47792 Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Notices

1 7 U.S.C. § 12a(10) (1994).

2 7 U.S.C. § 21(j) (1994).

3 7 U.S.C. § 21(o)(1) (1994).

4The Division received the letter from NFA on

August 27, 1997.

5Commission rules referred to herein can be

found at 17 CFR Ch. I (1997).

6The specific elements examined in evaluating

whether the particular foreign regulatory program

provides a basis for permitting substituted

compliance for purposes of exemptive relief

pursuant to Commission Rule 30.10 are set forth in

Appendix A to part 30, ‘‘Interpretative Statement

with Respect to Commission’s Exemptive Authority

dissection for disease or physiological

analysis, and genetic sampling. The

release and/or disposition of maturing

fish are for experimental purposes. The

release of mature ESA-listed fish is valid

in 1997 only. The sacrifice of excess

hatchery-produced jacks is valid for the

duration of permit 1010. Permit 1010

expires on December 31, 2000.

Issuance of the permit and the

modification to a permit, as required by

the ESA, was based on a finding that

such actions: (1) Were requested/

proposed in good faith, (2) will not

operate to the disadvantage of the ESAlisted species that is the subject of the

permits, and (3) are consistent with the

purposes and policies set forth in

section 2 of the ESA and the NMFS

regulations governing ESA-listed

species permits.

Dated: September 5, 1997.

Nancy Chu,

Chief, Endangered Species Division, Office

of Protected Resources, National Marine

Fisheries Service.

[FR Doc. 97–24127 Filed 9–10–97; 8:45 am]

BILLING CODE 3510–22–F

COMMODITY FUTURES TRADING

COMMISSION

Performance of Certain Functions by

National Futures Association With

Respect to Non-U.S. Firms and NonU.S. Markets

AGENCY: Commodity Futures Trading

Commission.

ACTION: Notice and order.

SUMMARY: The Commodity Futures

Trading Commission (Commission) is

authorizing National Futures

Association (NFA) to perform fitness

checks with respect to (1) foreign firms

acting in the capacity of futures

commission merchants (FCMs) seeking

relief under Rule 30.10 and (2) any

applicant for registration or registrant

having or seeking to add a foreign

principal, subject to any limitations by

individual offshore jurisdictions that

fitness information solely be

communicated to and among regulators.

In addition, the Commission is

authorizing NFA (1) to receive filings

from foreign firms acting in the

capacities of commodity pool operators

(CPOs) and commodity trading advisors

(CTAs) filing for exemption from

registration under Rule 30.5, (2) to

monitor compliance with Rule 30.10,

Rule 30.5, and the provisions of

Deutsche Terminborse (DTB) terminal

placement relief, (3) to receive filings

from FCMs with respect to order

transmittal procedure relief for foreign

futures and options orders, (4) to receive

documentation pertaining to Globex and

New York Mercantile Exchange

(NYMEX) ACCESS ‘‘pass-the-book’’

relief, and (5) to maintain and serve as

the official custodian of certain

Commission records.

EFFECTIVE DATE: September 11, 1997.

FOR FURTHER INFORMATION CONTACT:

Lawrence B. Patent, Associate Chief

Counsel, Division of Trading and

Markets, Commodity Futures Trading

Commission, Three Lafayette Centre,

1155 21st Street, N.W., Washington,

D.C. 20581. Telephone: (202) 418–5430.

United States of America

Before the Commodity Futures Trading

Commission Order Authorizing the

Performance of Certain Functions With

Respect to Non-U.S. Firms and NonU.S. Markets

I. Authority and Background

Section 8a(10) of the Commodity

Exchange Act 1 (Act) provides that the

Commission may authorize any person

to perform any portion of the

registration functions under the Act,

notwithstanding any other provision of

law, in accordance with rules adopted

by such person and submitted to the

Commission for approval or, if

applicable, for review pursuant to

Section 17(j) of the Act 2 and subject to

the provisions of the Act applicable to

registrations granted by the

Commission. Section 17(o)(1) of the

Act 3 provides that the Commission may

require NFA to perform Commission

registration functions, in accordance

with the Act and NFA rules. The

Commission’s Division of Trading and

Markets (Division) received a letter from

NFA expressing NFA’s willingness to

perform certain functions now

performed by the Commission, to

undertake to protect the confidentiality,

security and integrity of information

received and to abide by any additional

use requirements or limitations

regarding the receipt and handling of

information from foreign jurisdictions,

as discussed below.4

Upon consideration, the Commission

has determined to authorize NFA,

effective September 11, 1997, to perform

the following functions, subject to any

limitations by individual offshore

jurisdictions that fitness information

solely be communicated to and among

governmental regulators: (1) For foreign

firms acting in the capacity of an FCM,

fitness checks and monitoring of

compliance with Rule 30.10 5 relief

granted to the firm’s regulator or selfregulatory organization (SRO); (2) for

foreign firms acting in the capacities of

CPOs and CTAs, accepting filings that

comply with Rule 30.5; (3) conducting

fitness inquiries directed to foreign

regulatory and self-regulatory bodies

with respect to any firm applying for

registration under the Act or any

registrant having or adding a foreign

principal; (4) receiving documentation

pertaining to Globex and NYMEX

ACCESS ‘‘pass-the-book’’ relief; (5)

receiving filings from FCMs with

respect to order transmittal procedure

relief for foreign futures and options

orders; (6) monitoring DTB terminal

placement relief; and (7) maintaining

and serving as the official custodian of

records for the filings and

acknowledgment requirements

submitted by (a) exchange member firms

seeking ‘‘pass-the-book’’ relief, (b) FCMs

seeking order transmittal procedure

relief, or (c) firms intending to operate

DTB computer terminals in the U.S.,

and maintaining requests and related

materials submitted pursuant to Rules

30.10 and 30.5 or obtained in the course

of conducting foreign fitness inquiries.

