Commodity Futures Trading
Commission, 1155 21st Street, N.W., Washington, D.C. 20581. Telephone:
(202) 418-5430.
SUPPLEMENTARY INFORMATION:
I. Background
In 1987, the Commission adopted a new Part 30 to its
regulations.\1\ Part 30 governs, generally, the solicitation and sale
of foreign futures \2\ and foreign
[[Page 46614]]
option \3\ contracts to customers \4\ located in the United States.
These rules were promulgated pursuant to sections 2(a)(1)(A), 4(b) and
4c of the Commodity Exchange Act (``Act''), which vested the Commission
with exclusive jurisdiction over the offer and sale, in the United
States, of options and futures contracts traded on or subject to the
rules of a board of trade, exchange or market located outside of the
United States.
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\1\ 52 FR 28980 (August 5, 1987). CFTC regulations may be found
at 17 CFR Ch. I (1999).
\2\ ``Foreign futures'' as defined in Part 30 means ``any
contract for the purchase or sale of any commodity for future
delivery made, or to be made, on or subject to the rules of any
foreign board of trade.'' Commission Rule 30.1(a).
\3\ ``Foreign option'' as defined in Part 30 means ``any
transaction or agreement which is or is held out to be of the
character of, or in commonly known to the trade as, an `option',
`privilege', `indemnity', `bid', `offer', `put', `call', `advance
guaranty', or `decline guaranty,' made or to be made on or subject
to the rules of any foreign board of trade.'' Commission rule
30.1(b).
\4\ Pursuant to Commission Rule 30.1(c), ``Foreign futures or
foreign options customer'' means ``any person located in the United
States, its territories or possessions who trades in foreign futures
or foreign options: Provided, That an owner or holder of a
proprietary account as defined in paragraph (y) of [Commission rule]
1.3 shall not be deemed to be a foreign futures or foreign options
customer within the meaning of Secs. 30.6 and 30.7 of this part.''
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When it adopted Part 30, the Commission recognized that many
complexities would need to be addressed by the staff in the years after
adoption of these rules.\5\ Soon after the final rulemaking for Part 30
was published, the staff of the Division of Trading and Markets (the
``Division'') published several interpretative letters and no-action
positions regarding the application of the registration requirements of
Part 30 to foreign firms, and their ability to obtain an exemption from
certain of the requirements of Part 30, pursuant to Rule 30.10. The
Commission now proposes to codify some of those interpretations and
positions. Each of the interpretative letters discussed below will
cease to have any prospective applicability if the proposed rules are
adopted. Those who properly relied on interpretative statements in the
past must henceforth comply with the proposed rules if adopted. Since
no-action letters may only be relied on by the entity seeking the no-
action position, the entities who received the no-action letters
discussed below may continue to rely on the relief provided. All other
persons were, and are, required to comply with Commission rules.
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\5\ ``The Commission is mindful that the implementation of a
regulatory scheme such as this is an evolving process, particularly
as the issues are numerous and complex. Accordingly, the Commission
invites affected persons to seek interpretations of the rules, no-
action positions and exemptions, as appropriate. In this regard, the
Commission has determined to retain the general exemptive provision
set forth in rule 30.10, as proposed.'' 52 FR at 28980-28981 (August
5, 1987).
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A. Registration Required by Rule 30.4(a)
Rule 30.4(a) requires anyone who solicits or accepts orders and/or
money for foreign futures and options contracts from foreign futures
and options U.S. customers to register as an FCM. Rule 30.4(e) requires
registered FCMs to maintain an office in the United States which is
managed by an individual domiciled in the United States and registered
with the Commission as an associated person (``AP''). Rule 30.10 allows
any person to seek exemption form any provision of Part 30.
Shortly after Part 30 was adopted, it became clear that it might
not be necessary for certain conduct to trigger the registration
requirements of Rule 30.4(a). For example, foreign futures and options
brokers that did nothing more than carry the customer omnibus account
of a U.S. FCM fell within the registration provisions of Rule 30.4(a).
