[Federal Register Volume 75, Number 175 (Friday, September 10, 2010)]
[Notices]
[Pages 55310-55312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-21726]


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COMMODITY FUTURES TRADING COMMISSION


Performance of Registration Functions by National Futures 
Association With Respect to Retail Foreign Exchange Dealers and 
Associated Persons

AGENCY: Commodity Futures Trading Commission

ACTION: Notice and order

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is authorizing the National Futures Association (``NFA''), 
effective September 10, 2010, to process and grant applications for 
initial registration, renewed registration and withdrawals of retail 
foreign exchange dealers (``RFEDs'') and their associated persons 
(``APs'') and to issue temporary licenses to eligible APs; to conduct 
proceedings to deny, condition, suspend, restrict or revoke the 
registration of any RFED or AP of an RFED, or an applicant for 
registration in either category; and to maintain records regarding 
RFEDs and their APs, and to serve as the official custodian of those 
Commission records.

DATES: Effective Date: September 10, 2010.

FOR FURTHER INFORMATION CONTACT: For information contact: William 
Penner, Deputy Director, Division of Clearing and Intermediary 
Oversight, 1155 21st Street, NW, Washington, DC 20581. Telephone 
number: 202-418-5450; facsimile number: 202-418-5547; and electronic 
mail: <a href="/cdn-cgi/l/email-protection#81f6f1e4efefe4f3c1e2e7f5e2afe6eef7"><span class="__cf_email__" data-cfemail="6d1a1d080303081f2d0e0b190e430a021b">[email protected]</span></a>. Christopher Cummings, Special Counsel, Division 
of Clearing and Intermediary Oversight, 1155 21st Street, NW., 
Washington, DC 20581. Telephone number (202) 418-5450; facsimile 
number: 202-418-5547; and electronic mail: <a href="/cdn-cgi/l/email-protection#5d3e3e28303034333a2e1d3e3b293e733a322b"><span class="__cf_email__" data-cfemail="630000160e0e0a0d041023000517004d040c15">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: 

I. Authority and Background

    In a separate document published elsewhere in today's Federal 
Register, the Commission is issuing final rules regarding the 
regulation of off-exchange retail foreign exchange transactions and 
intermediaries. The final rules follow the publication of proposed 
rules on January 20, 2010,\1\ and represent a comprehensive regulatory 
scheme to implement the requirements of the CFTC Reauthorization Act of 
2008 (``CRA'') with regard to off-exchange retail forex 
transactions.\2\ The

[[Page 55311]]