As discussed below, each of these

functions involves the registration or

exemption from registration of non-U.S.

persons or is related to trading by U.S.

persons on non-U.S. markets. In the

future, the Commission may delegate

other similar administrative and

processing functions by letter and

Commission Advisory.

A. Foreign FCM Fitness and Compliance

With Rule 30.10

Rule 30.10 allows the Commission to

exempt a foreign firm acting in the

capacity of an FCM from compliance

with certain Commission rules and

regulations based upon the firm’s

compliance with comparable regulatory

requirements imposed by the firm’s

home-country regulator. The

Commission has established a process

whereby a foreign regulator or SRO can

petition on behalf of its regulatees or

members, respectively, for such an

exemption based upon the

comparability of the regulatory structure

in the foreign jurisdiction to that under

the Act.6 This petition process requires
Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Notices 47793

Under Section 30.10 of its Rules’’ and include the

following: (1) Registration, authorization or other

form of licensing, fitness review or qualification of

persons (both individuals and firms) through which

customer orders are solicited and accepted; (2)

minimum financial requirements for these persons

who accept customer funds; (3) protection of

customer funds from misapplication; (4) minimum

sales practice standards, including the disclosure of

the risks of futures transactions; (5) recordkeeping

and reporting requirements; (6) procedures to audit

for compliance with, and to take action against

those persons who violate, the requirements of the

program; and (7) the existence of appropriate

information-sharing arrangements.

7These conditions usually require the regulator

or SRO responsible for monitoring the compliance

of the firm with the regulatory requirements

described in the Rule 30.10 petition to represent in

writing to the Commission the following: (1) Each

firm for which relief is sought is registered, licensed

or authorized, as appropriate, and is otherwise in

good standing under the standards of its place of

domicile; such firm is engaged in business with

customers located in the location of the regulator

or SRO as well as in the U.S.; and, such firm would

not statutorily disqualified from registration under

Section 8a(2) of the Act; (2) it will monitor firms

to which relief is granted for compliance with the

regulatory requirements for which substituted

compliance is accepted and will promptly notify

the Commission or NFA of any change in status of

a firm which would affect its continued eligibility

for the exemption granted hereunder, including the

termination of its activities in the U.S.; (3) all

transactions on the exchanges under the

jurisdiction of the regulator or SRO with respect to

customers resident in the U.S. will be made on or

subject to the rules of each respective exchange and

the Commission will receive prompt notice of all

material changes in such exchanges’ codes and

regulations; (4) customers resident in the U.S. will

be provided no less stringent regulatory protection

than customers in the country where the regulator

or SRO is located under all relevant provisions of

law; and (5) it will cooperative with the

Commission with respect to any inquires

concerning any activity subject to regulation under

the Part 30 rules, including sharing the information

specified in Appendix A to the Part 30 rules on an

‘‘as needed’’ basis, and becomes aware of any

information which in its judgment affects the

financial or operational viability of a firm doing

business in the U.S. pursuant to an exemption

granted under Rule 30.10.

8These representations generally require the firm

to: (1) Consent to jurisdiction in the U.S. and

designate an agent for service of process in the U.S.

in accordance with the requirements set forth in

Rule 30.5; (2) agree to make its books and records

available upon the request of any representative of

the Commission or the U.S. Department of Justice;

(3) agree that all futures or regulated option

transactions with respect to U.S. customers will be

made on or subject to the rules of the applicable

exchange and will be undertaken consistent with

rules and codes under which such firm operates; (4)

represent that no principal of the firm would be

disqualified under Section 8a(2) of the Act from

registering to do business in the U.S. and notify the

Commission promptly of any change in that

representation; (5) disclose the identify of each U.S.

affiliate or subsdiary; (6) agree to be subject to NFA

arbitration; (7) consent to the release of certain

financial information; (8) refuse U.S. customers the

option of not having their funds segregated from the

firm’s proprietary funds, even if that option is

generally available under local law; (9) consent to

report the value of funds required to be segregated

on behalf of U.S. customers; and (10) undertake to

comply with the provisions of law and rules which

form the basis for granting the exemption. These

representations may vary from order to order

depending upon the regulatory structure of the

firm’s home country. To date, eleven orders have

been issued for the following regulators and selfregulatory organizations; Sydney Futures Exchange,

53 FR 44856 (November 7, 1988); Singagpore

International Monetary Exchange Limited, 54 FR

806 (January 10, 1989); Montreal Exchange, 54 FR

11179 (March 17, 1989); United Kingdom regulators

and/or SROs (Securities and Investments Board,

Securities and Futures Association, and Investment

Management Regulatory Organization), 54 FR

21599, 21604, 21609, and 21614 (May 19, 1989), 56

FR 14017 (April 5, 1991); Toronto Futures

Exchange, 55 FR 10611 (March 22, 1990); Tokyo

Grain Exchange, 58 FR 10953 (February 23, 1993);

MEFF Renta Fija, 60 FR 30462 (June 9, 1995); New

Zealand Futures and Options Exchange, 61 FR

64985 (December 10, 1996); and MEFF Renta

Variable, 62 FR 16687 (April 8, 1997).

