60560 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Rules and Regulations

1 ‘‘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.’’ Rule 30.1(a). Commission rules referred to

herein are found at 17 CFR Ch. I (2000).

2 ‘‘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 is 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.’’ Rule

30.1(b).

3The specific elements examined by the

Commission in evaluating whether the particular

foreign regulatory program provides a basis for

issuing an order pursuant to Rule 30.10 are set forth

in Appendix A to Part 30. See 52 FR 28990, 29001

(August 5, 1987).

4These conditions 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 make certain

representations regarding the fitness of each firm

seeking to receive confirmation of Rule 30.10 relief,

the protections to be afforded to U.S. Customers,

and the exchange of information with the

Commission. See 62 FR 47792, 47793, n.7

(September 11, 1997).

5For a list of representations typically required of

each Rule 30.10 firm, see 62 FR 47792, 47793, n.8.

6The Commission has issued orders granting

expanded relief to the U.K. Investment Management

Regulatory Organisation (‘‘IMRO’’) 62 FR 10449

(March 7, 1997), the U.K. Securities and Futures

Association (‘‘SFA’’) 62 FR 10447 (March 7, 1997,

New Zealand Futures and Options Exchange

(‘‘NZFOE’’), 61 FR 64985 (December 10, 1996), the

Montreal Exchange, 62 FR 8875 (February 27, 1997)

and the Sydney Futures Exchange (‘‘SFE’’), 62 FR

10445 (March 7, 1997). In addition, the Commission

has authorized members of the Singapore

International Monetary Exchange, now known as

the Singapore Exchange Derivatives Trading

Limited (‘‘SGX–DT’’), to solicit and accept orders

from U.S. customers for otherwise permitted

transactions on Eurex Deutschland, 64 FR 50248

(September 16, 1999). Although applicants for Rule

30.10 orders generally have obtained relief from

transactions entered into from within their home

country before seeking expanded relief applicable

to transactions entered into on an exchange located

outside their borders, e.g., IMRO, the Commission

has combined the two forms of relief into one single

order, e.g., NZFOE.

8. The Commission’s interpretation of the

Rule 30.7 secured amount requirement will

apply to all regulated activities with all new

and existing foreign futures and foreign

options customers as of October 11, 2000.

The Commission’s interpretation does not

alter any other requirement set forth in Rule

30.7 or any other section of Part 30.

Dated: Issued in Washington, D.C. on

October 5, 2000.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 00–26068 Filed 10–10–00; 8:45 am]

BILLING CODE 6351–01–M

COMMODITY FUTURES TRADING

COMMISSION

17 CFR Part 30

Foreign Futures and Options

Transactions

AGENCY: Commodity Futures Trading

Commission.

ACTION: Order.

SUMMARY: The Commodity Futures

Trading Commission (‘‘Commission’’ or

‘‘CFTC’’) is amending the orders issued

pursuant to Rule 30.10 to the New

Zealand Futures and Options Exchange,

the Montreal Exchange, the Sydney

Futures Exchange, the U.K. Securities

and Futures Authority, the U.K.

Investment Management Regulatory

Organisation Limited, and the Singapore

Exchange Derivatives Trading Limited.

The amendment reflects the

Commission’s revised interpretation of

the Rule 30.7 foreign futures or foreign

options secured amount requirement

(‘‘secured amount requirement’’) as it

applies to both futures commission

merchants (‘‘FCMs’’) and certain foreign

firms exempt from such registration.

Specifically, the Commission has

determined to revise its interpretation of

Rule 30.7 to clarify the obligations of an

FCM or a firm exempt from FCM

registration in accordance with Rule

30.10 concerning the treatment of funds

of foreign futures or foreign options

customers under Rule 30.7. The

Commission’s revised interpretation of

the secured amount requirement is set

out in a revised appendix issued

concurrently with this release and

published elsewhere in today’s Federal

Register.

EFFECTIVE DATE: October 11, 2000.

FOR FURTHER INFORMATION CONTACT:

Lawrence B. Patent, Associate Chief

Counsel, or Andrew V. Chapin, Staff

Attorney, Division of Trading and

Markets, Commodity Futures Trading

Commisison, 1155 21st Street, NW,

Washington, DC 20581. Telephone:

(202) 418–5430.