As a result, the staff issued an interpretation in CFTC Letter 87-7 to
make clear that a member of a foreign board of trade (or an affiliate
of a U.S firm that is authorized to carry accounts under relevant
foreign law), whose only contact with foreign futures and option
customers was limited to carrying the customer omnibus account of a
U.S. FCM, would not be required to register as an FCM under Rule
30.4(a). The Division reasoned that registration should not be required
in that circumstance because of the presence of an ``intervening
registrant [i.e., a U.S. FCM] to whom the rules would be fully
applicable.'' \6\ In other words, U.S. foreign futures and option
customers would continue to have a relationship with and be clients of
the U.S. FCM for which the foreign firm was carrying the omnibus
account, and would not have direct contact with the foreign futures and
options broker. Specifically, the Division stated:
\6\ CFTC Letter 87-7, [1987-1990 Transfer Binder] Comm. Fut. L.
Rep. (CCH) para. 23,972 (November 17, 1987). The scope of CFTC
Letter 87-7 was limited to foreign exchange members and US FCMs'
offshore affiliates which were licensed, authorized or otherwise
subject to regulation in the offshore jurisdiction. With regard to
affiliates, CFTC Letter 87-7 required the affiliate to identify to
the CFTC and to the National Futures Association (``NFA'') the
foreign clearing member through which the affiliate conducts
business in order to ensure an adequate audit trail so that
transactions may be traceable to the foreign exchange.
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[W]here an FCM transfers its customer omnibus account to an
offshore firm which is either a member or a foreign exchange or is
an offshore affiliate of a U.S. FCM licensed or authorized by the
offshore jurisdiction where it is located, and such foreign exchange
member's or affiliate's contact with foreign futures and options
customers is limited to carrying the customer omnibus account of a
U.S. FCM for execution on the foreign exchange, such activity should
not bring it within the scope of the foreign futures and options
rules.\7\
\7\ Id. at 34,407-8.
The Division sought to resolve other issues through the no-action
process. For instance, CFTC Letter 87-7 was limited to the transfer of
customer omnibus accounts to foreign firms and the existence of U.S.
branches resulted in the bank being characterized as ``present'' in the
United States.\8\ Thus, despite the relief offered in CFTC Letter 87-7,
foreign banks that, as brokers, carried US FCMs' customer omnibus
accounts, could not take advantage of that relief if the banks had bank
branches in the United States. In CFTC Letter 89-11, the Division
stated that it would not recommend an enforcement action against a
foreign bank with U.S. bank branches if the foreign bank availed itself
of the relief of CFTC Letter 87-7.\9\ The Division's no-action position
was contingent upon three undertakings by the foreign bank: (1) the
U.S. branches would not solicit or accept orders for foreign futures
contracts or options or engage in any activities subject to regulation
by the Commission, except in connection with proprietary trading
conducted by its U.S. branches; (2) the foreign bank would provide upon
request of the Commission or the National Futures Association, access
to the books and records of the U.S. branches to ensure compliance with
undertaking (1); and (3) the bank would designate an agent for the
purpose of accepting delivery and service of any communication from the
Commission relating to the foreign firm's activities in carrying the
omnibus accounts.\10\
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\8\ See discussion of CFTC Letter 89-5, infra.
\9\ CFTC Letter 89-11, [1987-1990 Transfer Binder] Comm. Fut. L.
Rep. (CCH) para. 24,516 (August 15, 1989).
\10\ The letter emphasized: ``The Division further understands
that each such U.S. Branch is subject to extensive regulation,
including reporting and recordkeeping requirements and examinations,
either under state banking laws or under federal law by the Office
of the Comptroller of the Currency.''
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Still other ambiguities arose with regard to foreign firms. In the
Part 30 rules, there is no specific provision relating to registration
requirements for foreign futures and options brokers handling
proprietary accounts. Commission Rule 3.10(c) provides a general
exemption from FCM registration for persons trading solely for
proprietary accounts, which is arguably applicable to foreign futures
and options brokers.\11\ Shortly after the
[[Page 46615]]
Commission adopted Part 30, an interpretative letter was requested
regarding foreign firms soley carrying U.S. customer foreign futures
and options accounts that would be proprietary accounts to the foreign
firm. In CFTC Letter 88-15,\12\ Division staff determined that, subject
to certain conditions, ``in instances where a foreign firm solely
carries accounts on behalf of customers in the United States which may
be deemed to be proprietary accounts of the foreign firm, such foreign
firm should not be subject to the registration requirement of Rule
30.4, or be required to apply for exemptive relief therefrom pursuant
to Rule 30.10 based on comparability of regulation in the foreign
jurisdiction.'' \13\ The Division further stated that such a firm
would, however, remain subject to all other applicable provisions of
the Act and rules, regulations and orders thereunder.