9The firm’s fitness is verified by checking the

following sources for any information on the firm:

(1) The Office of Proceedings for reparations cases;

(2) the Division of Trading and Markets for contract

market exchange actions; and (3) NFA’s

Clearinghouse of Disciplinary Information (CDI) for

NFA actions.

10 Division of Trading and Markets Advisory 41–

93 outlines procedures for firms applying for

confirmation of exemptive relief under Rule 30.10

that have affiliates or subsidiaries in the U.S. It is

reprinted as CFTC Interpretative Letter No. 93–65,

(1992–1994 Transfer Binder) Comm. Fut. L. Rep.

(CCH) ¶25,784 (July 26, 1993).

11NFA is currently the only futures association so

regulated.

12 52 FR 28980, 28990 (August 5, 1987).

13NFA already accepts filings for exemption from

registration under Rule 30.5 and supporting

agreements from qualifying persons acting as IBs.

14Such persons are generally, FCMs, CPOs,

CTAs, broker-dealers, investment companies,

banks, insurance companies, employee benefit

Continued

that the Commission issue an Order

granting general relief subject to certain

conditions 7 and that individual firms

then be granted confirmation of such

relief. Firms seeking confirmation of

Rule 30.10 relief must make the

required representations 8 set forth in

the Rule 30.10 Order issued to the

regulator or SRO from the firm’s home

country. The regulator or SRO forwards

to the Commission the firm’s

representations along with a request for

confirmation of Rule 30.10 relief as to

the particular firm. The Commission

grants a particular firm Rule 30.10 relief

after verifying the firm’s fitness 9 and

compliance with the conditions of the

appropriate Rule 30.10 Order and with

Division of Trading and Markets

Advisory 41–93, if applicable.10

The Commission believes that, once it

has examined the foreign jurisdiction’s

regulatory structure and issued an Order

under Rule 30.10 granting general relief

based upon the comparability of that

structure to the structure under the Act,

the steps needed to determine if relief

is appropriate for particular firms are

similar to those undertaken in the

course of fitness checks performed by

NFA with respect to applicants for

registration under the Act. The

Commission further believes that it is

appropriate for NFA to undertake the

performance of these steps to the extent

the appropriate foreign regulator and/or

other market authority can share

information directly with NFA, since it

has previously been authorized to

perform similar steps for applicants.

Accordingly, by this Order, NFA is

authorized to receive requests for Rule

30.10 relief on behalf of firms which are

acting in the capacity of an FCM for

purposes of handling orders for foreign

futures or futures options products for

U.S. persons and which are regulatees of

a foreign regulator or members of a

foreign SRO to which the Commission

has issued an order pursuant to Rule

30.10, to verify such firms’ fitness and

compliance with the conditions of the

appropriate Rule 30.10 Order and

Division of Trading and Markets

Advisory 41–93, and to exempt

qualifying firms from registration

pursuant to Rule 30.10.

B. Foreign CPO and CTA Compliance

With Rule 30.5

Rule 30.5 provides an exemption from

registration as a CPO, CTA or

introducing broker (IB) to any qualifying

non-domestic person, other than a

person required to be registered as an

FCM, who solicits U.S. residents to

trade foreign futures or options. To

qualify for the exemption from

registration under Rule 30.5, the nondomestic person must enter into a

written agency agreement with one of

the following: (1) The FCM carrying the

foreign futures or options account that

the non-domestic person solicited in the

U.S.; (2) any futures association

registered under the Act; 11 or (3) any

other person located in the U.S. in the

business of acting as an agent for service

of process. The agreement must provide

that the FCM, registered futures

association or other designated person is

authorized to serve as the agent of the

non-domestic person for purposes of

accepting delivery and service of

communications from the Commission,

U.S. Department of Justice, any SRO or

any foreign futures or foreign options

customer.12 Qualifying persons who act

in the capacities of IBs, CPOs and CTAs

and who are located outside of the U.S.

may be eligible to use the procedure

provided by Rule 30.5. By this Order,

NFA is authorized to accept filings for

exemption from registration under Rule

30.5 and supporting agreements from

qualifying persons acting as CPOs or

CTAs 13 provided such persons offer

their products and services solely to

qualified eligible participants (QEPs) or

qualified eligible clients (QECs) as

described in Rule 4.7.14 Under Rule
47794 Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Notices

plans, business development companies, certain

business entities with total assets in excess of

$5,000,000, natural persons with net worth in

excess of $1,000,000 (or with individual income in

each of the two most recent years in excess of

$200,000 or joint income of $300,000), certain

governmental entities and non-U.S. persons.

15For these purposes, NFA considers a foreign

principal to be any person with a current address

outside of the U.S. It does not include a foreign

national who has recently moved to the U.S. but

would include a U.S. citizen who has moved

abroad.

16Review of the Registration Fitness Program of

National Futures Association, Commodity Futures

Trading Commission, Division of Trading and

Markets (February 1996) (hereinafter, the Review).

17Review, Recommendation No. 3b at 7–8.

18Each firm applying for registration must file a

Form 8–R for each principal, and registrants must

file a Form 8–R for each new principal. Rules

3.10(a)(2), 3.32.

19CBT was a participant in Globex from June

1992 through May 1994.

20The term ‘‘pass the book’’ refers to the process

which orders for exchange contracts received for or

on behalf of customers of an exchange member firm

are transferred for entry into Globex terminals

located in a non-U.S. office of a foreign affiliate of

that exchange member firm outside normal U.S.

business hours.

21The June 20, 1988 agreement between the

Chicago Mercantile Exchange and Reuters Holdings

PLC which established certain rights and

responsibilities of the parties related to Globex is

set to expire in 1998. CME intends to continue to

provide an electronic execution system that will

retain the Globex name.