SUPPLEMENTARY INFORMATION: The

Commission has issued the following

Order:

Order Amending Prior Orders Issued

Pursuant to Rule 30.10 to the New

Zealand Futures and Options Exchange,

the Montreal Exchange, the Sydney

Futures Exchange, the U.K. Securities

and Futures Authority, the U.K.

Investment Management Regulatory

Organisation Limited, and the

Singapore Exchange Derivatives

Trading Limited

I. Background

Part 30 of the Commission’s rules sets

forth rules governing foreign futures 1

and foreign option 2 transactions. Under

Rule 30.10, the Commission may

exempt a foreign firm acting in the

capacity of a futures commission

merchant (‘‘FCM’’) from registration

under the Commodity Exchange Act

(‘‘Act’’) and compliance with certain

Commission rules based upon the firm’s

compliance with comparable regulatory

requirements imposed by the firm’s

home-country regulator or selfregulatory organization (‘‘SRO’’).3 Once

the Commission determines that the

foreign jurisdiction’s regulatory

structure offers comparable regulatory

oversight, the Commission may issue an

Order granting general relief subject to

certain conditions.4 Firms seeking

confirmation of relief (referred to herein

as ‘‘Rule 30.10 firms’’) must make

certain representations set forth in the

Rule 30.10 Order issued to the regulator

or SRO from the firm’s home country.5

In certain cases, where a foreign

regulator or SRO has requested that

firms subject to its jurisdiction to be

granted broader relief to engage in

transaction on exchanges other than in

its home jurisdiction (referred to herein

as ‘‘expanded relief’’), the relief has

been granted where the relevant

authority has represented that it will

monitor its firms for compliance with

the terms of the order in connection

with such offshore transactions.6

Although Rule 30.10 orders generally

exempt foreign intermediaries from

compliance with the secured amount

requirement under Rule 30.7, firms

seeking confirmation of the expanded

relief must represent that, with respect

to transactions entered into on behalf of

U.S. customers on any non-U.S.

exchange located outside their home

country, they will treat U.S. customer

funds in a manner consistent with the

provisions of Rule 30.7.

The orders granting expanded relief

require Rule 30.10 firms to either set

aside funds constituting the secured

amount requirement in a separate

account: (1) As set forth in the relevant

order for expanded relief (see below), (2)

as set forth in Rule 30.7 (treating those

funds in the manner prescribed by that

rule), or (3) in compliance with either of

the above procedures, with the amount

required to be segregated under local

law to be substituted for the secured

amount. The alternative secured amount

requirement described within each

order for expanded relief states, in

relevant part:

The separate account or accounts referred

to [herein] may be deemed a good secured

amount depository only if the [firm] obtains

and retains in its files for the period required

by applicable law and [exchange or SRO]

rules, a written acknowledgment from such

separate account depository that:

Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Rules and Regulations 60561

7For the most recent order, see 64 FR 50248,

50251, n.19 (SGX–DT).

• It was informed that such money,

securities or property are held for or on

behalf of customers of the [firm]; and

• It will ensure that such money, securities

or property will be held and treated in

accordance with the provisions of this

paragraph; and, provided further, that the

[firm] assures itself that such separate

account depository will not pass on such

money, securities or property to any other

depository unless the [firm] has assured itself

that all such other separate account

depositories will treat such funds in a

manner consistent with the procedures

described [herein]. (emphasis added)

In other words, the Commission

required each Rule 30.10 firm with

expanded relief to perform an inquiry

before customer funds were sent to

another intermediary, and to take

appropriate action (i.e., set aside funds

in a ‘‘mirror’’ account) in the event that

it became aware of facts leading it to

conclude that U.S. customer funds were

not being handled consistent with this

requirement by any intermediary or

exchange clearing organization beyond

the initial depository. The Commission

further stated that ‘‘[the secured

amount] requirement [set forth herein]

is intended to ensure that funds

provided by U.S. customers for foreign

futures and options transactions,

whether held at a U.S. FCM under Rule

30.7(c) or a firm exempted from

registration as an FCM under CFTC Rule

30.10, will receive equivalent protection

at all intermediaries and exchange

clearing organizations.’’ 7

II. Amendment

Upon further analysis and

reconsideration of this matter, the

Commission has determined to revise its

interpretation of the secured amount

requirement set forth in Rule 30.7 and

the orders for expanded relief. As set

forth in Appendix B to Part issued

concurrently with this order, the

Commission believes that existing

written risk disclosures provide foreign

futures and foreign options customers

with notice that the treatment of

customer funds outside the U.S. may

differ from the treatment of customer

funds inside the U.S. The Commission

also believes that the initial depository’s

ability to identify customer funds

affords foreign futures and foreign

options customers a measure of

protection in the event that the

intermediating firm becomes insolvent.