Commodity Exchange Act (``Act''),\3\ as amended by the CRA, provides 
that the Commission's jurisdiction extends to off-exchange contracts of 
sale of a commodity for future delivery (or an option on such a 
contract) or an option (other than an option executed or traded on a 
national securities exchange), and to certain off-exchange leveraged or 
margined contracts in foreign currency that are offered to or entered 
into with retail customers. Moreover, the CRA provides the Commission 
with the authority to register persons serving as intermediaries or 
counterparties to these transactions.
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    \1\ See Regulation of Off-Exchange Retail Foreign Exchange 
Transactions and Intermediaries; Proposed Rule, 75 FR 3282 (Jan. 20, 
2010).
    \2\ Food, Conservation, and Energy Act of 2008, Pub. L. 110-246, 
122 Stat. 1651, 2189-2201 (2008).
    \3\ 7 U.S.C. 1, et seq.
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    Specifically, the CRA gives the Commission the authority to require 
the registration of intermediaries who solicit retail customers to 
participate in off-exchange forex contracts, who pool customer money 
for the purpose of trading off-exchange currency contracts or who 
manage customer money for this purpose. In the final rules published 
today, the Commission has determined that these entities should be 
registered in the existing categories of introducing broker (``IB''), 
commodity pool operator (``CPO''), or commodity trading advisor 
(``CTA''), as appropriate.
    The CRA also authorizes the Commission to register entities that 
serve as counterparties to such transactions, either within the 
existing category of futures commission merchant (``FCM'') or as an 
RFED, a new category of registrant. RFEDs are counterparties not 
engaged primarily or substantially in the offer and sale of exchange-
traded futures (as opposed to FCMs, which are).\4\ The CRA provides 
that RFEDs, their APs, and each of the other categories of registrants 
discussed above, must be members of a registered futures association 
such as the National Futures Association (``NFA'') and must register 
with the Commission subject to such terms as the Commission may 
prescribe.\5\
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    \4\ Previously, firms serving as counterparties to retail forex 
typically registered as FCMs, even though they may not have engaged 
in exchange-traded futures business. Under the CRA, either FCMs or 
RFEDs can offer to serve as counterparties to retail forex 
transactions, but the entity must register as an FCM if primarily 
and substantially engaged in on-exchange trading, or an RFED if not. 
See, 7 U.S.C. 2(c)(2)(B)(i)(II)(cc) and (gg) and 7 U.S.C. 
2(c)(2)(C)(i).
    \5\ Id.
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    The CFTC has previously authorized NFA to perform the full range of 
registration functions with regard to FCMs, IBs, CTAs, CPOs and their 
respective APs, including granting applications for initial 
registration and renewed registration; enabling withdrawals and issuing 
temporary licenses to eligible APs; and conducting proceedings to deny, 
condition, suspend, restrict or revoke the registration of existing 
registrants or applicants for registration in each category.\6\ By 
today's order the Commission authorizes NFA to perform these functions 
with regard to RFEDs and their APs.
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    \6\ See 48 FR 15940 (Apr. 13, 1983); 48 FR 35158 (Aug. 3, 1983); 
48 FR 51809 (Nov. 14, 1983); 49 FR 8226 (Mar. 5, 1984); 49 FR 39593 
(Oct. 9, 1984); and 50 FR 34885 (Aug. 28, 1985).
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    As proposed and adopted, Commission Regulations 5.3(a)(4) and (6) 
require all those who meet the definition of an RFED, and any such 
associated persons of RFEDs to register with the Commission in 
accordance with part 3 of the Commission's Regulations. (17 CFR 3.1, et 
seq.) Commission Regulation 3.2 provides that the registration 
functions of the Commission are to be performed by the National Futures 
Association. Upon consideration, the Commission has determined to 
authorize NFA, effective September 10, 2010, to perform registration 
functions with regard to RFEDs and their APs as set forth in part 3 of 
the Commission's Regulations. Moreover, Section 17(o)(2) of the Act 
provides that the Commission may authorize a registered futures 
association, such as NFA, to perform Commission registration functions, 
to deny, condition, suspend, restrict or revoke any registration, 
subject to Commission review.\7\ The Commission is therefore also 
authorizing NFA to take such actions with regard to RFED and AP 
applicants as well as existing registrants in each of these categories.
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    \7\ 7 U.S.C. 21(o)(2).
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    The Commission further notes that it has, by prior orders, 
authorized NFA to maintain various Commission registration records, and 
has certified NFA as the official custodian of such records for the 
Commission.\8\ The Commission has determined, in accordance with its 
authority under section 8a(10) of the Act, to authorize NFA to maintain 
and serve as official custodian of the Commission's registration 
records with respect to RFEDs and their APs.
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    \8\ See 49 FR 39593 (Oct. 9, 1984) and 66 FR 43227 (Aug. 17, 
2001).
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    In maintaining the Commission's registration records pursuant to 
this Order, NFA shall be subject to all other requirements and 
obligations imposed upon it by the Commission in existing or future 
Orders or regulations. In this regard, NFA shall also implement such 
additional procedures (or modify existing procedures) as are necessary 
to ensure the security and integrity of these records as may be 
acceptable to the Commission; to facilitate prompt access to these 
records by the Commission and its staff; to facilitate disclosure of 
public or nonpublic information in those records when permitted by 
Commission Orders or rules, and to keep logs as required by the 
Commission concerning disclosures of nonpublic information; and 
otherwise to safeguard the confidentiality of the records.

II. Conclusion and Order

    The Commission has determined, in accordance with the provisions of 
Sections 2(c)(2)(B), 2(c)(2)(C), and 8a(10) of the Act, to authorize 
NFA, effective September 10, 2010 to perform the following registration 
functions:
    (1) To process and grant applications for initial registration, 
renewed registration and withdrawals from registration of retail 
foreign exchange dealers (``RFEDs'') and their associated persons 
(``APs'') and to issue temporary licenses to eligible APs;
    (2) To conduct proceedings to deny, condition, suspend, restrict or 
revoke the registration of any RFED or AP of an RFED, or any applicant 
for registration in either category; and
    (3) To maintain records regarding RFEDs and their APs, and to serve 
as the official custodian of those Commission records.
    NFA shall perform these functions in accordance with the standards 
established by the Act and the regulations promulgated thereunder. NFA 
shall follow the same procedures with respect to recordkeeping, 
disclosure and tracking of fitness investigations and adverse action 
proceedings concerning RFEDs and their APs as it must follow in cases 
involving FCMs, IBs, CPOs, CTAs, and their respective APs.
    These determinations are based upon the Congressional intent 
expressed in sections 2(c)(2)(B), 2(c)(2)(C), 8a(10) and 17(o) of the 
Act. This Order does not, however, authorize NFA to accept or act upon 
requests for exemption from registration, or to render ``no-action'' or 
interpretive letters with respect to applicable registration 
requirements.
    Nothing in this Order, or in sections 2(c)(2)(B), 2(c)(2)(C), 
8a(10) and 17(o) of the Act, shall affect the Commission's authority to 
review the performance by NFA of Commission registration functions.\9\
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    \9\ See also section 17(o)(3) of the Act, 7 U.S.C. 21(o)(3).


[[Page 55312]]


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    Issued in Washington, DC, on August 26, 2010.
David A. Stawick,
Secretary of the Commission.
[FR Doc. 2010-21726 Filed 9-9-10; 8:45 am]
BILLING CODE P


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