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NATIONAL FUTURES ASSOCIATION 

May 2, 2007 

Received CflC 

Records sectllll 

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By E-Mail (secretary@cftc.gov) "" .... ,, .. 

Ms. Eileen A. Donovan ~ ·· 

Acting Secretary ~. r.: ·.. · 

Commodity Futures Trading Commission, 

Three Lafayette Centre ' 

1155 21st St., N.W ., 

Washington, D.C. 20581 

COMMENT 

Re: RIN 3038-AC26; Exemption From Registration for Certain Foreign 

Persons 

Dear Ms. Donovan: 

National Futures Association applauds the Commodity Futures Trading 

Commission's efforts to codify a long-standing registration exemption for foreign brokers. 

As discussed below, NFA supports the proposal and asks the Commission to consider 

extending it to other entities. 

The Commission's proposal would codify its existing position that foreign 

entities are not required to register as FCMs if they do not solicit or carry accounts for 

U.S. customers and limit their activities in the U.S. to placing trades with a registered 

FCM that carries the foreign entity's omnibus account. Although the Commission may 

have broader jurisdiction over these firms, for prudential purposes it has chosen to 

exempt them from FCM registration and from any requirements that apply solely to 

registrants-e.g., net capital and segregation requirements. 

As we understand it, the Commission's intent is to codify its existing 

position and maintain the status quo . . We also understand, however, that some members 

of the industry are concerned that the specific language proposed by the Commission 

could be interpreted more broadly to apply requirements that may currently apply only to 

registered entities. We understand that FIA may propose language in its comment letter 

to address this concern. We are supportive of this effort and are willing to discuss this 

issue further with Commission staff. 

NFA frequently receives questions regarding registration requirements for 

foreign entities and individuals, and many of these inquiries relate to off-shore firms and 

individuals who do not solicit or manage funds for U.S. customers. While some of these 

200 West Madison Street Suite 1600 Chicago, Illinois 60606 312. 781.1300 800.621.3570 312.781.1467 fax www.nfa.futures.org 

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inquiries ask whether a foreign firm is required to register as an FCM, many of them deal 

with registration as IBs, CPOs, CTAs, and APs. We answer those inquiries by 

mentioning the CFTC's longstanding position that these firms and individuals are not 

generally required to register with the Commission. If the person requesting the 

information asks for legal authority, we refer them to various Federal Register releases 

and CFTC no-action and interpretive letters. Unfortunately, however, the information is 

not found in a single location, and people often comment that it would be helpful if it was. 

As the Commission notes in its release, as long ago as 1976 the Office of 

General Counsel adopted a no-action position for foreign pool operators and account 

managers without U.S. customers or participants.1 In 1980, the Commission stated that it 

would focus its limited resources on dome$tic firms and customers and eliminated . 

registration requirements for foreign APs of domestic FCMs if those individuals do not 

solicit U.S. customers.2 The Commission's August 3, 1983 Federal Register release 

adopting rules for introducing brokers extended this reasoning to exempt foreign persons 

from registration as introducing brokers if they solicit only foreign customers.3 

To make this information easier to find and reference, we ask the 

Commission to consider codifying its existing positions by amending CFTC Regulation 

3.10(c) to include exemptions from IB, CPO, and CTA registration for foreign entities that 

do not solicit or manage funds for U.S. customers or participants. We also recommend 

amending CFTC Regulation 3.12(h) to codify the exemption from AP registration for 

foreign individuals that are located in a foreign office and solicit only foreign customers. 

Although we recognize that this may require a separate rule-making proceeding, we 

encourage the Commission to take that step. 

If you have any questions concerning this letter, please contact me 

(312-781-1413 or tsexton@nfa.futures.org) or Kathryn Camp (312-781-1393 or 

kcamp@nfa.futures.org). 

Respectfully submitted, 

Thomas W. Sexton 

Vice President and General Counsel 

(kpcJCommentletters/Foreign Persons) 

1 CFTC Staff Letter 76-21 [1975-1977 Transfer Binder] Comm. Fut. L. Rep. (CCH) Para. 

20,222 (August 15, 2976). 

2 45 Fed. Reg. 18356, 18360 (March 20, 1980). See a/so 45 Fed. Reg. 80485, 80490 

(December 5, 1980). 

3 48 Fed. Reg. 35247,35261 (August 3, 1983).