Document ID: SEC-2009-0887-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2009-07-06T04:00Z

[Federal Register Volume 74, Number 127 (Monday, July 6, 2009)]
[Notices]
[Pages 32022-32026]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-15741]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60172; File No. SR-FINRA-2009-040]

 Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change To Adopt 
FINRA Rule 2380 To Limit the Leverage Ratio Offered by Broker-Dealers 
for Certain Forex Transactions

June 25, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 4, 2009, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been substantially prepared by 
FINRA. The Commission is publishing this notice to solicit comments on 
the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to adopt FINRA Rule 2380 to prohibit any member 
firm from permitting a customer to: (1) Initiate any forex position 
with a leverage ratio of greater than 1.5 to 1; and (2) withdraw money 
from an open forex position that would cause the leverage ratio for 
such position to be greater than 1.5 to 1.
    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, at the principal office of FINRA and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements 
concerning the purpose of and basis for the

[[Page 32023]]

proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. FINRA has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    FINRA is proposing to limit the leverage ratio offered by broker-
dealers for certain forex transactions to no more than 1.5 to 1. The 
proposed rule change addresses forex transactions in the off-exchange 
spot contract market. This market has grown in recent years following 
the passage of the Commodity Futures Modernization Act of 2000 
(``CFMA''), which permits certain enumerated entities, including 
broker-dealers, to act as counterparties to a retail forex contract.\3\ 
While most of the growth in this area has been concentrated in the 
futures commission merchant (``FCM'') channel, recent changes in 
legislation have brought greater interest to forex by broker-
dealers.\4\ The proposed rule change seeks to limit investor losses 
resulting from small changes in the exchange rate of a foreign currency 
and is intended to reduce the risks of excessive speculation.
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    \3\ Commodity Futures Modernization Act of 2000, Public Law 106-
554, 114 Stat. 2763, 2763A-378 (2001).
    \4\ See CFTC Reauthorization Act of 2008, Public Law 110-246, 
122 Stat. 1651 (2008).
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    Paragraph (a) of the proposed rule change states that no member 
shall permit a customer to initiate a forex position (as defined below) 
with a leverage ratio greater than 1.5 to 1. Thus, at the time a 
customer initiates a forex position, the customer must deposit at least 
\2/3\ of the notional value of the contract. Using the example in 
supplementary material .01, a customer entering into a forex contract 
representing $750,000 of a foreign currency must have an initial 
deposit of at least $500,000. The proposed rule change differs from the 
leverage limits in the FCM channel, where depending on the foreign 
currency selected, a customer at 400 to 1 leverage would need only an 
initial deposit of $1,875.
    In addition, paragraph (a) also states that ``no member shall 
permit a customer to withdraw money from an open forex position that 
would cause the leverage ratio for such position to be greater than 1.5 
to 1.'' This provision is intended to prevent a customer from 
depositing funds at the initiation of the forex position and then 
immediately withdrawing them once the position is established. If a 
customer were permitted to withdraw the funds once a position is 
established, the leverage limitation could easily be circumvented as 
the same deposit could be used to establish multiple forex positions.
    The limitation on a customer's ability to withdraw funds that would 
cause the leverage ratio to exceed 1.5 to 1 differs from a maintenance 
margin requirement in that an adverse movement in a customer's forex 
contract will not necessitate the deposit of additional funds. The 
intra-day and day-to-day pricing changes of a forex contract may cause 
a customer to have a leverage ratio greater than 1.5 to 1. So long as a 
customer does not withdraw funds from those initially used to establish 
the position, a leverage ratio may exceed 1.5 to 1. FINRA considered 
