DIVISION OF 

TRADING AND MARKETS 

·near 

COMMODITY FUTURES TRADING COMMISSION 

2033 K STREET, N.W., WASHINGTON, D.C. 20581 

(202) 264-6955 

(202) 264-6265 FACSIMILE 

71Q-822-9327 TELEX 

August 15, 1989 

This is in response to your letter to the Division of 

'Trading and Markets ("Division") dated July 20, 1989, on behalf 

of __ L. , in which you requested 

that the Divl.slon confirm that rr-w!l.L-not recommend any 

enforcement action against . for failure to register as a 

futures commission merchant ("FCM") under the circumstances 

described below. 

In your letter you have stated that: 

is a Japanese bank organized as a corporation 

under the law of Japan. . principal office 

is located in Tokyo, Japan and _ also maintains 

offices elsewhere in Japan and in other non-u.s. 

cities. In addition, maintains several branch 

offices in the u.s. (the "U.S. Branches"). 

is a member of the Tokyo International Financial 

Futures Exchange ("TIFFE") which commenced trading 

activities on June 30, 1989. · intends to carry 

accounts for customers for the purpose of executing 

transactions in futures contracts (and option 

contracts as permitted by the Commission pursuant 

to Commission Rule 30.3(a)) traded on TIFFE and 

other non-u.s. futures and options exchanges 

("Foreign Futures Contracts") and carrying positions 

in Foreign Futures Contracts. In that connection, 

expects that it will also carry customer omnibus 

accounts ("Omnibus Accounts") for registered U.S. FCMs 

through which such FCMs will obtain execution and 

clearing of Foreign Futures Contracts and carry Foreign 

Futures Contract positions for U.S. customers. 

All funds and property required for margin or premiums 

with respect to Foreign Futures Contracts carried in 

the Omnibus Accounts will be transferred directly by 
the FCM to the Tokyo office of • Similarly, all 

withdrawals from Omnibus Accounts will be transmitted 

directly from in Tokyo to the FCM. All orders and 

other inst~uctions relating to the Qmnibus Accounts 

will be transmitted directly to Tokyo office by 

the FCMs and all reports and other communications 

relating to the Omnibus Accounts will be transmitted 

directly from _ Tokyo office to the.FCM. will 

not have any contact with the u.s. fore~gn futures 

customers beyond carrying the positions of such 

customers on an undisclosed basis in an Omnibus 

Account. Furthermore, the u.s. Branches will not be 

involved in any way in 's activities as a broker 

in Japan in respect of Foreign Futures Contracts, 

except that the u.s. Branches may respond to 

unsolicited questions regarding Foreign Futures 

Contracts by referring the inquirer to an FCM 

which may be an FCM which maintains an Omnibus Account 

with . Neither the u.s. Branches nor any employee 

of the u.s. Branches will be compensated directly or 

indirectly by the FCM for responding in that manner to 

such unsolicited inquiries. 

Commodity Futures Trading Commission ("Commission"} rule 

30.4(a) generally provides that it shall be unlawful for any 

person with respect to a foreign futures or foreign options 

customer to accept orders for or involving any foreign futures or 

options transaction and to accept any money, securities or 

property (or extend credit in lieu thereof) to margin, guarantee 

or secure such transactions without first registering as an FCM. 

In Interpretative Letter 87-7, however, the Division stated 

that where an FCM transfers its customer omnibus account to an 

offshore firm which is a member of a foreign exchange and such 

foreign exchange member's contact with foreign futures and 

options customers is limited to carrying the customer omnibus 

account of a u.s. FCM for execution on the foreign exchange, such 

activity should not bring the offshore firm within the scope of 

the foreign futures and options rules. 1/ Accordingly, but for 

the existence of the u.s. Branches, could avail itself of the 

relief contained in Interpretative Letter 87-7 in connection with 

the.activities proposed to be undertaken on behalf of customers 

resident in the United States on foreign boards of trade. 

1/ See Interpretative Letter 87-7, 2 Cornm. Fut. L. Rep. (CCH) ~23,972 (November 17, 1987). 
In your letter, you represent that in support of its request 

for this no action position, the appropriate authorized officer 

of will undertake on behalf of as follows: 

(a) 

(b) 

(c) 

None of the U.S. Branches will solicit or accept orders 

for Foreign Futures Contracts or options (except that 

the U.S. Branches may respond to unsolicited inquiries 

concerning Foreign Futures Contracts by referring such 

inquiries to an FCM which may be an FCM which maintains 

an Omnibus Account with in Tokyo) or engage in any 

activities subject to regulation by the Commission 

(except in connection with proprietary trading 

conducted by the U.S. Branches); 

agrees to provide, upon request of the Commission 

or National Futures Association, access to books and 

records of the U.S. Branches for purposes of ensuring 

compliance with the foregoing undertaking; and 

agrees that the agent appointed in accordance with 

the undertakings of contained in its June 23, 1989 

letter will also be agent for the purpose of 

accepting delivery and service of any communication 

from the Commission relating to activities in 

carrying the Omnibus Accounts. 

The Division notes that by letter dated June 23, 1989, in 

connection with a no action position related to.trading by, 

Tokyo office for or on behalf of non-u.s. persons on u.s. 

markets, has identified to the Division its U.S. Branches and 

undertaken to notify the Division of any new u.s. Branches which 

determines to open. The Division further understands that 

each such U.S. Branch is subject to extensive regulation, 

including reporting and recordkeeping requirements and 

examinations, either under state banking laws or under federal 

law by the Office of the Comptroller of the Currency. 

The Division has reviewed the undertakings proposed by 

and believes that subject to compliance with the additional 

requirement that identify the FCM(s) to which the unsolicited 

inquiries as specified in paragraph (a) above will be referred, 

such undertakings will be sufficient to ensure that the 

regulatory purposes of limiting the relief in Interpretative 

Letter 87-7 to firms located outside the United States which 

carry a u.s. FCM's customer omnibus account would be adequately 

addressed. Specifically, in these circumstances, the FCM which 

would benefit from the promotional activities of its unregistered 

agents is located in the u.s. and its sales practices, including 

any potential activities by its unregistered agents, could be 

detected by the Commission, the National Futures Association or 

other self-regulatory organization during the course of 
an audit. 2/ 

The Division wishes to clarify that the no action position 

set forth herein will not take effect until an appropriate 

officer of with authority to bind both and the U.S. 

Branches files the documents required above and a notice on 

behalf of _ and its u.s. Branches affirming his consent to all 

of the consents and representations specified herein. The 

Division will review such submission and provide written 

confirmation as to the applicability of the no action relief. 

Based upon the foregoing, subject to compliance with the 

terms and conditions of this letter, the Division will not 

recommend that the Commission initiate enforcement action against 

for failure to register as an FCM under the circumstances as 

described above. The position adopted herein is based on the 

information provided to us. Any different, changed or omitted 

facts or conditions might require us to reach a different 

conclusion. This position is solely that of the Division of 

Trading and Markets and does not necessarily represent the views 

.of the Commission or those of any uni f i s staff. 

~ 

Andrea M. 

Director 

II See also Interpretative Letter 88-3, 2 Comm. Fut. L. 

Rep.(CCH) ~24,085 (January 15, 1988).