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\11\ Rule 3.10(c) provides: ``A person trading solely for
proprietary accounts, as defined in 1.3(y) of this chapter, is not
required to register as a futures commission merchant: Provided that
such person remains subject to all other provisions of the Act and
of the rules, regulations and orders thereunder.''
\12\ CFTC Letter 88-15, [1987-1990 Transfer Binder] Comm. Fut.
L. Rep. (CCH) para. 24,296 (August 10, 1988).
\13\ The requestor of the letter had a U.S. affiliate whose
account it carried; both firms were in turn wholly owned by a parent
company. The term ``proprietary account'' as defined in rule 1.3(y),
17 CFR 1.3(y) (1998), includes an account carried on the books and
records of a corporation or other type of association for a
``business affiliate that directly or indirectly is controlled by or
is under common control with, such . . . corporation or
association.''
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While the staff previously has addressed the situation where a
foreign firm carries its own ``proprietary'' account, it has not issued
an interpretative letter relating to the applicability of the Rule 30.4
registration requirement to a foreign futures and options broker when
the foreign futures and options broker carries the proprietary account
of a U.S. FCM that is not proprietary to the foreign firm. Pursuant to
Rule 30.4a, a U.S. FCM trading its proprietary account through a
foreign futures and options broker is a ``U.S. foreign futures and
options customer,'' requiring the foreign futures and options broker to
register in order to carry the firm's proprietary account.\14\ The
logic of CFTC Letter 87-7, however, suggests that certain foreign
futures and options brokers carrying FCM proprietary accounts similarly
should not be required to register or to obtain a Rule 30.10 exemption.
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\14\ Rule 30.1(c) exempts an owner or holder of a proprietary
account from the definition of foreign futures and options, cutomer
only with regard to the disclosure requirements of Rule 30.6 and the
secured amount requirement of Rule 30.7. Owners or holders of
proprietary accounts currently are not excluded from the definition
for purposes of Rule 30.4, thereby triggering the registration
requirement for foreign futures and options brokers who do business
with them.
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The registration relief in CFTC Letter 87-7 was limited by its
terms to a foreign firm which either was a member of a foreign board of
trade or was an offshore affiliate of a U.S. FCM licensed, authorized
or otherwise subject to regulation in the offshore jurisdiction where
it was located. The staff took this position because, among other
things, there would be no contact by a foreign firm with the FCM's
customers and the U.S. FCM will have engaged in all sales practices and
remain responsible for compliance with the Part 30 rules. Similarly,
sales practice considerations are not of particular concern where an
FCM opens a firm account (i.e., noncustomer account) with a foreign
board of trade member. U.S. FCMs are professionals in the commodities
industry and therefore should be familiar with the risks of trading
foreign commodity futures and options contracts. The FCM does not need
the added protections afforded by requiring the foreign firm to
register as an FCM, provided of course that the foreign firm is a
member of a foreign board of trade or a registered affiliate of the
U.S. FCM. Moreover, where the foreign firm carries the proprietary
account of a U.S. FCM, the requirement of registration and the
attendant capital and customer funds rules are not necessary because
the foreign jurisdiction generally has already imposed rules to protect
the foreign clearing house.
B. Availability of Rule 30.10 Exemptions to Foreign Firms With U.S.
Bank Branches
Those persons located outside the United States that solicit or
accept orders directly from United States customers for foreign futures
or options transactions and that are subject to a comparable regulatory
scheme in the country in which they are located \15\ may apply under
Appendix A to Rule 30.10 for relief from the registration requirements
of Rule 30.4. Rule 30.10 and Appendix A thereto have been the basis for
exemptions granted to a number of foreign firms that, along with their
governmental agency or self-regulatory organization, have demonstrated
that their particular foreign regulatory program is comparable to that
of the Commission.
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\15\ Appendix A, ``Interpretative Statement with Respect to the
Commission's Exemptive Authority Under Sec. 30.10 of Its Rules,''
CCH para. 2707, 57 FR 49644 (November 2, 1992) (Emphasis added.)