imposing a maintenance margin requirement but determined that the level 
of initial deposit was sufficiently high that a maintenance margin 
requirement was not necessary.
    The proposed rule change does not impact existing rules addressing 
the necessary customer funds to enter into and maintain a forex 
position. For example, Regulation T does not have margin requirements 
for forex and allows a customer to obtain nonpurpose credit in a good 
faith account to effect and carry transactions in forex.\5\ However, it 
should be noted that any funds deposited in a margin account to 
maintain a forex position or any account equity derived from a forex 
position may not be used to purchase securities in that account.
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    \5\ 12 CFR 220.6.
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    Paragraph (b) of the proposed rule change establishes the key 
definitions. The term ``forex'' is defined to mean a foreign currency 
spot, forward, future, option or any other agreement, contract, or 
transaction in foreign currency that: (1) Is offered or entered into on 
a leveraged basis, or financed by the offeror, the counter party, or a 
person acting in concert with such person, (2) offered to or entered 
into with persons that are not eligible contract participants; \6\ and 
(3) not executed on or subject to the rules of a contract market,\7\ 
derivatives transaction execution facility,\8\ national securities 
exchange,\9\ or foreign board of trade.\10\ FINRA is proposing an 
amended version of the definition of forex from what appeared in 
Regulatory Notice 09-06 by adding the terms ``spot'' and ``forward'' in 
order to clarify that the leverage limitation will apply to foreign 
currency transactions no matter how they are legally classified. 
FINRA's definition of forex is similar to the National Futures 
Association's (``NFA'') definition of forex \11\ and to amended Section 
2(c)(2) of the Commodity Exchange Act which sets forth the scope of the 
Commodity Futures Trading Commission's (``CFTC'') rulemaking 
jurisdiction.\12\ The FINRA definition, however, does not contain an 
exclusion for certain spot and forward contracts found in the NFA and 
CFTC definitions, which were included due to CFTC jurisdictional 
limitations.\13\
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    \6\ ``Eligible Contract Participants'' (``ECPs'') include 
regulated entities such as financial institutions, insurance 
companies, investment companies and broker-dealers. Certain 
corporations and individuals qualify as ECPs by meeting the 
requirements under the statute. See 7 U.S.C. 1a(12).
    \7\ ``Contract markets'' are markets that are designated by the 
CFTC that meet the criteria in Section 5 of the Commodity Exchange 
Act. See 7 U.S.C. 7.
    \8\ ``Derivatives transaction execution facilities'' (``DTEFs'') 
are CFTC-registered trading facilities that limit access primarily 
to institutional or otherwise eligible traders and/or limit the 
products traded. See 7 U.S.C. 7a.
    \9\ A ``national securities exchange'' is a securities exchange 
that has registered with the SEC under Section 6 of the Exchange 
Act. See 15 U.S.C. 78f.
    \10\ A ``foreign board of trade'' means any organized exchange 
or trading facility located outside of the United States.
    \11\ NFA By-Law 1507(b).
    \12\ See CFTC Reauthorization Act of 2008, 13101 (to be codified 
at 7 U.S.C. 2(c)(2)(C)(i)(I)).
    \13\ NFA By-Law 1507(b) and CFTC Reauthorization Act of 2008, 
13101 (to be codified at 7 U.S.C. 2(c)(2)(C)(i)(II)).
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    Paragraph (b) also defines the term ``leverage ratio'' to mean the 
fraction represented by the numerator which is the notional value of a 
forex transaction, and the denominator, which is the amount of good 
faith deposit or account equity required from the customer for a forex 
position. For example, if the notional value of a forex contract is 
$250,000, and the customer deposits $200,000, the leverage ratio would 
be 1.25 to 1.
    FINRA will announce the effective date of the proposed rule change 
in a Regulatory Notice to be published no later than 60 days following 
Commission approval. The effective date will be 30 days following 
publication of the Regulatory Notice announcing Commission approval.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\14\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative

[[Page 32024]]

acts and practices, to promote just and equitable principles of trade, 
and, in general, to protect investors and the public interest. FINRA 
believes that the proposed rule change is consistent with the 
provisions of the Act noted above in that it will limit leverage 
ratios, requiring greater initial deposits that will substantially 
reduce the likelihood that any small adverse percentage change in the 
exchange rate of a foreign currency will cause an investor's funds to 
be wiped out. Moreover, limiting the leverage ratios is intended to 
reduce the risks of excessive speculation.
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    \14\ 15 U.S.C. 78o-3(b)(6).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The proposed rule change was published for comment in FINRA 
Regulatory Notice 09-06 (January 2009). FINRA received 109 comments in 
response to the Regulatory Notice. A copy of the Regulatory Notice is 
attached as Exhibit 2a, the index to the comment letters is attached as 
Exhibit 2b and copies of the comment letters received in response to 
the Regulatory Notice are attached as Exhibit 2c.\15\
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    \15\ All references to commenters under this Item are to the 
commenters as listed in Exhibit 2b to the proposed rule change [SR-
FINRA-2009-040].
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    Of the 109 comment letters received, none were in favor of the 
proposed rule change and 108 were opposed; one comment letter did not 
express an opinion.
    Ninety-seven of the comment letters were from individual investors 
who opposed FINRA's attempts to limit the amount of leverage 
available.\16\ FINRA believes the central theme in these comment 
letters was that it was unfair to lower the leverage ratios available 
and that neither the government nor any regulator should inhibit an 
individual's freedom to invest and make money.\17\ In short, commenters 
believe that they should be entitled to invest their money at whatever 
leverage ratio they see fit. Several of these commenters \18\ argued 
that the proposed rule change would kill the off-exchange retail forex 
business or force traders to trade in foreign, less regulated 
markets.\19\ Many of the individual investors believed that the 
leverage limitations were unnecessary because they could manage their 
risk by trading in small amounts or by entering a stop-loss order.\20\
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    \16\ Abhay, Aird, Akhras, Ali, Andrews, Arthur, Avery, Chris, 
Cohn, Colman, Crowley, Dallmann, Daniels, David, Day, Decker, 
Delfino, Doozan, Evergreen, Figlewski, Findley, Fortner, Gallagher, 
Gallagher 2, Getline, Goff, GoodBoy, Gray, gslatham, Gurkan, 
Hoepker, Howell, Hurley, Issacs, Jackal, Jackson, Jacobs, James, 
Jim, Johnston, Jones, Kerr, Lambert, Langin, Lannon, Lebold, 
Leousis, Levy, Marsh, Marshall, Muir, National Information, 
Nadjakov, Negus, Newhouse, Nichols, Nick, nv46, O'Moore, Otlo, 
Overfield, Parker, Pellot, Pena, Prime, Prindle, Quesenberry, 
Rajenthiran, Ramlakhan, Ramsey, Rawlins, Revolg, Rice, Richardson, 
L. Richardson, Rigney, Rocha, Romero, Sabo, Salatino, Shore, 
Sinclair, Sinclair 2, Thomlinson, Tischer, Uwins, Vern, Walker, 
Waratah, Weaver, Weisbloom, Wilkes, Williams, Young, Young 2, 
Zarlengo and Zepco.
    \17\ Aird, Akhras, Avery, Day, Doozan, Findley, Gallagher, 
Gallagher 2, Getline, GoodBoy, gslatham, Jackson, Jacobs, James, 
Jones, Lannon, Marsh, National Information, Newhouse, nv46, O'Moore, 
Quesenberry, Ramsey, Revolg, Richardson, L. Richardson, Rigney, 
Sabo, Sinclair, Vern, Walker, Wilkes, Williams, Young and Zarlengo.
    \18\ Abhay, Akhras, Andrews, Crowley, David, Figlewski, Fortner, 
Getline, GoodBoy, Gray, Gurkan, Hoepker, Lambert, Lebold, Leousis, 
Nick, nv46, Prindle, Ramlakhan, Rawlins, Rice, Romero, Sinclair 2, 
Thomlinson, Tischer, Waratah, Wilkes, Williams and Zepco.
    \19\ Because many of these commenters are unfamiliar with FINRA 
and its jurisdiction, FINRA believes that these commenters 
mistakenly believe that the proposed rule change would eliminate 
their ability to trade forex at higher leverage levels. FINRA's 
proposal would have no direct effect on the leverage ratios offered 
by non-broker-dealers, which currently represent the overwhelming 
