[Federal Register Volume 60, Number 111 (Friday, June 9, 1995)]
[Rules and Regulations]
[Pages 30462-30466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14147]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 30
Foreign Futures and Option Transactions
AGENCY: Commodity Futures Trading Commission.
ACTION: Order.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (``Commission'' or
``CFTC''), subject to the conditions specified below, is authorizing
certain option contracts traded on the MEFF Sociedad Rectora de
Productos Financieros Derivados de Renta Fija (the ``Exchange'' or
``MEFF Renta Fija'') to be offered or sold to persons located in the
United States; and granting an exemption to designated members of the
Exchange from the application of certain of the Commission's foreign
futures and option rules based on substituted compliance with certain
comparable regulatory and self-regulatory requirements of a foreign
regulatory authority.
This Order is issued pursuant to Commission rule 30.3(a), 17 CFR
30.3(a), which makes it unlawful for any person to engage in the offer
or sale of a foreign option product until the Commission, by order,
authorizes such foreign option to be offered in the United States, and
rule 30.10, 17 CFR 30.10, which allows certain persons to petition the
Commission for exemption from the application of certain of the rules
set forth in Part 30 and authorizes the Commission to grant such
petition if the exemption is not otherwise contrary to the public
interest or to the purposes of the provisions from which exemption is
sought.
EFFECTIVE DATE: July 10, 1995.
FOR FURTHER INFORMATION CONTACT: Jane C. Kang, Esq., or Robert H.
Rosenfeld, Esq., Division of Trading and Markets, Commodity Futures
Trading Commission, 2033 K Street, N.W., Washington, D.C. 20581.
Telephone: (202) 254-8955.
SUPPLEMENTARY INFORMATION: On July 23, 1987, the Commission adopted
final rules governing the domestic offer and sale of commodity futures
and option contracts traded on or subject to the rules of a foreign
board of trade. 52 FR 28980 (August 5, 1987). These rules, which are
codified in Part 30 of the Commission's regulations, 17 CFR part 30,
generally extend the Commission's existing customer protection
regulations for products offered or sold on contract markets in the
United States to foreign futures and option products 1 sold to
United States customers by imposing requirements with respect to
registration, disclosure, capital adequacy, protection of customer
funds, recordkeeping and reporting, sales practice and compliance
procedures that are generally comparable to those applicable to wholly
domestic transactions.
\1\ Commission rule 30.1(a), 17 CFR 30.1(a), defines the term
``foreign futures'' as ``any contract for the purchase or sale of
any commodity for future delivery made, or to be made, on or subject
to the rules of any foreign board of trade.''
Commission rule 30.1(b), 17 CFR 30.1(b), defines the term
``foreign option'' as ``any transaction or agreement which is or is
held out to be of the character of, or is commonly known to the
trade as, an ``option,'' ``privilege,'' ``indemnity,'' ``bid,''
``offer,'' ``put,'' ``call,'' ``advance guaranty,'' or ``decline
guaranty,'' made on or subject to the rules of any foreign board of
trade.''
---------------------------------------------------------------------------
With respect to foreign options, in view of the history of abuses
in the options markets prior to the imposition of the options ban,
2 the Commission determined to phase in foreign options on a
market-by-market basis through particularized review of applications
submitted by individual markets and issuance of an authorization order,
as appropriate, by the Commission.3 In adopting the final rules
which implement that procedure, the Commission stated that
notwithstanding part 30, which provides a regulatory framework to
govern transactions in both foreign futures and foreign options, and
which has been the subject of extensive notice and comment, it would be
unlawful for any person to engage in the offer or sale of a particular
foreign option product until the Commission specifically authorizes
such foreign option to be offered and sold in the United States.4
As a consequence, rule 30.3(a) permits the Commission to consider,
among other things, its ability to determine whether or not a
particular trade has been transmitted to and executed on a foreign
exchange as part of its decision to authorize transactions in specific
foreign exchange-traded options.5
\2\ See 51 FR 12104 (April 8, 1986). The pattern of abuses that
was characteristic of option sales practices in the past, and which
contributed to the Commission's decision to suspend all option sales
in 1978, included the unavailability of data necessary to permit a
determination of whether orders for options had in fact been
executed or whether they simply had been ``bucketed''. See 43 FR
16155 (April 17, 1978).