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Although the Commission orders granting general Rule 30.10
exemptive relief from FCM registration have applied only with respect
to persons located outside of the United States, the Division has
permitted foreign futures and options brokers with U.S. bank branches
to obtain a Rule 30.10 exemption under certain conditions. In CFTC
Letter 89-5,\16\ the Division stated that it would not recommend
enforcement action if a division or branch of a foreign bank is de
facto treated as a separate entity by the Office of the Comptroller of
the Currency (OCC) and has no involvement with U.S. foreign futures and
options customers. Under those circumstances, the branch could be
treated by the bank as though it were a subsidiary or affiliate,\17\
and the foreign firm would be eligible for an exemption under Rule
30.10. The Division staff has required foreign firms with U.S. bank
branches that are seeking confirmation of Rule 30.10 relief to make
representations which ensure that the U.S. branch does not solicit or
otherwise have contact with U.S. customers for transactions governed by
Commission rules. In so doing, the Division noted that the bank branch
``is viewed as a separate legal entity in many respects under the
federal bank regulatory scheme.'' \18\
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\16\ CFTC Letter 89-5, [1987-1990 Transfer Binder] Comm. Fut. L.
Rep. (CCH) para. 24,271 (December 5, 1988).
\17\ In CFTC Letter 88-3, the Division distinguished between a
foreign firm having U.S. divisions (which are ``legally part of the
firm itself''), and a foreign firm with a U.S. subsidiary or
affiliate (which ``is a separate legal entity.'') [1987-1999
Transfer Binder] Comm. Fut. L. Rep. (CCH) para. 24,085 (January 15,
1988). The letter stated that while a foreign firm with a U.S.
branch or division would not be eligible for Rule 30.10 relief, a
foreign firm with a U.S. subsidiary or affiliate would be eligible
for a 30.10 exemption. Id. The Division modified that position in
CFTC Letter 89-5 by recognizing that branches and divisions are
often operated separately and in a manner analogous to a subsidiary.
CFTC Letter 89-5 at 36,071. Foreign firms with separately
incorporated U.S. subsidiaries or affiliates must follow the
guidelines in CFTC Advisory 41-93 (July 26, 1993) when petitioning
for Rule 30.10 relief. See CFTC Letter 93-65, [1992-1994 Transfer
Binder] Comm. Fut. L. Rep. (CCH) para. 25,784 (July 26, 1993).
\18\ CFTC Letter 89-5, id. at p. 36,071.
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In the ten years following the issuance of CFTC Letter 89-5, staff
has issued several no-action letters to foreign firms with U.S. bank
branches permitting them to obtain confirmation of Rule 30.10 relief.
Since that time, the staff has not become aware of problems with
foreign firms using their U.S. bank branches inappropriately.
Therefore, the Commission proposes to codify the procedure by which
foreign firms with U.S. bank branches may obtain 30.10 relief. Doing so
will obviate the need for affected persons to seek interpretative
relief or a non-action position, and will
[[Page 46616]]
thus utilize Commission resources more efficiently.
II. The Proposed Amendments
The Commission believes it can provide clarity to its registration
requirements under Part 30 by specifically addressing, in Rule 30.4,
when registration by a foreign futures and options broker is not
required. As discussed earlier, the Commission proposes to amend Rule
30.4(a) to clarify that it does not require registration by certain
foreign futures and options brokers that carry U.S. foreign futures and
foreign options customer omnibus accounts of U.S. FCMs and have no
customer contact, including foreign brokers with U.S. bank branches.
The Commission also proposes to amend Rule 30.4(a) to clarify that a
foreign firm that carries a U.S. FCM's proprietary account, or a
foreign firm which trades for its own proprietary account (including
U.S. affiliates whose accounts are ``proprietary'' to the foreign
firm), need not register as an FCM so long as certain conditions are
met. Such foreign firms would, however, otherwise remain subject to
provisions of Part 30 that are not dependent upon registration as an
FCM, such as the antifraud provision of Rule 30.9. While the Commission
is proposing to permit foreign brokers to carry ``proprietary''
accounts in the broader sense of the term (as defined in Rule 1.3(y)),
not just firm trading accounts or ``house'' accounts \19\, the
Commission invites comment on the advisability of limiting the
exemption to house accounts only.\20\
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\19\ Firm trading or ``house'' accounts are defined as
``proprietary'' in Rule 1.17(b)(3) for regulatory capital purposes,
while ``proprietary accounts'' comprise a broader category in the
Rule 1.3(y) definition.
