February 27, 2008 

Mr. David A. Stawick 

Secretary 

Commodity Futures Trading Commission 

1155 21st Street NW 

Washington DC 20581 

Futures Industry Association 

2001 Pennsylvania Ave. NW 202.466.5460 

Suite 600 202.296.3184 fax 

Washington, DC 20006·1823 www.futuresiodustry.org 

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COMMENT <,·. i;! § 

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Re: Exemption from Registration for Certain Firms with Regulation 3'0.10 Relief, 

73 Fed.Reg. 4499 (January 25, 2008) 

Dear Mr. Stawick: 

The Futures Industry Association ("FIA") 1 welcomes the opportunity to comment on the 

Commodity Futures Trading Commission's ("Commission's) proposed amendment to 

Commission rule 3.10(c). The amendment would codify the terms and conditions of several noaction letters adopted by the Division of Clearing and Intermediary Oversight ("Division"), 

pursuant to which foreign affiliates of certain US FCMs have been authorized to accept orders 

from US institutional customers2 for execution on US designated contract markets ("DCMs") 

notwithstanding that such affiliates are not registered with the Commission as introducing 

brokers.3 

Consistent with the terms and conditions of the Division letters, proposed rule 3.10(c)(4) would 

exempt from registration as an introducing broker a foreign affiliate of a US FCM that accepts 

orders from US institutional customers for execution on US DCMs, provided: 

• The affiliate is exempt from registration as an FCM in accordance with the provisions of 

Commission rule 30.10; 

FIA is a principal spokesman in the United States for the commodity futures and options industry. Our 

regular membership is comprised of approximately 40 of the largest futures commission merchants ("FCMs") in the 

United States. Among our approximately 150 associate members are representatives of virtually all other segments 

of the futures industry, both national and international, including US and international exchanges, banks, legal and 

accounting firms, introducing brokers, commodity trading advisors, commodity pool operators and other market 

participants, and information and equipment providers. Reflecting the scope and diversity of our membership, FIA 

estimates that our members are responsible for more than 80 percent of all customer transactions executed on US 

contract markets. 

An institutional customer is defined in Commission rule 1 .3(g) to mean an eligible contract participant as 

set forth in section 1a(12) of the Commodity Exchange Act ("Act"). 

The no-action letters are listed in footnote 10 of the Federal Register release accompanying the proposed 

amendment. 73 Fed.Reg. at 4501. 

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Mr. David A. Stawick 

February 27, 2008 

Page 2 

• All accounts of US institutional customers are introduced on a fully-disclosed basis in 

accordance with Commission rule 1.57; 

• The affiliated FCM files with the National Futures Association ("NF A") an 

acknowledgment that it will be jointly and severally liable for any violations of the Act or 

the Commission's regulations by the affiliate in connection with such activities, whether 

or not the affiliated FCM clears any trades resulting therefrom; and 

• The affiliate does not solicit any person located in the US for trading on a DCM or handle 

any customer funds of any person located in the US for trading on a DCM. 

FIA strongly supports the adoption of proposed rule 3.10(c)(4) and encourages the Commission 

to promulgate a fmal rule promptly.4 As is evident from the number of requests for no-action 

received in the past year-at least several of which were on behalf of FIA member FCMs and 

their affiliates-the proposed relief has become increasingly important to FCMs and their 

affiliates as their institutional customers extend their trading activities to a growing number of 

international markets. It is no longer necessary for FCMs and their affiliates that wish to take 

advantage of this relief to file separate no-action requests. 5 

In the accompanying Federal Register release, the Commission requested comment on "whether 

it would be appropriate to establish minimum capital or other standards for the affiliated FCM as 

a condition for the exemptive relief." 74 Fed.Reg. at 4501. FIA opposes the adoption of a 

minimum capital requirement for affiliated FCMs. We appreciate that the financial strength and 

organizational structure of each FCM and affiliate was a factor in the Division's decision to grant 

no-action relief. However, since the foreign affiliates will be acting only in the capacity of 

introducing brokers with respect to transactions on US markets and FCMs will be holding all 

customer funds, the relationship is no different from that of any other FCM and introducing 

broker relationship. 

In this regard, the circumstances are significantly different from those for which relief is granted 

under Commission rule 30.12. Under this latter rule, institutional customers of an FCM may be 

FIA also supports the Commission's proposal to revoke rule 30.8. 

In the accompanying Federal Register release, the Commission noted that, upon adoption of a final rule, it 

would rescind the no-action letters previously issued and listed in footnote 10. Except as noted below, we believe 

rescission would be appropriate. At the same time, however, we ask the Commission to confirm that, since they 

have already filed an acknowledgment of joint and several liability with the Commission, the FCMs that received 

the no-action letters will not be required to file a new acknowledgment with NF A. 

The Commission encouraged any person that would be adversely affected by such rescission to file a comment. In 

this regard, we understand that Macquarie Futures USA Inc. has filed a comment letter in which it asks the 

Commission to not rescind CFTC Letter No. 07-16, which was issued to Macquarie Futures USA Inc. and its 

affiliate Macquarie Futures & Options (Hong Kong) Limited. Hong Kong, of course, is not a 30.10 jurisdiction and, 

if Letter No. 07-16 were rescinded, Macquarie Futures & Options will lose the relief that it had previously been 

granted. FIA supports the Macquarie entities in this matter and suggests that other FIA member firms and their 

affiliates that are not located in 30.10 jurisdictions may want to request similar relief. Therefore, the Commission 

may want to consider whether to address this issue in any fmal rule that is promulgated. 
Mr. David A. Stawick 

February 27, 2008 

Page 3 

authorized to place trades directly with a foreign broker for execution in the FCM' s customer 

omnibus account with that broker. Thus, the FCM is assuming direct responsibility for meeting 

margin obligations with respect to such transactions carried by the foreign broker. 

The Commission also asked whether the proposed exemption should be extended to otherwise 

qualified foreign persons that advise institutional customers for the purposes of trading on US 

markets. Presumably, such relief would be limited to affiliates ofUS FCMs. At this time, FIA is 

uncertain whether such is necessary. 

Conclusion 

FIA appreciates the opportunity to submit these comments in support of proposed Commission 

rule 3.10(c)(4). If you have any questions concerning this letter, please contact Barbara 

Wierzynski, PIA's General Counsel, at (202) 466-5460. 

Sincerely, 

John M. Damgard 

President 

cc: Honorable Walter Lukken, Acting Chairman 

Honorable Michael Dunn, Commissioner 

Honorable Jill E. Sommers, Commissioner 

Honorable Bart Chilton, Commissioner 

Division of Clearing and Intermediary Oversight 

Ananda Radhakrishnan, Director 

Andrew V. Chapin, Special Counsel