22CFTC Interpretative Letter No. 92–11, [1990–

1992 Transfer Binder] Comm. Fut. L. Rep. (CCH)

¶ 25,325 (June 25, 1992), superseded in part by

CFTC Interpretative Letter No. 93–83, [1992–1994

Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 25,849

(August 9, 1993).

23The Division received the notice with respect

to Hong Kong on August 15, 1993.

24The Division received the notice with respect

to Japan on December 16, 1993.

25The Division issued the letter granting relief to

NYMEX members that ‘‘pass the book’’ to their

foreign affiliates in the United Kingdom utilizing

NYMEX ACCESS terminals in the United Kingdom

on October 29, 1993 and expanded it to Hong Kong

on June 10, 1997.

26The Division received the notice with respect

to Australia on September 28, 1995.

27CFTC Interpretative Letter No. 93–83, [1992–

1994 Transfer Binder] Comm. Fut. L. Rep. (CCH)

¶ 25,849 (August 9, 1993). For example, each

exchange member FCM intending to operate

pursuant to pass-the-book relief must, among other

undertakings: (1) Identify itself, its foreign affiliates,

and ‘‘designated persons’’ at such affiliates

authorized to solicit, accept or enter orders from

customers on behalf of the exchange member firm

in writing to appropriate exchanges, NFA and the

Commission; (2) carry all customer accounts on the

books of the exchange member firm as customer

accounts of that firm, including for purposes of

computing net capital; (3) ensure that all written

communication with customers is by the exchange

member firm on its own stationery; (4) maintain all

monies, securities, and property of customer

accounts in accordance with appropriate statutory

and regulatory requirements as segregated or

secured amount funds, depending upon whether

the transaction is effected on or subject to the rules

of a contract market or a foreign exchange,

respectively; (5) have the right to terminate the

authority of any designated person at the foreign

affiliate to solicit, accept, or enter orders on behalf

of customers; and (6) be liable under the Act, the

Commission’s regulations and exchange rules for all

solicitations, acceptances or entries of orders for

exchange contracts on Globex by the foreign

affiliate through its designated persons for or on

behalf of customers of the exchange member firm.

Generally, the filing and acknowledgment

requirements are intended to give exchanges the

ability to monitor and to investigate trading on

Globex involving passing the book equivalent to

their ability to do so in connection with orders

placed directly at the exchange member firm.

30.5(d), any person exempt from

registration with the Commission in

accordance with the provisions of Rule

30.5 must, upon the request of any

representative of the Commission or the

U.S. Department of Justice, provide the

records such person is required to

maintain under Rule 30.5 at the place in

the U.S. designated by the

representative within 72 hours after the

person receives the request.