\20\ When an FCM executes trades for its proprietary account
with a foreign firm, funds other than those of the FCM are at risk
(e.g., of affiliates and employees as per CFTC Rule 1.3(y)). One can
assume that the class of persons defined by Rule 1.3(y) is in a
relationship of trust and confidence to the FCM and thus the same
considerations that would permit the FCM to open an account with
foreign firm registering as an FCM also apply to the FCM's
proprietary accounts.
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In addition, the Commission proposes to amend Rule 30.10 to clarify
that foreign firms with U.S. bank branches may be eligible for Rule
30.10 relief if certain representations are made. A foreign firm with
U.S. bank branches would be able to obtain a Rule 30.10 exemption
without requesting a no-action position if it files the following
representations with the NFA Vice-President, Registration & Membership:
(1) No U.S. bank branch, office of division of the foreign futures
and options broker will engage in the trading of futures or options on
futures within or from the United States, except for its own
proprietary account;
(2) No U.S. bank branch, office of division of the foreign futures
and options broker will refer any foreign futures or options customer
to the foreign broker or otherwise be involved in the foreign broker's
business in foreign futures and option transactions;
(3) No U.S. bank branch, office or division of the foreign futures
and options broker will solicit any foreign futures or options business
or purchase or sell foreign futures and option contracts on behalf of
any foreign futures or option customers or otherwise engage in any
activity subject to regulation under Part 30 or engage in any clerical
duties related thereto. If any U.S. division, office or branch desires
to engage in such activities, it will only do so through an appropriate
CFTC registrant;
(4) The foreign futures and options broker will maintain outside
the United States all contract documents, books and records regarding
foreign futures and option transactions;
(5) The foreign futures and options broker and each of its U.S.
bank branches, offices or divisions agree to provide upon request of
the Commission, the NFA or the U.S. Department of Justice, access to
their books and records for the purpose of ensuring compliance with the
foreign undertakings and consents to make such records available for
inspection at a location in the United States within 72 hours after
service of the request; \21\ and
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\21\ The Commission has recognized that Japanese and Hong Kong
laws require that original books and records of any firm located
within either country be maintained within the local jurisdiction.
See CFTC Letter 95-83 [1994-1996 Transfer Binder] Comm. Fut. L. Rep.
(CCH) para.26,559 at 43,490 (September 20, 1995) (no-action position
permitting the Japanese and Hong Kong affiliates of a U.S. FCM to
accept directly foreign futures and options orders from certain
sophisticated U.S. customers); 62 FR 47792 (September 11, 1997)
(extending the relief under CFTC Letter 95-83 to the Japanese and
Hong Kong affiliates of all U.S. FCMs). For the purpose of this
rulemaking, the Commission proposes to allow foreign futures and
options brokers in Japan and Hong Kong to satisfy the books and
records requirement by: (1) providing within 72 hours authenticated
copies of its books and records upon request of a Commission
representative; (2) providing within 72 hours access to original
books and records in the foreign jurisdiction; (3) waiving objection
to the admissibility of the copies as evidence in a Commission
action against the foreign futures and options broker; and (4)
agreeing in the event of a proceeding to provide a witness to
authenticate copies of books and records given to the Commission.
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(6) Although it will continue to engage in normal commercial
activities, no U.S. bank branch, office or division of the foreign
futures and options broker will establish relationships in the United
States with the applicant's foreign futures and options customers for
the purpose of facilitating or effecting transactions in foreign
futures and option contracts in the United States.
Similarly, any foreign futures and options broker that would not be
required to register under the proposed Rule 30.4(a) because it solely
carries a U.S. customer omnibus account, its own proprietary account,
or a U.S. FCM's proprietary account, will not be required to register
solely because it has U.S. bank branches provided that it files with
the NFA, Vice President, Registration & Membership, the above
representations in accordance with Rule 30.10(b).
The Commission solicits comment regarding the number of foreign
futures or options brokers' non-bank branches located in the United
States, as well as information concerning their activities.\22\ The
Commission also requests comment on the advisability of expanding the
relief provided by the proposed rule amendments to foreign futures and
options brokers with any type of U.S. branch, not just bank branches.
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\22\ The rationale for providing relief to foreign firms with
bank branches in the U.S. is that those branches are otherwise
regulated by the banking authorities. Although this rationale would
be inapplicable to non-bank branches, there may be other reasons why
exemption from registration under Part 30 would be appropriate.
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Finally, the proposed rule defines ``foreign futures and options
customer omnibus account'' in Rule 30.1(d), and ``foreign futures and
options broker'' in Rule 30.1(e).