Accordingly, the Commission believes

that the Rule 30.7 acknowledgment

required of certain Rule 30.10 firms

should apply only to the maintenance of

the account or accounts containing

foreign futures and foreign options

customer funds by the initial

depository.

Appendix B provides that FCMs and

certain Rule 30.10 firms need not

maintain mirror accounts, provided that

they obtain from the initial depository

the acknowledgment described in Rule

30.7 and that they furnish a written

disclosure statement to customers

concerning treatment of customer funds

by other jurisdictions set forth either in

Rule 1.55(b)(7) or paragraphs 6 and 8 of

Appendix A to Rule 1.55(c), or in a

comparable disclosure statement

prescribed by the firm’s home country

regulator. The Commission believes that

Rule 30.10 firms transacting business for

foreign futures and foreign option

customers outside of the firms’

jurisdictions should be able to operate

in a similar fashion. Accordingly, if a

Rule 30.10 firm operating pursuant to an

order for expanded relief receives from

the initial depository the

acknowledgment described in Rule 30.7

and furnishes to foreign futures and

foreign option customers the written

disclosure statement set forth either in

Rule 1.55(b)(7) or paragraphs 6 and 8 of

Appendix A to Rule 1.55(c), or a

comparable disclosure statement

prescribed by its home country

regulator, then it may include all funds

maintained in the account or accounts

in calculating its secured amount

requirement. Should a Rule 30.10 firm

fail to receive from the initial depository

the required acknowledgment or to

furnish the required risk disclosure,

then it must set aside funds with an

acceptable depository and receive from

such depository the required

acknowledgment.

III. Conclusion and Order

The Commission has determined to

revise its interpretation of the secured

amount requirement. For drafting

purposes, the Commission has

determined to amend the alternative

secured amount requirement set forth in

prior Rule 30.10 orders for expanded

relief to track as closely as possible the

language of Rule 30.7. In addition, the

Commission is adding to each order the

requirement that each Rule 30.10 firm

furnish to each foreign futures and

foreign option customer a risk

disclosure statement containing the

language set forth either in Rule

1.55(b)(7) or paragraphs 6 and 8 of

Appendix A to Rule 1.55(c), or a

comparable disclosure statement

prescribed by the firm’s home country

regulator. For the sake of clarity, the

Commission also is deleting from each

order granting expanded relief the

footnote describing the obligation to

perform an inquiry with respect to

depositories beyond the initial

depository and, if necessary, to set aside

funds. These amendments are made to

the following orders:

NZFOE (61 FR 64988–89)

The text of paragraphs describing the

secured amount requirement is

amended to read:

II. Each Dealer seeking rule 30.10 relief

hereunder must apply in writing whereby it:

* * * * *

K. With respect to transactions effected on

behalf of U.S. customers on any non-U.S.

futures and options exchange other than the

NZFOE and the SFE 20 [footnote unchanged],

whether by the Dealer directly as a clearing

member of such other exchange or through

the intermediation of one or more

intermediaries, complies with paragraphs 1

or 2 below:

1.a. Must maintain in a separate account or

accounts money, securities and property in

an amount at least sufficient to cover or

satisfy all of its current obligations to U.S.

customers denominated as the foreign futures

or foreign options secured amount;

* * * * *

e. Each Member must obtain and retain in

its files for the period required by applicable

law and Exchange rules an acknowledgment

from a depository identified in paragraph

d.(1)–(4) above that the depository was

informed that such money, securities or

property are held for or on behalf of foreign

futures and foreign options customers and

are being held in accordance with the

provision of these regulations.

f. Each Member must provide each foreign

futures and foreign options customer with

one of the written disclosure statements in

(1), (2) or (3) below:

(1) Foreign futures transactions involve

executing and clearing trades on a foreign

exchange. This is the case even if the foreign

exchange is formally ‘‘linked’’ to a domestic

exchange whereby a trade executed on one

exchange liquidates or establishes a position

on the other exchange. No domestic

organization regulates the activities of a

foreign exchange, including the execution,

delivery and clearing of transactions on such

exchange, and no domestic regulator has the

power to compel enforcement of the rules of

the foreign exchange or the laws of the

foreign country. Moreover, such laws or

regulations will vary depending on the

foreign country in which the transaction

occurs. For these reasons, customers who

trade on foreign exchanges may not be

afforded certain of the protections which

apply to domestic transactions, including the

right to use alternative dispute resolution. In

particular, funds received from customers to

margin foreign futures transactions may not

be provided the same protections as funds

received to margin futures transactions on

domestic exchanges. Before you trade, you

should familiarize yourself with the foreign

rules which will apply to your particular

transaction.

OR

60562 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Rules and Regulations

(2) You should familiarize yourself with

the protections accorded money or property

you deposit for domestic and foreign

transactions, particularly in the event of a

firm insolvency or bankruptcy. The extent to

which you may recover your money or

property may be governed by specified

legislation or local rules. In some

jurisdictions, property which has been

specifically identifiable as your own will be

pro-rated in the same manner as cash for

purposes of distribution in the event of a

shortfall.

Transactions on markets in other

jurisdictions, including markets formally

linked to a domestic market, may expose you

to additional risk. Such markets may be

subject to regulation which may offer

different or diminished investor protection.

Before you trade you should enquire about

any rules relevant to your particular

transactions. You local regulatory authority

will be unable to compel the enforcement of

the rules of the regulatory authorities or

markets in other jurisdictions where your

transactions have been effected. You should

ask the firm with which you deal for details

about the types of redress available in both

your home jurisdiction and other relevant

jurisdictions before you start to trade

OR

(3) A comparable disclosure statement

prescribed by the NZFOE; or

2. Must comply with the terms and

procedures of paragraph 1, with the amount

required to be segregated under NZFOE rules

and New Zealand laws to be substituted for

the secured amount requirement as set forth

in paragraph 1.21 [formerly footnote 22]

* * * * *

For the sake of clarity, the Commission

notes that language similar to the following

HAS BEEN STRICKEN from each order,

using the NZFOE order as an example:

1. * * *

e. The separate account or accounts

referred to in paragraph 1.a. may be deemed

to be a good secured amount depository only

if the Dealer obtains and retains in its files

for the period required by Exchange rules, a

written acknowledgment from such separate

account depository that:

(1) It was informed that such money,

securities or property are held for or on

behalf of customers of the Dealer; and

(2) It will ensure that such money,

securities or property will be held and treated

at all times effectively in accordance with the

provisions of this paragraph; and, provided

further, that the Dealer assures itself that

such separate account depository will not

pass on such money, securities, or property

to any other depository unless the Dealer has

assured itself that all such other separate

account depositories will treat such funds in

a manner consistent with the procedures

described in this paragraph 1 herein; 21

[footnote 21 deleted]

2. Must set aside funds constituting the

entire secured amount requirement in a

separate account as set forth in Commission

rule 30.7, 17 CFR 30.7 (2000), and treat those

funds in the manner described by that rule.

* * * * *

The Montreal Exchange (62 FR 8875,

8876)

The text of paragraphs describing the

secured amount requirement is

amended to read:

Accordingly, the expanded relief permitted

Montreal Exchange Member firms to engage

in foreign futures and [foreign] options

transactions for U.S. customers other than on

the Montreal Exchange under this

Supplemental Order will be contingent upon

compliance by the Exchange Member firm

with the following additional conditions:

* * * * *

(6) With respect to transactions effected on

any non-U.S. futures and options exchange

on behalf of U.S. customers, whether by the

Montreal Exchange Member directly as a

clearing member of such other exchange or

through the intermediation of one or more

intermediaries, complies with paragraph 1

below:

1.a. Must maintain in a separate account or

accounts money, securities and property in

an amount at least sufficient to cover or

satisfy all of its current obligations to U.S.

customers denominated as the foreign futures

or foreign options secured amount;

* * * * *

e. Each Member must obtain and retain in

its files for the period required by applicable

law and Exchange rules an acknowledgement

from a depository identified in paragraph

d.(1)–(4) above that the depository was

informed that such money, securities or

property are held for or on behalf of foreign

futures and foreign options customers and

are being held in accordance with the

provision of these regulations.

