DIVISION OF 

TRADING AND MARKETS 

COMMODITY FUTURES TRADING COMMISSION 

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

July 3, 1986 

Re: CPO No-P...ction Hhere Limited Partners are Related. 

Dear r.'l..r • : 

This is in response to your letter dated June 17, 1986, as supplemented 

by a telephone conversation with Division staff held on June 26, 1986, 

wherein you requested relief from regulation as a commodity pool operator 

("CPO") on behalf of "A" with respect to the Partnership in which "B" and "C" 

would be the limited partners. y 

Based upon the representations made in your letter, as supplemented, 

we understand the facts to be as follows: 

"C", [a] merchant bank in the United Kingdom, 

owns all of the outstanding stock of "D", a 

holding company which awns all of the outstanding 

stock of "B". 

"C" cuJ.d "B" have had a joint trading account 

at "B" for several months. "B" directs the 

trading, which exclusively is arbitrage trading 

between U.S. government securities and futures 

contracts based on such government securities. 

For internal reasons, "C" and "B" have detennined 

to change the legal status of the account fran a 

joint venture to a limited partnership where "C" 

and "B" would be the sole limited partners. The 

partnership will not be available for investment 

by any limited partner other than "C" and "B". 

"B" approached "A", with which it has an 

ongoing business relationship [as, from time to 

time, that firn1' s "clearing broker"], and proposed 

that "A", act as general partner of the limited 

partnership. 2/ For its services [in acting as 

the general partner -- ~·, assuming the liabilities of that position and being the "tax partner" 

}:_/ Your letter represents, and Corrrnission records confinn, that "A" and "B" 

are each registered as a futures conmission merchant under the Canrrodi ty 

Exchange Act, as amended (the "Act"). 

y "B" will continue to direct the Partnership's trading. 
Page 2 

for all Federal tax issues], "A" will receive 

$50,000 annually from the limited partnership and 

a portion of the goverrrrnent securities trading 

will be done with "A", 'Which is a goverrnrent 

securities dealer. ["A" will not, however, 

receive any portion of the brokerage commissions 

generated by the Pe~ership's commodity interest 

trading.] For tax purposes, "A" will contribute 

to the Partnership 1% of the total capital contributed by the pnrtners. 

Based upon the foregoing representations, you have asked for concurrence in your view that the Partnership would not be a "pool" \'lithin the 

meaning and intent of Rule 4.10(d), 17 C.F.R. §4.10(d) (1985). In this 

regard, you argue that a joint account made up of "family" members -- i.e., 

"C" and "B" -- should not be deerred to a be a commodity pool because its 

structure will be changed to that of a limited partnership. This argurrent 

ignores the addition of a "non-family" member to the account, "A". 1.1 

Based upon the foregoing representations we do, however, relieve that 

relief from CPO registration should be available to "A". Specifically, this 

belief is based upon the representations that: (1) "C" and "B" are affiliated 

finus; (2) "B" approached "A" to form the Partnership; (3) "C" and "B" will 

be the only limited partners in the Partnership; and (4) "B" will continue to 

direct the Partnership's commodity interest trading. Accordingly, based upon 

those represent~tions the Division will not recommend that the Commission 

take any enforce.ment action against "A" if it fails to register as a CPO in 

connection with its operation of the Partnership. This position is, however, 

subject to the condition that "A" advise the Division of the name of the 

Partnership whe~. that name is selected. 

You should be aware that the "no-ac·tion" position taken by this letter 

does not excuse "A" from ccrnpliance with any otherwise applicable requirements 

contained in the Act or in the Corrmission' s regulations thereunder. For 

example, it remains subject to Section 4o of the Act, 7 u.s.c. §6o (1982), 

and to the reporting requirements for traders set forth in Parts 15 and 18 of 

the ComRission's regulations, 17 C.F.R. Parts 15 and 18 (1985). 

The position taken by this letter is based on the representations that 

have been made to us and is subject to ccrnpliance with the condition set 

forth above. Any different, change or omitted facts or conditions might 

ll Compare Division of Trading and Markets Interpretative Letter No. 83-9, 

Ccmn. Fut. L. Rep. (CCH) '1[21, 909 (November 3, 1983), 'Wherein we concluded 

that a joint trading account would not be a "pool" within Rule 4.10(d) 

because of, among others, the fact that it would be comprised essentially 

of family members. 
Page 3 

require us to reach a different conclusion. In this connection, we request 

that you notify us immediately in the event the Partnership's operation, 

including its ITIP.lllbership composition, changes in any way fran that as represented in your letter and in your telephone conversation with Division staff. 

Very truly yours, 

Andrea M. Corcoran 

Director 

cc: Daniel A. Driscoll, National Futures Association