C. Foreign Fitness Inquiries of Any

Applicant for CFTC Registration or

Registrant Having a Foreign Principal

As part of the registration process,

NFA reviews the fitness of any foreign

principal of an applicant for registration

and any foreign principal subsequently

listed with a registrant by means of a

criminal background check through

INTERPOL.15 In addition, in cases of a

foreign-domiciled applicant firm with a

foreign principal, NFA’s fitness review

encompasses a check with a foreign

regulator or SRO. Under current

practice, NFA must forward the request

for fitness information to the Division,

which then requests the information

from the foreign regulator and/or SRO in

the jurisdiction of the principal’s

residence. Information received from

the foreign regulator and/or SRO by the

Commission’s staff is subsequently

forwarded to NFA. NFA evaluates this

information based on the standards set

forth in its Registration Investigation

Procedures Manual in making its

determination as to whether to grant

registration. These standards were

reviewed by the Commission in

February 1996.16 The Division has

recommended that NFA consider

expanding foreign fitness inquiries to

include previous employment locations

within the prior five years in addition

to requesting information from

authorities in the foreign jurisdiction

where the applicant resides.17 The

Division also recommended that NFA

consider enhancing foreign fitness

inquiries to include any principal with

a U.S. residence who has worked abroad

for a period of at least six months during

the prior five years. By this Order, NFA

is authorized to request fitness

information directly from the relevant

foreign regulator(s) and/or SRO(s) of any

applicant for registration or registrant

having a foreign principal to the extent

the Commission has advised NFA such

regulator is willing to transfer such

information directly to NFA. The

relevant foreign regulator(s) and/or

SRO(s) of any applicant for registration

includes foreign regulators and/or SROs

in all employment locations of the

applicant for the five years prior to the

date of the application. NFA is further

authorized to request fitness

information on any principal who has

worked outside of the U.S. for at least

six months during the five years

preceding the filing of Form 8–R to the

same extent.18

D. Globex and NYMEX ACCESS ‘‘Passthe-Book’’ Relief

The Chicago Mercantile Exchange’s

(CME’s) Globex trading system and

NYMEX’s ACCESS trading system

permit the trading of contracts of those

respective exchanges, and those of

certain foreign exchanges, via electronic

media outside of regular U.S. trading

hours. In response to a request for relief

on behalf of FCM member firms of the

CME and the Chicago Board of Trade

(CBT),19 the Division adopted a noaction position with respect to certain

Commission registration requirements

that would apply to the member firms

and their foreign affiliates in France and

the United Kingdom that ‘‘pass the

book’’ 20 of customer orders for entry

into the Globex 21 electronic trading

system and to personnel involved in

that process.22 The Division required

the exchanges to notify the Commission

to confirm the applicability of the noaction relief with respect to the

placement of Globex terminals in other

jurisdictions, and such notice has been

received with respect to Hong Kong 23

and Japan.24 The Division also granted

similar relief to FCM member firms of

the NYMEX and their foreign affiliates

in the United Kingdom who ‘‘pass the

book’’ of customer orders and engage in

certain order acceptance activities

involving the NYMEX ACCESS trading

system.25 The Division also has received

a notice from NYMEX as to the

placement of Sydney Computerized

Overnight Market (SYCOM) terminals in

Australia that would permit Sydney

Futures Exchange member firms to

execute NYMEX transactions for

NYMEX member firms and their foreign

affiliates.26

Exchange member FCMs seeking to

avail themselves of the Globex and

NYMEX no-action relief must comply

with filing, acknowledgment, and other

requirements described in CFTC

Interpretative Letter No. 93–83.27

Currently, the Commission receives a
Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Notices 47795

28Such customers are identified in Interpretative

Letter No. 93–115 and are similar in description to

persons that qualify as QEPs under Commission

Rule 4.7. See CFTC Interpretative Letter No. 93–

115, [1992–1994 Transfer Binder] Comm. Fut. L.

Rep. (CCH) ¶ 25,932 (December 23, 1993).

29 In order to assure that the order transmittal

procedure is structured in a manner that facilitates

an FCM’s ability to supervise its financial

condition, the Division conditioned relief on the

following: (1) The FCM’s establishment of and

adherence to written procedures that make explicit

the internal control procedures that apply to any

direct contacts between the FCM’s customers and

the foreign affiliate, including authorization,

identification, and supervision of orders; (2)

identification by the FCM to the foreign affiliate of

the FCM’s customers authorized to transmit orders

directly to the foreign affiliate; (3) the foreign

affiliate’s identification of the customer on the order

ticket at the time it is created; (4) written

confirmation of receipt and execution of the

customer’s order by the foreign affiliate, along with

an audit trail and designated personnel with

authority to reconcile certain trades; (5) the FCM’s

establishment of and adherence to procedures to

monitor customer positions aggregated across all

markets, including the ability to assess whether a

customer is assuming too high a degree of financial

risk with respect to these and any other positions

the customer may have with the FCM that is greater

than the FCM, in its business judgment, based on

reasonable reviews, believes is appropriate for that

customer; (6) a written agreement between the FCM

and its affiliate specifying that the FCM is directly

liable to the foreign affiliate for margin payments

related to the omnibus accounts; and (7)

documentation provided to the customer from the

FCM advising customers that (a) orders delivered

pursuant to the direct order transmittal procedure

are for their FCM’s omnibus account with the

foreign affiliate, (b) such customers are customers

of the FCM only and are not customers of the

foreign affiliate, and (c) the customer has five days

to object to the conditions imposed on the direct

order transmittal procedure. CFTC Interpretative

Letter No. 93–115.

30CFTC Interpretative Letter No. 95–8, [1994–

1996 Transfer Binder] Comm. Fut. L. Rep. (CCH)

¶ 26,300 (January 25, 1995). In addition to

compliance with all the terms and conditions set

forth in Interpretative Letter No. 93–115, foreign

affiliates of U.S. FCMs which do not have Rule

30.10 relief and the U.S. FCMs are required to

comply with the terms and conditions summarized

as follows: (1) The U.S. FCM must accept liability

under the Act and the Commission’s rules for all

acts of the foreign affiliate undertaken by certain

persons; (2) the designated persons of the foreign

affiliate authorized to solicit, accept and enter

orders must be listed and procedures must be

established to ensure that customers deal only with

such designated persons; (3) at least one designated

person must be registered with the Commission as

an associated person (AP) and all designated

persons must be supervised by an AP; (4) all

designated persons who accept or enter orders must

be registered with the Commission as an AP; (5) all

designated persons not registered as APs must

acknowledge that they are subject to the Act and the

Commission’s rules, and must not be subject to

statutory disqualification from registration under

Section 8a(2) of the Act; (6) the Commission must

be assured access to original books and records

related to the solicitation, acceptance or entry of

U.S. institutional customer orders on behalf of the

U.S. FCM at the foreign affiliate; and (7) the foreign

affiliate must appoint the U.S. FCM as its agent for

service of process with respect to any materials

arising out of its activities concerning these orders.

31As Japanese and Hong Kong laws require that

original books and records of the U.S. FCM’s foreign

affiliate be maintained within the local jurisdiction,

U.S. FCMs with foreign affiliates in Japan or Hong

Kong may comply with the following terms and

conditions in satisfaction of the requirement that an

FCM and its foreign affiliate assure the Commission

access to the foreign affiliate’s original books and

records: (1) The U.S. FCM and its Japanese or Hong

Kong affiliate will provide authenticated copies of

the foreign affiliate’s original books and records

upon request of a Commission representative; (2)

the U.S. FCM and its affiliate will provide access

to original books and records in the foreign

jurisdiction; (3) to the U.S. FCM and its affiliate

waive objection to the admissibility of the copies

as evidence in a Commission action against the

FCM or its affiliate; and (4) the U.S. FCM and its

affiliate agree in the event of a proceeding to

provide a witness to authenticate copies of books

and records given to the Commission. CFTC

Interpretative Letter 95–83, [1994–1996 Transfer

Binder]) Comm. Fut. L. Rep. (CCH) ¶ 26,559

(September 29, 1995).

32The DTB, located in Frankfurt, Germany, is a

fully automated international options and futures

exchange on which all trades are executed and

cleared electronically. Trading is conducted via

computer terminals. The market participants’

computers and terminals are linked to the DTB

computer center by means of a wide-ranging

telecommunications network.