f. Each Member must provide each foreign

futures and foreign options customers with

one of the written disclosure statements in

(1), (2) or (3) below:

(1) Foreign futures transactions involve

executing and clearing trades on a foreign,

exchange. This is the case even if the foreign

exchange is formally ‘‘linked’’ to a domestic

exchange whereby a trade executed on

exchange liquidates or establishes a position

on the other exchange. No domestic

organization regulates the activities of a

foreign exchange, including the execution,

delivery and clearing of transactions on such

exchange, and no domestic regulator has the

power to compel enforcement of the rules of

the foreign exchange or the laws of the

foreign country. Moreover, such laws or

regulations will vary depending on the

foreign country in which the transaction

occurs. For these reasons, customers who

trade on foreign exchanges may not be

afforded certain of the protections which

apply to domestic transactions, including the

right to use alternative dispute resolution. In

particular, refunds received from customers

to margin foreign futures transactions may

not be provided the same protections as

funds received to margin futures transactions

on domestic exchanges. Before you trade, you

should familiarize yourself with the foreign

rules which will apply to your particular

transaction.

OR

(2) You should familiarize yourself with

the protections accorded money or property

you deposit for domestic and foreign

transactions, particularly in the event of a

firm insolvency or bankruptcy. The extent to

which you may recover your money or

property may be governed by specified

legislation or local rules. In some

jurisdictions, property which has been

specifically identifiable as your own will be

pro-rated in the same manner as cash for

purposes of distribution in the event of a

shortfall.

Transactions on markets in other

jurisdictions, including markets formally

linked to a domestic market, may expose you

to additional risk. Such markets may be

subject to regulation which may offer

different or diminished investor protection.

Before you trade you should enquire about

any rules relevant to your particular

transactions. Your local regulatory authority

will be unable to compel the enforcement of

the rules of the regulatory authorities or

markets in other jurisdictions where your

transactions have been effected. You should

ask the firm with which you deal for details

about the types of redress available in both

your home jurisdiction and other relevant

jurisdictions before you start to trade.

OR

(3) A comparable disclosure statement

prescribed by the Exchange; or

* * * * *

SFE (62 FR 10445, 1044)

The text of paragraphs describing the

secured amount requirement is

amended to read:

Accordingly, the Commission has

determined to clarify that the relief set forth

in the expanded relief authorized pursuant to

the 1993 Order is applicable only if the

Exchange Member firm complies with the

following procedures, which are consistent

with the requirements applicable to

commission registered FCMs concerning the

protection of customer funds under the

provisions of [Rule 30.7]: [footnote 6

unchanged]

With respect to transactions effected on

behalf of U.S. customers on any non-U.S.

futures and options exchange other than the

NZFOE 7 [footnote 7 unchanged] and the

SFE, whether by the SFE member directly as

a clearing member of such other exchange or

through the intermediation of one or more

intermediaries, the SFE member complies

with paragraphs a or b below:

a.(1) Must maintain in a separate account

or accounts money, securities and property

in an amount denominated as the foreign

futures or foreign options secured amount, at

least sufficient to cover or satisfy all of its

current obligations to U.S. customers;

* * * * *

(5) Each member must obtain and retain in

its files for the period required by applicable

law and Exchange rules an acknowledgment

from a depository identified in paragraph

(4)(a)–(d) above that the depository was

informed that such money, securities or

property are held for or on behalf of foreign

futures and foreign options customers and

Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Rules and Regulations 60563

are being held in accordance with the

provision of these regulations.

(6) Each member must provide each foreign

futures and foreign options customer with

one of the written disclosure statements in

(a), (b) or (c) below:

(a) Foreign futures transactions involve

executing and clearing trades on a foreign

exchange. This is the case even if the foreign

exchange is formally ‘‘linked’’ to a domestic

exchange whereby a trade executed on one

exchange liquidates or establishes a position

on the other exchange. No domestic

organization regulates the activities of a

foreign exchange, including the execution,

delivery and clearing of transactions on such

exchange, and no domestic regulator has the

power to compel enforcement of the rules of

the foreign exchange or the laws of the

foreign country. Moreover, such laws or

regulations will vary depending on the

foreign country in which the transaction

occurs. For these reasons, customers who

trade on foreign exchanges may not be

afforded certain of the protections which

apply to domestic transactions, including the

right to use alternative dispute resolution. In

particular, funds received from customers to

margin foreign futures transactions may not

be provided the same protections as funds

received to margin futures transactions on

domestic exchanges. Before you trade, you

should familiarize yourself with the foreign

rules which will apply to your particular

transaction.

