Source: https://www.federalregister.gov/documents/2008/10/14/E8-24315/foreign-futures-and-options-transactions
Timestamp: 2017-09-22 21:48:25
Document Index: 308990339

Matched Legal Cases: ['art 30', 'art 30', '§\u200930', 'art 30', '§\u200930', 'art 30', 'art 18', 'arts 17']

A Rule by the Commodity Futures Trading Commission on 10/14/2008
60625-60627 (3 pages)
https://www.federalregister.gov/d/E8-24315 https://www.federalregister.gov/d/E8-24315
The Commodity Futures Trading Commission (Commission or CFTC) is granting an exemption to firms designated by the Tokyo Financial Exchange, Inc. (TFX) from the application of certain of the Commission's foreign futures and option regulations based upon substituted compliance with certain comparable regulatory and self-regulatory requirements of a foreign regulatory authority consistent with conditions specified by the Commission, as set forth herein. This Order is issued pursuant to Commission Regulation 30.10, which permits persons to file a petition with the Commission for exemption from the application of certain of the Regulations set forth in Part 30 and authorizes the Commission to grant such an exemption if such action would not be otherwise contrary to the public interest or to the purposes of the provision from which exemption is sought.
Andrew V. Chapin, Associate Director; Helene Schroeder, Special Counsel; or Peter B. Sanchez, Special Counsel, Division of Clearing and Intermediary Oversight, Commodity Futures Trading Commission, 1155 21st Street, NW., Washington, DC 20581. Telephone: (202) 418-5430. E-mail: DCIO@cftc.gov.
Order Under CFTC Regulation 30.10 Exempting Firms Designated by the Tokyo Financial Exchange, Inc. (TFX) From the Application of Certain of the Foreign Futures and Option Regulations the Later of the Date of Publication of the Order Herein in the Federal Register or After Filing of Consents by Such Firms and TFX, as Appropriate, to the Terms and Conditions of the Order Herein.
Appendix A to Part 30, “Interpretative Statement With Respect to the Commission's Exemptive Authority Under § 30.10 of Its Rules” (Appendix A), generally sets forth the elements the Commission will evaluate in determining whether a particular regulatory program may be found to be comparable for purposes of exemptive relief pursuant to Regulation 30.10.[2] These elements include: (1) Registration, authorization or other form Start Printed Page 60626of licensing, fitness review or qualification of persons that solicit and accept customer orders; (2) minimum financial requirements for those persons who accept customer funds; (3) protection of customer funds from misapplication; (4) recordkeeping and reporting requirements; (5) sales practice standards; (6) procedures to audit for compliance with, and to take action against those persons who violate, the requirements of the program; and (7) information sharing arrangements between the Commission and the appropriate governmental and/or self-regulatory organization to ensure Commission access on an “as needed” basis to information essential to maintaining standards of customer and market protection within the U.S.
On August 10, 2007, TFX petitioned the Commission on behalf of its member firms, located and doing business in Japan, for an exemption from the application of the Commission's Part 30 Regulations to those firms.[4] In support of its petition, TFX states that granting such an exemption with respect to such firms that it has authorized to conduct foreign futures and option transactions on behalf of customers located in the U.S. would not be contrary to the public interest or to the purposes of the provisions from which the exemption is sought because such firms are subject to a regulatory framework comparable to that imposed by the Commodity Exchange Act (Act) and the regulations thereunder.
Based upon a review of the petition, supplementary materials filed by TFX and the recommendation of the Commission's staff, the Commission has concluded that the standards for relief set forth in Regulation 30.10 and, in particular, Appendix A thereof, have been met and that compliance with applicable Japanese law and TFX regulations may be substituted for compliance with those sections of the Act and regulations thereunder more particularly set forth herein.
By this Order, the Commission hereby exempts, subject to specified conditions, those firms identified to the Commission by TFX as eligible for the relief granted herein from:
—The requirement in Commission Regulation 30.6(a) and (d), 17 CFR § 30.6(a) and (d), that firms provide customers located in the U.S. with the risk disclosure statements in Commission Regulation 1.55(b), 17 CFR 1.55(b), and Commission Regulation 33.7, 17 CFR 33.7, or as otherwise approved under Commission Regulation 1.55(c), 17 CFR 1.55(c);
(7) Mechanisms for sharing of information between the Commission, TFX, and the Japanese regulatory authorities on an “as needed” basis including, without limitation, confirmation data, data necessary to trace funds related to trading futures products subject to regulation in Japan, position data, and data on firms' standing to do business and financial condition.