II. Related Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-611,
requires that agencies, in proposing rules, consider the impact of
those rules on small businesses. The Commission has previously
established certain definitions of ``small entities'' to be used by the
Commission in evaluating the impact of its rules on such entities in
accordance with the RFA.\23\ The proposed rules discussed herein would
affect foreign members of foreign boards of trade who perform the
functions of an FCM, some of which may be foreign affiliates of U.S.
FCMS. The Commission previously has determined that, based upon the
fiduciary nature of the FCM/customer relationships, as well as the
requirement that FCMs meet minimum financial requirements, FCMs should
be excluded from the definition of small entities. Therefore, the
[[Page 46617]]
Chairman, on behalf of the Commission, hereby certifies, pursuant to 5
U.S.C. 605(b), that these proposed regulations will not have a
significant economic impact on a substantial number of small entities.
Nonetheless, the Commission specifically requests comment on the impact
these proposed rules may have on small entities.
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\23\ 47 FR 18618-18621 (April 30, 1982).
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B. Paperwork Reduction Act
When publishing proposed rules, the Paperwork Reduction Act of 1995
\24\ imposes certain requirements on federal agencies (including the
Commission) in connection with their conducting or sponsoring any
collection of information as defined by the Paperwork Reduction Act. In
compliance with the Act, the Commission, through this rule proposal,
solicits comments to: (1) evaluate whether the proposed collection of
information is necessary for the proper performance of the functions of
the agency, including the validity of the methodology and assumptions
used; (2) evaluate the accuracy of the agency's estimate of the burden
of the proposed collection of information including the validity of the
methodology and assumptions used; (3) enhance the quality, utility, and
clarity of the information to be collected; and (4) minimize the burden
of the collection of the information on those who are to respond,
including through the use of appropriate automated, electronic,
mechanical, or other technological collection techniques or other forms
of information technology, e.g., permitting electronic submission of
responses.
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\24\ Pub. L. 104-13 (May 13, 1995).
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The Commission has submitted this proposed rule and its associated
information collection requirements to the Office of Management and
Budget. The burden associated with this entire collection 3038-0023,
including this proposed rule, is as follows:
Average burden hours per response: .1645.
Number of Respondents: 73,610.
Frequency of response: On occasion; annually, semi-annually;
quarterly.
The burden associated with this specific proposed rule, is as
follows:
Average burden hours per response: .05.
Number of Respondents: 110.
Frequency of response: On occasion.
Persons wishing to comment on the estimated paperwork burden
associated with this proposed rule should contact the Desk Officer,
CFTC, Office of Management and Budget, Room 10202, NEOB, Washington,
D.C. 20503, (202) 395-7340. Copies of the information collection
submission to OMB are available from the CFTC Clearance Officer, 1155
21st Street NW, Washington, D.C. 20581, (202) 418-5160.
List of Subjects in 17 CFR Part 30
Definitions, Foreign futures, Foreign options, Registratiaon
requirements, Reporting and recordkeeping requirements. Registration
requirements,
In consideration of the foregoing, and pursuant to the authority
contained in the Commodity Exchange Act and, in particular, sections
2(a)(1), 4(b), 4c and 8 thereof, 7 U.S.C. 2, 6(b) 6c and 12a (1982),
and pursuant to the authority contained in 5 U.S.C. 552 and 552b
(1982), the Commission hereby proposes to amend Chapter I of Title 17
of the Code of Federal Regulations as follows:
PART 30--FOREIGN OPTIONS AND FOREIGN FUTURES TRANSACTIONS
1. The authority citation for Part 30 continues to read as follows:
Authority: 7 U.S.C. 1a, 2, 4, 6, 6c and 12a, unless otherwise
noted.
2. Section 30.1 is proposed to be amended by adding paragraph (d)
and (e) to read as follows:
Sec. 30.1 Definitions.
* * * * *
(d) Foreign futures and options customer omnibus account is defined
as an account in which the transactions of one or more foreign futures
and options customers are combined and carried in the name of the
originating futures commission merchant rather than in the name of each
individual foreign futures and options customer.
(e) Foreign futures and options broker (FFOB) is defined as a non-
U.S. person that is a member of a foreign board of trade, as defined in
Sec. 1.3(ss), licensed, authorized or otherwise subject to regulation
in the jurisdiction where the foreign board of trade is located; or a
foreign affitiate of a U.S. futures commission merchant, licensed,
authorized or otherwise subject to regulation in the jurisdiction where
the affiliate is located.