OR

(b) You should familiarize yourself with

the protections accorded money or property

you deposit for domestic and foreign

transactions, particularly in the event of a

firm insolvency or bankruptcy. The extent to

which you may recover your money or

property may be governed by specified

legislation or local rules. In some

jurisdictions, property which has been

specifically identifiable as your own will prorated in the same manner as cash for

purposes of distribution in the event of a

shortfall.

Transactions on markets in other

jurisdictions, including markets formally

linked to a domestic market, may expose you

to additional risk. Such markets may be

subject to regulation which may offer

different or diminished investor protection.

Before you trade you should enquire about

any rules relevant to your particular

transactions. Your local regulatory authority

will be unable to compel the enforcement of

the rules of the regulatory authorities or

markets in other jurisdictions where your

transactions have been effected. You should

ask the firm with which you deal for details

about the types of redress available in both

your home jurisdiction and other relevant

jurisdictions before you start to trade.

OR

(c) A comparable disclosure statement

prescribed by SFE; or

b. Complies with the terms and procedures

of paragraph a, except that the amount

required to be segregated under SFE rules

and Australian laws may be substituted for

the secured amount requirement as set forth

in such paragraphs.8 [formerly footnote 9]

* * * * *

SFA (62 FR 10448, 10449)

The text of paragraphs describing the

secured amount requirement is

amended to read:

Accordingly, the Commission has

determined to clarify that the relief

authorized in its Original Order with respect

to transactions on [an exchange other than a

U.K. Recognized Investment Exchange] is

applicable only if an SFA member firm

complies with the following procedures,

which are consistent with the requirements

applicable to Commission registered futures

commission merchants (‘‘FCMs’’) concerning

the protection of customer funds under the

provisions of [Rule 30.7]:6 [footnote 6

unchanged]

With respect to transactions effected on

behalf of U.S. customers on any non-U.S.

futures and options exchange which is a DIE,

whether by the SFA Member directly as a

clearing member of such other exchange or

through the intermediation of one or more

intermediaries, the SFA member complies

with paragraphs a or b below:

a.(1) Maintains in a separate account or

accounts money, securities and property in

an amount denominated as the foreign

futures or foreign options secured amount, at

least sufficient to cover or satisfy all of its

current obligations to U.S. customers;

* * * * *

(5) Each member must obtain and retain in

its files for the period required by applicable

law and Exchange rules an acknowledgment

from a depository identified in paragraph

(4)(a)–(d) above that the depository was

informed that such money, securities or

property are held for or on behalf of foreign

futures and foreign options customers and

are being held in accordance with the

provision of these regulations.

(6) Each member must provide each foreign

futures and foreign options customer with

one of the written disclosure statements in

(a), (b) or (c) below:

(a) Foreign futures transactions involve

executing and clearing trades on a foreign

exchange. This is the case even if the foreign

exchange is formally ‘‘linked’’ to a domestic

exchange whereby a trade executed on one

exchange liquidates or establishes a position

on the other exchange. No domestic

organization regulates the activities of a

foreign exchange, including the execution,

delivery and clearing of transactions on such

exchange, and no domestic regulator has the

power to compel enforcement of the rules of

the foreign exchange or the laws of the

foreign country. Moreover, such laws or

regulations will vary depending on the

foreign country in which the transaction

occurs. For these reasons, customers who

trade on foreign exchanges may not be

afforded certain of the protections which

apply to domestic transactions, including the

right to use alternative dispute resolution. In

particular, funds received from customers to

margin foreign futures transactions may not

be provided the same protections as funds

received to margin futures transactions on

domestic exchanges. Before you trade, you

should familiarize yourself with the foreign

rules which will apply to your particular

transaction.