majority of participants in this industry. As of November 2008, the 
NFA had 26 Forex Dealer Members. See Lee Oliver, Retail FX in the 
U.S.: A Market in Transformation, Futures Industry Magazine, 
November/December 2008, at 35.
    \20\ Abhay, Colman, Gurkan, Leousis, Sinclair 2, Weisbloom and 
Williams.
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    FINRA staff disagrees with these commenters and the laissez faire 
and caveat emptor approach. FINRA's mandate includes investor 
protection, and many of the comment letters, such as those from 
retirees and retail investors, are from individuals whose interests are 
traditionally helped by FINRA's regulatory program.\21\ Taken to their 
logical conclusion, FINRA believes that these commenters would likely 
oppose many of FINRA's existing rules (including a 25% maintenance 
margin requirement, and the minimum equity of $25,000 for pattern day 
traders),\22\ as well as the initial margin limitations in the Federal 
Reserve Board's Regulation T.\23\ Further, while a stop-loss order may 
help minimize the losses on any particular forex position, it does not 
address the fact that at high levels of leverage, such as 400 or 100 to 
1, a very small movement in the exchange rate of a foreign currency 
pair trade will quickly trigger the stop-loss provision and close out 
the position with a loss. Similarly, the fact that a firm will close 
out a customer position and not issue a margin call does not address 
the potential for losses resulting from such high leverage ratios.
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    \21\ One investor noted that after finally saving up $114, he 
was able to start trading forex.
    \22\ See NASD Rule 2520.
    \23\ 12 CFR 220.
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    In addition, these commenters believed that the proposal was 
targeted at the retail investor, while allowing larger institutional 
investors to have access to higher levels of leverage.\24\ One 
commenter compared the proposed rule change to the ``accredited 
investor'' standard which he viewed as preventing the little guy from 
having access to the best deals.\25\ Interestingly, some of those 
commenters who opposed the proposed rule change also acknowledged that 
existing levels of leverage were excessive and would not trade at these 
levels.\26\
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    \24\ Abhay, Arthur, Chris, Goff, Gurkan, James, Jim, Kerr, 
Leousis, Nadjakov, Newhouse, Nichols, Prime, Prindle, Ramsey, 
Sinclair, Sinclair 2, Vern, Weisbloom, Williams and Young 2.
    \25\ Avery.
    \26\ Crowley (offered 40 to 1, yet trades at no more than 2 to 
1); Dallmann (says you should not risk more than 2% of your account 
balance); Delfino (allow for a maximum leverage of 100 to 1); 
Lambert (understanding lowering the limit to 100 to 1); Parker 
(proposing maximum leverage of 5 to 1 or 4 to 1); Ramlakhan (the 
firm he trades with offers 40 to 1, but he uses no more than 16 to 
1); Revolg (leverage no less than 20 to 1); Uwins (stating ``400:1 
is getting a little ridiculous'' and favoring 100:1 or less); and 
Waratah (uses a true leverage of 5 to 1).
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    Several broker-dealers submitted comment letters on the proposed 
rule change. Interactive Brokers, Knight, TD Ameritrade and thinkorswim 
believed that the investor protection benefits of the proposed rule 
change would not be attained as the proposal would merely divert 
customers' forex activities to non-FINRA members.\27\ Knight urged 
FINRA to allow customers to trade forex at broker-dealers ``on similar 
terms as accounts held at entities that are not regulated by FINRA.'' 
FINRA does not believe that the opportunity for customers to trade in a 
less-regulated environment or on more lenient terms is a compelling 
rationale to limit the application of the proposed rule change. Prior 
to soliciting comment on the proposed rule change in Regulatory Notice 
09-06, FINRA reviewed the regulatory requirements of other regulators 
and concluded that the availability of such high levels of leverage was 
the crux of the problem faced by investors. FINRA acknowledges that 
different regulators may choose to pursue their regulatory mandate in 
separate ways; however,