33CFTC Interpretative Letter No. 96–28, [Current

Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶ 26,669

(February 29, 1996).

34These terms and conditions are listed in the

February 29, 1996 letter, as supplemented by a May

9, 1997 letter, from the Division to DTB granting

relief to DTB and are as follows: (1) DTB terminals

will be located only in U.S. offices of DTB members

or on the floor of the CME; (2) all DTB members

that intend to operate pursuant to the relief will be

identified to the Commission and the NFA; (3)

pursuant to the DTB’s rules, DTB members must

apply to the DTB for DTB terminal placement and

identify the location and connection of user devices

to DTB’s electronic trading system and, upon

request, DTB shall provide information received

from its members and in its possession to the

Commission regarding the location of all such

terminals in the U.S., and shall update such

information on a periodic basis upon reasonable

request; (4) all orders executed pursuant to the

relief will be for ‘‘principal’’ accounts if executed

by a non-FCM DTB member firm and the Division

will be notified promptly in the event that there is

Continued

letter from each firm intending to

operate pursuant to pass-the-book relief

setting forth these filings,

acknowledgments and representations,

and the Division verifies the

completeness of the letter. By this

Order, NFA is authorized to serve as the

repository for the filings,

acknowledgments and representations

submitted by exchange member FCMs

seeking to avail themselves of Globex

and NYMEX pass-the-book relief and is

authorized to verify that the filings,

acknowledgments and representations

made by the firms are complete as

described in CFTC Interpretative Letter

No. 93–83.

E. FCM Order Transmittal Procedure

Relief

The Division permits certain

customers 28 of FCMs to transmit foreign

futures and options orders directly to

qualified foreign firms that: (1) Are

affiliated with the customer’s FCM

through a parent/subsidiary relationship

or through common ownership; and (2)

carry such FCM’s omnibus account.

When the order transmittal procedure

relief was granted initially, the foreign

firm receiving these orders must already

have been granted relief under Rule

30.10.29 The Division subsequently

expanded the order transmittal

procedure relief to allow U.S. FCMs to

implement the order transmittal

procedures with their foreign affiliates

which had not received Rule 30.10

relief, provided that certain additional

conditions were met and

representations were given.30 When a

U.S. FCM and its foreign affiliate wish

to operate pursuant to the order

transmittal procedure relief, they write

a letter to the Commission representing

that they will comply with the

conditions outlined in Letter No. 93–

115 and, if applicable, with the

conditions outlined in Letters No. 95–8

and No. 95–83.31 The Division then

verifies that the U.S. FCM and its

foreign affiliate have made the

appropriate representations. By this

Order, NFA is authorized to receive

filings for order transmittal procedure

relief and to verify the completeness of

the representations contained therein.

F. DTB Terminal Placement Relief

By letter dated February 29, 1996, the

Division stated that it would not

recommend that the Commission

commence an enforcement action

against DTB32 in connection with the

placement of DTB computer terminals

in the U.S. in order to permit DTB

members to execute transactions

involving DTB futures and option

products which are otherwise approved

for trading by U.S. persons without the

DTB being deemed a U.S.-based board

of trade required to be designated as a

contract market pursuant to Section 5 of

the Act.33 Relief was conditioned upon,

among other conditions, the filing of

materials identifying all DTB members

that intend to operate pursuant to the

relief. The Division has also established

a procedure that requires firms to

submit an acknowledgment of

jurisdiction and compliance with the

terms of the relief as outlined in the

February 29, 1996 letter (the

Acknowledgment).

By this Order, the NFA is authorized

to receive and to review identification

filings and Acknowledgments from

firms intending to operate DTB

terminals in the U.S. NFA is authorized

to verify that the identification filings

accurately identify the firms and that

the Acknowledgments include the terms

and conditions required for relief.34
47796 Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Notices

a change under applicable German laws or rules of

the DTB concerning the definition of the word

‘‘principal’’; (5) participating DTB members will

provide, upon the request of the Commission or

NFA, prompt access to original books and records

and the premises where DTB terminals are installed

in the U.S., and will consent to Commission

jurisdiction for purposes of ensuring compliance

with the conditions of the no-action relief; (6) DTB

will continue to adhere to the ‘‘Principles for

Oversight of Screen Based Trading Systems for

Derivative Products,’’ a statement of regulatory

policy recommended by the International

Organization of Securities Commissions and

adopted by the Commission on November 21, 1990;

(7) DTB will submit to the Commission, on at least

a quarterly basis, information reflecting the volume

of trades originated from U.S.-based computer

terminals compared to DTB’s overall trading

volume; and (8) DTB will undertake to provide the

Division with prompt notice of all material changes

to DTB rules, the German Exchange Act, the

German Securities Act, and other German laws

relevant to futures and options which may impact

on the issuance of DTB Terminal Placement relief.

35 49 FR 39593 (October 9, 1984); 50 FR 34885

(August 28, 1985); 51 FR 25929 (July 17, 1986); 54

FR 19594 (May 8, 1989); 54 FR 41133 (October 5,

1989); 58 FR 19657 (April 15, 1993).

36This should include a person residing in the

U.S. who has resided outside of the U.S. for at least

six months during the five years immediately prior

to the filing of Form 8–R.

37The relevant foreign regulatory authority can

include an authority in any jurisdiction where the

principal has worked during the prior five eyars as

well as the authority for the principal’s current

residence.