OR

(b) You should familiarize yourself with

the protections accorded money or property

you deposit for domestic and foreign

transactions, particularly in the event of a

firm insolvency or bankruptcy. The extent to

which you may recover your money or

property may be governed by specified

legislation or local rules. In some

jurisdictions, property which has been

specifically identifiable as your own will be

pro-rated in the same manner as cash for

purposes of distribution in the event of a

shortfall.

Transactions on markets in other

jurisdictions, including markets formally

linked to a domestic market, may expose you

to additional risk. Such markets may be

subject to regulation which may offer

different or diminished investor protection.

Before you trade you should enquire about

any rules relevant to your particular

transactions. Your local regulatory authority

will be unable to compel the enforcement of

the rules of the regulatory authorities or

markets in other jurisdictions where your

transactions have been effected. You should

ask the firm with which you deal for details

about the types of redress available in both

your home jurisdiction and other relevant

jurisdictions before you start to trade.

OR

(c) A comparable disclosure statement

prescribed by SFA; or

b. Complies with the terms and procedures

of paragraph a, except that the amount

required to be segregated under SFA rules

and United Kingdom laws may be substituted

for the secured amount requirement as set

forth in paragraph a.8 [formerly footnote 9]

* * * * *

IMRO (62 FR 10449, 10450)

The text of paragraphs describing the

secured amount requirement is

amended to read:

Accordingly, the Commission has

determined to clarify that the relief

authorized in its Original Order with respect

to transactions on [an exchange other than a

U.K. Recognized Investment Exchange] is

applicable only if an IMRO member firm

complies with the following procedures,

which are consistent with the requirements

applicable to Commission registered futures

commission merchants (‘‘FCMs’’) concerning

the protection of customer funds under the

provisions of [Rule 30.7]: 6 [footnote 6

unchanged]

With respect to transactions effected on

behalf of U.S. customers on any non-U.S.

futures and options exchange which is a DIE,

whether by the IMRO Member directly as a

clearing member of such other exchange or

through the intermediation of one or more

intermediaries, the IMRO member complies

with paragraphs a or b below:

a.(1) Maintains in a separate account or

accounts money, securities and property in

60564 Federal Register / Vol. 65, No. 197 / Wednesday, October 11, 2000 / Rules and Regulations

an amount denominated as the foreign

futures or foreign options secured amount, at

least sufficient to cover or satisfy all of its

current obligations to U.S. customers;

* * * * *

(5) Each member must obtain and retain in

its files for the period required by applicable

law and IMRO rules an acknowledgment

from a depository identified in paragraph

(4)(a)–(d) above that the depository was

informed that such money, securities or

property are held for or on behalf of foreign

futures and foreign options customers and

are being held in accordance with the

provision of these regulations.

(6) Each member must provide each foreign

futures and foreign options customer with

one of the written disclosure statements in

(a), (b) or (c) below:

(a) Foreign futures transactions involve

executing and clearing trades on a foreign

exchange. This is the case even if the foreign

exchange is formally ‘‘linked’’ to a domestic

exchange whereby a trade executed on one

exchange liquidates or establishes a position

on the other exchange. No domestic

organization regulates the activities of a

foreign exchange, including the execution,

delivery and clearing of transactions on such

exchange, and no domestic regulator has the

power to compel enforcement of the rules of

the foreign exchange or the laws of the

foreign country. Moreover, such laws or

regulations will vary depending on the

foreign country in which the transaction

occurs. For these reasons, customers who

trade on foreign exchanges may not be

afforded certain of the protections which

apply to domestic transactions, including the

right to use alternative dispute resolution. In

particular, funds received from customers to

margin foreign futures transactions may not

be provided the same protections as funds

received to margin futures transactions on

domestic exchanges. Before you trade, you

should familiarize yourself with the foreign

rules which will apply to your particular

transaction.

OR

(b) You should familiarize yourself with

the protections accorded money or property

you deposit for domestic and foreign

transactions, particularly in the event of a

firm insolvency or bankruptcy. The extent to

which you may recover your money or

property may be governed by specified

legislation or local rules. In some

jurisdictions, property which has been

specifically identifiable as your own will be

pro-rated in the same manner as cash for

purposes of distribution in the event of a

shortfall.

Transactions on markets in other

jurisdictions, including markets formally

linked to a domestic market, may expose you

to additional risk. Such markets may be

subject to regulation which may offer

different or diminished investor protection.