[[Page 32025]]

FINRA is not compelled to follow the standards adopted by other 
regulators.
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    \27\ This view also was reflected in comment letters by FIA and 
FXC.
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    FIA, FXC and thinkorswim urged FINRA to use the standards 
articulated in Regulatory Notice 08-66 (Retail Foreign Currency 
Exchange) and FINRA Rule 2010 (Standards of Commercial Honor and 
Principles of Trade), and best practices adopted by the forex community 
in lieu of the proposed rule change. While FINRA believes that the 
protections afforded investors under Regulatory Notice 08-66 and FINRA 
Rule 2010 are meaningful, they do not, in FINRA's view, go far enough. 
FXC also questioned whether FINRA has the authority to control the 
terms of a non-securities transaction. FINRA does not read any 
provisions in the Act that prohibit it from proposing rules on broker-
dealer conduct relating to non-securities. The standards for the rules 
of a national securities association in Section 15A of the Act include 
the ``protect[ion] of investors'' irrespective of whether such activity 
relates to securities. Ironically, FXC's premise that FINRA Rule 2010 
and Regulatory Notice 08-66 are sufficient to protect investors 
contradicts its assertion that FINRA does not have authority to adopt 
rules relating to non-securities transactions.
    FIA and Interactive Brokers stated that the proposed rule change is 
inconsistent with congressional intent in allowing a broker-dealer to 
engage in an off-exchange retail forex business. While Congress 
authorized a class of regulated entities to engage in an off-exchange 
retail forex business,\28\ FINRA believes that there is nothing in the 
legislation to suggest that Congress intended that each regulated 
entity would adopt a conforming regulatory regime. Indeed, when the 
CFMA was adopted, Congress was well-aware of the differing regulatory 
regimes in the eligible entities. Moreover, FINRA believes Congress 
actually contributed to the regulatory disparities in only increasing 
the minimum net capital required for FCMs.\29\
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    \28\ See supra note 6.
    \29\ CFTC Reauthorization Act of 2008, 13101 (to be codified at 
7 U.S.C. 2(c)(2)(B)).
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    Interactive Brokers, Roberts & Ryan and TradeStation suggested that 
FINRA adopt an exclusion from the proposed rule change for FINRA 
members that are dually registered broker-dealer/FCMs like themselves. 
Both Interactive Brokers and TradeStation stated that dual registrants 
will be subject to oversight by the CFTC and/or NFA. FINRA believes 
Interactive Brokers and TradeStation are misreading the CEA and the 
scope of the NFA's rules. The CEA specifically states that the CFTC's 
jurisdiction over off-exchange retail forex applies only to FCMs that 
are not also a registered broker-dealer.\30\ Similarly, NFA exempts 
from its Forex Dealer Members entities that are a member of a national 
securities association.\31\ Thus, Interactive Brokers' and 
TradeStation's off-exchange retail forex business operate outside the 
ambit of the CFTC and NFA rules tailored to forex. It is not sufficient 
for regulatory purposes that the CTFC and NFA can enforce their books 
and records and general anti-fraud provisions. Moreover, even if 
Interactive Brokers and TradeStation were to voluntarily submit to the 
NFA's jurisdiction for purpose of applying its off-exchange retail 
forex rules, FINRA would still have concerns about the level of 
leverage provided in what is a joint broker-dealer/FCM.
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    \30\ CFTC Reauthorization Act of 2008, 1301 (to be codified at 7 
U.S.C. 2(c)(2)(B)(i)(II)(cc)(AA)).
    \31\ NFA By-Law 306.
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    Interactive Brokers, thinkorswim and TradeStation also argued that 
the proposed rule change will disadvantage combined broker-dealer/FCMs. 
FINRA agrees that conducting an off-exchange retail forex business in a 
combined broker-dealer will subject the firm to a different regulatory 
regime than if the business were conducted in a separate FCM. Such 
differences exist today in the application of FINRA Rule 2010 and NASD 
Rule 2210 to joint broker-dealer/FCMs. FINRA also notes that joint 
broker-dealer/FCMs are in many other ways operating in a less regulated 
environment inasmuch as they operate outside of the CFTC and NFA rules 
on forex. However, the observation that either another regulatory 
scheme or practices occurring outside of any regulatory scheme allow 
business in retail forex at greater leverage levels is neither a 
compelling reason for FINRA to mandate a standard less than that deemed 
necessary by FINRA for investor protection nor does it demonstrate a 
deficiency for meeting the elements of approval of this proposed rule 
change under the Act.
    Several commenters \32\ suggested that disclosure about the risks 
of leverage, or the actual leverage, in a particular transaction would 
be an effective alternative to the proposed rule change. FINRA 
disagrees that disclosure alone is an effective regulatory solution. 
FINRA also notes that Regulatory Notice 08-66 already requires 
disclosures of the risks of forex trading and the risks and terms of 
leveraged trading.\33\ SIFMA suggested that FINRA adopt a definition of 
retail customer. FINRA disagrees and believes that the reference to the 
``eligible contract participant'' standard is most appropriate for the 
proposed rule change as that is the terminology used in the federal 
legislation that permits a broker-dealer to engage in an off-exchange 
retail forex business. SIFMA and TD Ameritrade also requested that 
FINRA adopt a hedging exemption to allow customers to hedge foreign 
currency exposure from securities. FINRA does not support a hedging 
exemption as there are many other available alternatives (e.g., 
exchange traded futures and options, and other OTC products) that may 
be used to hedge foreign currency exposure. Furthermore, FINRA does not 
believe that the off-exchange retail forex markets are used for hedging 
and is concerned that burdens and complexities in establishing a 
hedging exemption will not be justified.
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    \32\ Dallmann, Hurley, Rocha and Young.
    \33\ See Regulatory Notice 08-66, page 4.
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    SIFMA also suggested that FINRA clarify whether Exchange Act Rule 
15c3-3 is applicable to the deposit required to carry positions 
involving retail transactions in foreign exchange. FINRA will work with 
the SEC to publish an interpretation of Exchange Act Rule 15c3-3 that 
will address this question.
    Finally, TD Ameritrade stated that the proposed rule change would 
cause broker-dealers to establish an FCM affiliate or to establish an 
introducing relationship with an NFA firm that offers off-exchange 
retail forex, and that the broker-dealer would therefore be unregulated 
with respect to its forex activity. FINRA disagrees and notes that 
Regulatory Notice 08-66 was very clear in reminding firms that broker-
dealer forex activities, including referral and introducing activities, 
would be subject to FINRA Rule 2010.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and

[[Page 32026]]

arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2009-040 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2009-040. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of FINRA. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-FINRA-2009-040 and should be 
submitted on or before July 27, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-15741 Filed 7-2-09; 8:45 am]
BILLING CODE 8010-01-P