3. Section 30.4 is proposed to be amended by revising paragraph (a)
to read as follows:
Sec. 30.4 Registration required.
* * * * *
(a)(1) To solicit or accept orders for or involving any foreign
futures contract or foreign options transaction and, in connection
therewith, to accept any money securities or property (or extend credit
in lieu thereof), to margin, guarantee or secure any trades or
contracts that result or may result therefrom, unless such person shall
have registered, under the Act, with the Commission as a futures
commission merchant and such registration shall not have expired nor
been suspended nor revoked; provided that, a foreign futures and
options broker (as defined in Sec. 30.1(e)) is not required to register
as an FCM:
(i) In order to accept orders from or to carry a U.S. futures
commission merchant foreign futures and options customer omnibus
account, as that term is defined in Sec. 30.1(d);
(ii) In order to accept orders from or to carry a U.S. FCM
proprietary account, as that term is defined in paragraph (y) of
Sec. 1.3 of this chapter; or
(iii) In order to accept orders from or to carry a U.S. affiliate
account which is proprietary to the foreign broker, as ``proprietary
account'' is defined in paragraph (y) of Sec. 1.3 of this chapter.
(2) Such foreign futures and options broker remains subject to all
other applicable provisions of the Act and of the rules, regulations
and orders thereunder. Foreign futures and options brokers that have
U.S. bank branches, offices or divisions engaging in the above-listed
activity are not required to register as an FCM if they file with the
National Futures Association, Vice-President, Registration and
Membership, 200 West Madison Avenue, Suite 1600, Chicago, Illinois
60606, the representations in Sec. 30.10(b)(1)-(6).
* * * * *
4. Section 30.10 is revised to read as follows:
Sec. 30.10 Petitions for exemption.
(a) Any person adversely affected by any requirement of this part
may file a petition with the Secretary of the Commission, which
petition must set forth with particularity the reasons why that person
believes that he should be exempt from such requirement. The Commission
may, in its discretion, grant such an exemption if that person
demonstrates to the Commission's satisfaction that the exemption is not
otherwise contrary to the public interest or to the purposes of the
provision from which exemption is sought. The petition will be granted
or denied on the basis of the papers filed. The petition may be granted
subject to such terms and conditions as the Commission may find
appropriate.
(b) Any foreign person that files a petition for an exemption under
this section shall be eligible for such an exemption notwithstanding
its presence in the United States through U.S. bank
[[Page 46618]]
branches, offices or divisions if, in conjunction with a petition for
confirmation of Sec. 30.10 comparability relief under an existing
Sec. 30.10 Commission order, it files the following representations
with the National Futures Association, Vice-President, Registration &
Membership:
(1) No U.S. bank branch, office or division will engage in the
trading of futures or options on futures within or from the United
States, except for its own proprietary account;
(2) No U.S. bank branch, office or division will refer any foreign
futures or options customer to the foreign broker or otherwise be
involved in the foreign broker's business in foreign futures and option
transactions;
(3) No U.S. bank branch, office or division will solicit any
foreign futures or options business or purchase or sell foreign futures
and option contracts on behalf of any foreign futures or option
customers or otherwise engage in any activity subject to regulation
under this part or engage in any clerical duties related thereto. If
any U.S. division, office or branch desires to engage in such
activities, it will only do so through an appropriate CFTC registrant;
(4) The foreign person will maintain outside the United States all
contract documents, books and records regarding foreign futures and
option transactions;
(5) The foreign person and each of its U.S. bank branches, offices
or divisions agree to provide upon request of the Commission, the
National Futures Association or the U.S. Department of Justice, access
to their books and records for the purpose of ensuring compliance with
the foreign undertakings and consents to make such records available
for inspection at a location in the United States within 72 hours after
service of the request; and
(6) Although it will continue to engage in normal commercial
activities, no U.S. bank branch, office or division of the foreign
person will establish relationships in the United States with the
applicant's foreign futures and options customers for the purpose of
facilitating or effecting transactions in foreign futures and option
contracts in the United States.
Dated: August 19, 1999.
By the Commission.
Catherine D. Dixon,
Assistant Secretary of the Commission.
[FR Doc. 99-22019 Filed 8-25-99; 8:45 am]
BILLING CODE 6351-01-M
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