38The Commission may delegate other similar

administrative and processing functions by letter

and Commission Advisory. The Commission also

will furnish to NFA existing Commission records

that it identifies as pertaining to the matters

discussed in this Order.

NFA is further authorized to conduct a

fitness review of the firm such as is

performed in connection with

registration with the Commission.

G. Recordkeeping Requirements

By prior orders, the Commission has

authorized NFA to maintain various

other Commission registration records

and certified NFA as the official

custodian of such records for this

agency.35 The Commission has now

determined, in accordance with its

authority under Section 8a(10) of the

Act, to authorize NFA to maintain and

to serve as the official custodian of

records for the filings and

acknowledgment requirements

submitted by: (1) Exchange member

FCMs in connection with ‘‘pass-thebook’’ relief; (2) FCMs and their foreign

affiliates in connection with order

transmittal procedure relief; and (3)

firms intending to operate DTB

computer terminals in the U.S. In this

connection, NFA has undertaken to

abide by any special use restrictions

applicable to information received from

a foreign market authority to the full

extent permitted by law. The Division

also has determined to authorize NFA to

maintain requests and related materials

submitted pursuant to Rules 30.10 and

30.5 or obtained in the course of

conducting foreign fitness inquiries.

These determinations are based upon

NFA’s representations regarding the

implementation of rules and procedures

for maintaining and safeguarding all

such records, as well as the need to

facilitate NFA’s preparations for

assuming responsibility for the abovementioned activities.

In maintaining the Commission’s

records pursuant to this Order, NFA

shall be subject to all other requirements

and obligations imposed upon it by the

Commission in existing or future orders

or regulations. In this regard, NFA shall

also implement such additional

procedures (or modify existing

procedures) as are necessary to ensure

the security and integrity of the records

in NFA’s custody and acceptable to the

Commission; to facilitate prompt access

to those records by the Commission and

its staff, particularly as described in

other Commission orders or rules; to

facilitate disclosure of public or

nonpublic information in those records

when permitted by Commission orders

or rules and to keep logs as required by

the Commission concerning disclosure

of nonpublic information; and otherwise

to safeguard the confidentiality of the

records.

II. Conclusion and Order

The Commission has determined, in

accordance with the provisions of

Sections 8a(10) and 17(o)(1) of the Act

and NFA’s letter dated August 27, 1997,

subject to any restriction by a given

jurisdiction that information must pass

directly between regulatory authorities,

to authorize NFA to perform the

following functions:

(1) To grant, either with or without

conditions, exemptive relief to firms

acting in the capacity of FCMs which

are members of regulatory or selfregulatory bodies to which an order

under Commission Rule 30.10 has been

issued from the registration

requirements of part 30;

(2) To maintain filings for exemption

from the registration requirements of

part 30 and supporting agreements

submitted pursuant to the provisions of

Commission Rule 30.5 by qualifying

persons acting as CPOs or CTAs who

offer their products and services solely

to ‘‘qualified eligible participants’’ or

‘‘qualified eligible clients,’’ as those

terms are defined in Commission Rule

4.7;

(3) To grant, either with or without

conditions, the registration of any

applicant for registration with a foreign

principal and the addition by a

registrant of a foreign principal after

NFA verifies the fitness of the foreign

principal 36 with the relevant foreign

regulatory authority,37 where NFA

previously would have forwarded the

request for fitness information to the

Commission in order for the

Commission to request the fitness

information from the appropriate

foreign regulatory body;

(4) To maintain the filings and

acknowledgments submitted by

exchange member FCMs in connection

with Globex and NYMEX Access ‘‘passthe-book’’ relief;

(5) To maintain filings of FCMs and

their foreign affiliates made in

connection with order transmittal relief

where the filings contain the required

representations for claiming such relief;

(6) To maintain identification filings

and acknowledgments from firms

intending to operate DTB terminals in

the U.S. where such identification

filings and acknowledgments contain

the required representations and

information for claiming relief; and

(7) To maintain filings,

acknowledgments, and records

pertaining to the functions previously

delegated in this Order and to serve as

the official custodian of those

Commission records.38

The Commission is in the process of

preparing an update to its systems of

records (with respect to CFTC–12 and

CFTC–20) to make permissible under

the Privacy Act of 1974 the concomitant

disclosure to NFA of personal

information on individuals that may be

contained in these filings,

acknowledgments, and records.

NFA shall perform these functions in

accordance with the standards

established by the Act and the

regulations and orders promulgated

thereunder, particularly Rule 30.10 and

Commission orders issued thereunder,

and shall provide the Commission with

such summaries and periodic reports as

the Commission may determine are

necessary for effective oversight of this

program.

These determinations are based upon

the Congressional intent expressed in

Sections 8a(10) and 17(o) of the Act that

the Commission have the authority to

delegate to NFA any portion of the

Commission’s registration

responsibilities under the Act for

purposes of carrying out these

responsibilities in the most efficient and

cost-effective manner and NFA’s

representations concerning the

standards and procedures to be followed

and the reports to be generated in

administering these functions.
Federal Register / Vol. 62, No. 176 / Thursday, September 11, 1997 / Notices 47797

This Order does not, however,

authorize NFA to render ‘‘no-action’’

opinions or interpretations with respect

to applicable registration requirements.

Nothing in this Order or in Sections

8a(10) or 17(o) of the Act shall affect the

Commission’s authority to review the

granting of a registration application by

NFA in the performance of Commission

registration functions, or to review the

maintenance of registration by NFA.