Commission staff have concluded, upon review of the petition of TFX and accompanying exhibits, that Japan's regulation of financial futures and options exchanges is comparable to that of the U.S. in the areas specified in Appendix A of Part 30, as described above.
This Order does not provide an exemption from any provision of the Act or regulations thereunder not specified herein, such as the antifraud provision in Regulation 30.9. Moreover, the relief granted is limited to brokerage activities undertaken on behalf of customers located in the U.S. with respect to transactions on or subject to the regulations of TFX for products that customers located in the U.S. may trade.[5] The relief does not extend to regulations relating to trading, directly or indirectly, on U.S. exchanges. For example, a firm trading in U.S. markets for its own account would be subject to the Commission's large trader reporting requirements.[6] Similarly, if such a firm were carrying positions on a U.S. exchange on behalf of foreign clients and submitted such transactions for clearing on an omnibus basis through a firm registered as a futures commission merchant under the Act, it would be subject to the reporting requirements applicable to foreign brokers.[7] The relief herein is inapplicable where the firm solicits or accepts orders from customers located in the U.S. for transactions on U.S. markets. In that case, the firm must comply with all applicable U.S. laws and regulations, including the requirement to register in the appropriate capacity.
(1) The regulatory or self-regulatory organization responsible for monitoring the compliance of such firms with the regulatory requirements described in the Start Printed Page 60627Regulation 30.10 petition must represent in writing to the CFTC [8] that:
(c) All transactions with respect to customers resident in the U.S. will be made on or subject to the regulations of TFX and the Commission will receive prompt notice of all material changes to the relevant laws in Japan, any regulations promulgated thereunder and TFX regulations;
(f) Undertakes to comply with the applicable provisions of Japanese laws and TFX regulations that form the basis upon which this exemption from certain provisions of the Act and Regulations thereunder is granted.
The Commission also confirms that TFX members that receive confirmation of relief set forth herein may engage in limited marketing conduct with respect to certain qualified customers located in the U.S. from a non-permanent location in the U.S., subject to the terms and conditions set forth in prior Commission Orders.[10] The Commission notes that any firm and their employees or other representatives which engage in marketing conduct pursuant to this relief are deemed to have consented to the Commission's jurisdiction over such marketing activities by their filing of a valid and binding appointment of an agent in the U.S. for service of process.
This Order will become effective as to any designated TFX firm the later of the date of publication of the Order in the Federal Register or the filing of the consents set forth in paragraphs (2)(a)-(f). Upon filing of the notice required under paragraph (1)(b) as to any such firm, the relief granted by this Order may be suspended immediately as to that firm. That suspension will remain in effect pending further notice by the Commission, or the Commission's designee, to the firm and TFX.
1. Commission regulations referred to herein are found at 17 CFR Ch. I (2007).
4. The Commission previously reviewed petitions from two Japanese self-regulatory organizations—the Tokyo Grain Exchange (TGE) and the Tokyo Commodity Exchange (TOCOM). See 58 FR10953 (February 23, 1993) (TGE); 71 FR 6759 (February 9, 2006) (TOCOM).
6. See, e.g., 17 CFR Part 18 (2007).
7. See, e.g., 17 CFR Parts 17 and 21 (2007).
9. 62 FR 47792, 47793 (September 11, 1997). Among other duties, the Commission authorized NFA to receive requests for confirmation of Regulation 30.10 relief on behalf of particular firms, to verify such firms' fitness and compliance with the conditions of the appropriate Regulation 30.10 Order and to grant exemptive relief from registration to qualifying firms.
10. See 57 FR 49644 (November 3, 1992) (permitted limited marketing of foreign futures and foreign option products to certain governmental and institutional customers located in the U.S.); 59 FR 42156 (August 17, 1994) (expanding the relief set forth in the 1992 release to conduct directed towards “accredited investors”, as defined in the Securities and Exchange Commission's Regulation D issued pursuant to the Securities Act of 1933).
[FR Doc. E8-24315 Filed 10-10-08; 8:45 am]