Before you trade you should enquire about

any rules relevant to your particular

transactions. Your local regulatory authority

will be unable to compel the enforcement of

the rules of the regulatory authorities or

markets in other jurisdictions where your

transactions have been effected. You should

ask the firm with which you deal for details

about the types of redress available in both

your home jurisdiction and other relevant

jurisdictions before you start to trade.

OR

(c) A comparable disclosure statement

prescribed by IMRO.

b. Complies with the terms and procedures

of paragraph a, except that the amount

required to be segregated under IMRO rules

and United Kingdom laws may be substituted

for the secured amount requirement as set

forth in paragraph a.7 [formerly footnote 8]

* * * * *

SGX–DT (64 FR 50248, 50250–51)

The text of paragraphs describing the

secured amount requirement is

amended to read:

The expanded Rule 30.10 relief provided

under this Supplemental Order, however, is

contingent upon SGX–DT’s and SGX–DT

Member’s compliance with certain

conditions below.

* * * * *

(5) With respect to transactions effected on

Eurex on behalf of U.S. customers, whether

by the SGX–DT Member directly as a clearing

member of Eurex or through the

intermediation of one or more intermediaries,

the SGX–DT Member complies with

paragraphs 1 or 2 below:

1.a. Must remain in a separate account or

accounts money, securities and property in

an amount at least sufficient to cover or

satisfy all of its current obligations to U.S.

customers denominated as the foreign futures

or foreign options secured amount;

* * * * *

e. Each Member must obtain and retain in

its files for the period required by applicable

law and Exchange rules an acknowledgment

from a depository identified in paragraph

d.(1)–(4) above that the depository was

informed that such money, securities or

property are held for or on behalf of foreign

futures and foreign options customers and

are being held in accordance with the

provision of these regulations.

f. Each Member must provide each foreign

futures and foreign options customer with

one of the written disclosure statements in

(1), (2) or (3) below:

(1) Foreign futures transactions involve

executing and clearing trades on a foreign

exchange. This is the case even if the foreign

exchange is formally ‘‘linked’’ to a domestic

exchange whereby a trade executed on one

exchange liquidates or establishes a position

on the other exchange. No domestic

organization regulates the activities of a

foreign exchange, including the execution,

delivery and clearing of transactions on such

exchange, and no domestic regulator has the

power to compel enforcement of the rules of

the foreign exchange or the laws of the

foreign country. Moreover, such laws or

regulations will vary depending on the

foreign country in which the transaction

occurs. For these reasons, customers who

trade on foreign exchanges may not be

afforded certain of the protections which

apply to domestic transactions, including the

right to use alternative dispute resolution. In

particular, funds received from customers to

margin foreign futures transactions may not

be provided the same protections as funds

received to margin futures transactions on

domestic exchanges. Before you trade, you

should familiarize yourself with the foreign

rules which will apply to your particular

transaction.

OR

(2) You should familiarize yourself with

the protections accorded money or property

you deposit for domestic and foreign

transactions, particularly in the event of a

firm insolvency or bankruptcy. The extent to

which you may recover your money or

property may be governed by specified

legislation or local rules. In some

jurisdictions, property which has been

specifically identifiable as your own will be

pro-rated in the same manner as cash for

purposes of distribution in the event of a

shortfall.

Transactions on markets in other

jurisdictions, including markets formally

linked to a domestic market, may expose you

to additional risk. Such markets may be

subject to regulation which may offer

different or diminished investor protection.

Before you trade you should enquire about

any rules relevant to your particular

transactions. You local regulatory authority

will be unable to compel the enforcement of

the rules of the regulatory authorities or

markets in other jurisdictions where your

transactions have been effected. You should

ask the firm with which you deal for details

about the types of redress available in both

your home jurisdiction and other relevant

jurisdictions before you start to trade.

OR

(3) A comparable disclosure statement

prescribed by SGX–DT.

2. Complies with the terms and procedures

of paragraph 1, except that the amount

required to be segregated under SGX–DT

rules and Singapore law may be substituted

for the secured amount requirement as set

forth in paragraph 1.

* * * * *

Issued in Washington, DC on October 5,

2000.

Jean A. Webb,

Secretary of the Commission.

[FR Doc. 00–26069 Filed 10–10–00; 8:45 am]

BILLING CODE 6351–01–M