NFA is authorized to perform all

functions specified herein until such

time as the Commission orders

otherwise. Nothing in this Order shall

prevent the Commission from exercising

the authority delegated herein. NFA

may submit to the Commission for

decision any specific matters that have

been delegated to it and Commission

staff will be available to discuss with

NFA staff issues relating to the

implementation of this Order. Nothing

in this Order affects the applicability of

any previous orders issued by the

Commission under Part 30.

Issued in Washington, D.C. on September

5, 1997 by the Commission.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 97–24015 Filed 9–10–97; 8:45 am]

BILLING CODE 6351–01–P

COMMODITY FUTURES TRADING

COMMISSION

Membership of the Commission’s

Performance Review Board

AGENCY: Commodity Futures Trading

Commission.

ACTION: Membership Change of

Performance Review Board.

SUMMARY: In accordance with the Office

of Personnel Management guidance

under the Civil Service Reform Act of

1978, notice is hereby given that the

following employees will serve as

members of the Commission’s

Performance Review Board.

Chairman: Donald Tendick, Acting

Executive Director. Members: Susan

Lee, Executive Assistant to the

Chairperson, Office of the Chairperson;

Daniel Waldman, General Counsel,

Office of General Counsel; Geoffrey

Aronow, Director, Division of

Enforcement; John Mielke, Acting

Director, Division of Economic

Analysis.

DATES: This action was effective

September 5, 1997.

ADDRESSES: Commodity Futures Trading

Commission, Office of Human

Resources, Suite 7200, 1155 21st Street

N.W., Washington, D.C. 20581.

FOR FURTHER INFORMATION CONTACT:

Jayne Seidman, Director, Office of

Human Resources, Commodity Futures

Trading Commission, Suite 7200, 1155

21st Street N.W., Washington, D.C.

20581, (202) 418–5010.

SUPPLEMENTAL INFORMATION: This action

which changes the membership of the

Board supersedes the previously

published Federal Register Notice, July

26, 1996.

Issued in Washington, D.C. on September

5, 1997.

Jean A. Webb,

Secretary to the Commission.

[FR Doc. 97–24036 Filed 9–10–97; 8:45 am]

BILLING CODE 6351–01–M

DEPARTMENT OF DEFENSE

Department of the Army

Proposed Collection; Comment

Request

AGENCY: Deputy Chief of Staff for

Personnel (DAPE–ZXI–RM), U.S. Army;

DOD.

ACTION: Notice.

SUMMARY: In compliance with Section

3506(c)(2)(A) of the Paperwork

Reduction Act of 1995, the Department

of the Army announces a proposed

public information collection and seeks

public comment on the provisions

thereof. Comments are invited on: (a)

Whether the proposed collection of

information is necessary for the proper

performance of the functions of the

agency, including whether the

information shall have practical utility;

(b) the accuracy of the agency’s estimate

of the burden of the proposed

information collection; (c) ways to

enhance the quality, utility, and clarity

of the information to be collected; and

(d) ways to minimize the burden of the

information collection on respondents,

including through the use of automated

collection techniques or other forms of

information technology.

DATES: Consideration will be given to all

comments received by November 10,

1997.

ADDRESSES: Written comments and

recommendations on the proposed

information collection should be sent to

U.S. Army Research Institute for the

Behavioral and Social Sciences, 5001

Eisenhower Avenue, Alexandria, VA

22333–5600 Attn: (Dr. Peter J. Legree).

Consideration will be given to all

comments received within 60 days of

the date of publication of this notice.

FOR FURTHER INFORMATION CONTACT:

To request more information on this

proposed information collection or to

obtain to copy of the proposal and

associated collection instruments,

please write to the above address, or call

Department of the Army Reports

clearance officer at (703) 614–0454.

Title: Modeling the Individual

Enlistment Decision.

Needs and Uses: The career decision

survey captures the attitudes of 16–21

year old youth toward service, as well

as other available career options. It also

addresses qualification for service,

primarily in terms of aptitude, and their

availability. This administration will be

used to identify the items that best

predict enlistment propensity, and to

segment the population by quality and

availability factors.

Affected Public: Individual or

Households.

Annual Burden Hours: 2000.

Number of Respondents: 4000.

Responses Per Respondent: 1.

Average Burden Per Response: 30

minutes.

Frequency: One time.

SUPPLEMENTARY INFORMATION: The new

data collected will be used by analyst

within the Army Research Institute and

its prime contractor, the (HumRRO), to

investigate the viability of alternative

means of indirectly assessing cognitive

ability and enlistment propensity. If the

collection were not conducted, the

Army would not have the information of

improved relevance and validity needed

to fulfill and improve upon its

recruiting mission.

Gregory D. Showalter,

Army Federal Register Liaison Officer.

[FR Doc. 97–24144 Filed 9–10–97; 8:45 am]

BILLING CODE 3710–08–M

DEPARTMENT OF DEFENSE

Department of the Navy

Notice of Closed Meeting of the Chief

of Naval Operations (CNO) Executive

Panel

SUMMARY: Pursuant to the provisions of

the Federal Advisory Committee Act (5

U.S.C. App. 2), notice is hereby given

that the Chief of Naval Operations

(CNO) Executive Panel will meet

September 26, 1997, from 3:00 p.m. to

4:00 p.m. at the office of the Chief of

Naval Operations, 2000 Navy Pentagon,

Washington, D.C. 20350–2000. This

session will be closed to the public.

The purpose of this meeting is to

conduct the final briefing of the

Business Simulation Task Force to the

Chief of Naval Operations. These

matters constitute classified information

that is specifically authorized by

Executive order to be kept secret in the