UNITED STATES OF AMERICA 

COMMODITY FUTURES TRADING COMMISSION 

2033 K Street, N.W. 

Washington, D.C. 20581 

I 

[ADDRESSEE] 

Dear 

--------

By letter dated June 28, 1988, you request, on behalf 

of [The Underwriter] and [The Issuer.] that the staff of the 

Commodity Futures Trading Commission confirm that it will 

riot recommend to the Commission that any enforcement action 

be taken in connection with the proposed issuance and 

offering of notes, designated as •.. ("Notes"). In your 

letter, you represent that the proposed Notes differ from 

those which were the subject of an earlier no-action letter 

from Commission staff, dated June 20, 1988, in the following 

respects: the identity of the issuer, the coupon interest 

rate, and the formula for determining the principal amount 

payable upon maturity. Based upon the characteristics of 

the Notes, which resemble yen-denominated debt instruments, 

and the other matters discussed below, the staff has 

determined that it will not recommend to the. Commission any 

enforcement action under Section 4(a) of the Commodity 

Exchange Act based upon the isssuance of the proposed Notes • 

. • • the proposed issuer, is a Delaware corporation, 

with total stockholders' equity of approximately $ ••• 

engaged in the manufacture and sale of • • • and other 

products. In addition, ••• , a wholly-owned nonconsolidated subsidiary, offers various financial and 

insurance services and, through its subsidiaries, engages in 

mortgage banking operations. 

From your letter, we understand that the Notes will be 

registered with the Securities and Exchange Commission and 

will be marketed to the public as debt securities, not 

having the beneficial characteristics of commodity option or 

futures contracts. We further understand that the Notes 

will be issued in denominations of U.S. $ ••• and integral 

multiples of U. S. $ •.• above that amount, with a term to 

maturity of five years. Interest will be payable in U. S. 

dollars, based upon the face amount of the Notes, ab a rate 

of ••• , per annum, payable semi-annually in arrears (or 

such other rate determined at the time of issuance). 

Repayment at maturity of the Note's principal will be, 

for each $ ... face amount of the Note, an amount in United 

States dollars equal to the formula of U.S. $ ••• minus the 
2 

u.s. dollar equivalent of approximately ••• Japanese Yen 

(or such other rate determined as of the date of the offering). The determination of the U.S. dollar equivalent of 

the yen amount will be determined by an average dealer price 

on approximately the second business day preceding the 

maturity date. Finally, your letter compares the salient 

features of the Notes to the criteria identified in the 

Commission's pending Advance Notice of Proposed Rulemaking, 

52 Fed. Reg. 47022 (Dec. 11, 1987), under which certain 

otherwise regulated instruments with "incidental" commodity 

option components are proposed to be exempt from the Commission's rules. 

Based upon the representations in your letter it 

appears that the commodity interest component of the Notes 

distribute returns between the lender and the borrower based 

upon the direction and magnitude of the price change in the 

Japanese yen relative to the U.S. dollar. As with the Notes 

which were the subject of the June 20, 1988, staff no-action 

letter, the Notes can be viewed as a coupon-bearing instrument where repayment of the principal has been indexed to 

the yen on a one-to-one basis. Thus, the commodity-related 

component of the transaction resembles a foreign currencydenominated debt instrument, or an instrument in foreign 

currency repayable in dollars which bears interest and as 

with the instruments which were the subject of the earlier 

staff letter, their other characteristics preclude ready 

characterization of the Notes as futures equivalents. 

Accordingly, the staff will not recommend to the 

Commission any enforcement action under Section 4(a) of the 

Commodity Exchange Act based upon the issuance of the 

proposed Notes. The staff position is based upon the 

representations in your letter including those relating to 

the marketing and disclosure that will accompany the 

proposed offering, the particular terms and conditions of 

the proposed Notes, and upon the agreement of the issuer to 

submit to special calls for information with respect to the 

Notes and the matters addressed herein. 

This position does not excuse the issuer from complying 

with any otherwise applicable provisions of the Commodity 

Exchange Act and is based upon the facts and representations 

contained in your letter. Any different, omitted or changed 

facts or conditions might require a different conclusion. 

Moreover, it should be noted that this position is that of 

the staff and is not binding upon the Commission and that 

any subsequent determination by the Commission with regard 
3 

to the outstanding Advance Notice may require a reconsideration of this position for subsequent offerings. 

cc: 

Sincerely, 

Marshall E. Hanbury 

Co-Chairman 

Commodity Futures 

Trading Commission 

Off-Exchange Task Force 

Paula A. Tosini 

Co-Chairman 

Commodity Futures 

Trading Commission 

Off-Exchange Task Force