\3\ Although the statutory prohibition on the offer and sale of
foreign options formerly contained in section 4c(c) of the Commodity
Exchange Act (``CEA'' or the ``Act'') has been removed, see Futures
Trading Act of 1986, Pub. L. No. 99-641, section 102, 100 Stat. 3556
(1987), the regulatory prohibition in Commission rule 32.11, 17 CFR
32.11, adopted pursuant to section 4c(b) of the CEA, remains in
effect.
\4\ 52 FR 28980 (August 5, 1987). Notwithstanding the
prohibition in Commission rule 30.3(a), nondomestic exchange-traded
options which are traded pursuant to the trade option exemption in
Commission rule 32.4(a), 17 CFR 32.4(a), may continue to be offered
and sold.
\5\ 51 FR 12104, 12105 (April 8, 1986).
---------------------------------------------------------------------------
In issuing orders under rule 30.3(a), the Commission considers: (1)
The existence of information sharing arrangements relevant to
preventing abuses in the trading of option contracts on the exchange;
(2) the arrangements in place for assuring that sales practice abuses
in such options do not occur, including that sales practice compliance
audits commensurate with those which apply to domestic products will be
conducted with respect to firms engaged in the offer or sale of the
exchange's option products in the United States; (3) the arrangements
for United States customers to redress grievances with respect to
matters directly pertaining to the conduct of trading or other
activities relevant to the offer or sale of such products; and (4) the
regulatory environment in which the options are traded.
In formulating a regulatory program to govern the offer and sale of
foreign futures and option products to United States customers, the
Commission, among other things, considers the potential
extraterritorial impact of such a program and the desirability of
avoiding duplicative regulation of firms engaged in international
business. Based upon these considerations, the Commission, as set forth
in Commission rule 30.10, determined to permit persons located outside
the United States and subject to a comparable regulatory structure in
the jurisdiction in which they are located to seek an exemption from
certain of the requirements imposed by the Part 30 rules based upon
substituted compliance with the comparable regulatory requirements
imposed by the foreign jurisdiction.
In issuing orders under rule 30.10, the Commission evaluates
whether the [[Page 30463]] particular foreign regulatory program
provides a basis for permitting substituted compliance for purposes of
exemptive relief pursuant to Commission rule 30.10. The specific
elements examined are set forth in Appendix A to Part 30,
``Interpretative Statement With Respect to the Commission's Exemptive
Authority Under Section 30.10 of Its Rules'' (``Appendix A''). 17 CFR
part 30, appendix A. These elements include: (1) Registration,
authorization or other form of licensing, fitness review or
qualification of persons (both individuals and firms) through which
customer orders are solicited and accepted; (2) minimum financial
requirements for those persons who accept customer funds; (3)
protection of customer funds from misapplication; (4) minimum sales
practice standards, including the disclosure of the risks of futures
transactions; (5) recordkeeping and reporting requirements; (6)
procedures to audit for compliance with, and to take action against
those persons who violate, the requirements of the program; and (7) the
existence of appropriate information-sharing arrangements. The
Commission may apply additional conditions to ensure that brokers
licensed under other regulatory regimes are not permitted to solicit
U.S. customers while effectively evading U.S. requirements, such as
those relative to statutory disqualification.
Moreover, the Commission specifically stated in adopting rule 30.10
that no exemption based on substituted compliance of a general nature
would be granted unless the persons to whom the exemption is to be
applied: (1) consent to jurisdiction in the United States and designate
an agent for service of process in the United States with respect to
transactions subject to Part 30 by filing a copy of the relevant agency
agreement with the National Futures Association (``NFA''); (2) agree to
make their books and records available in the United States to
Commission and Department of Justice representatives; and (3) notify
NFA of the commencement or termination of business in the United
States.6
\6\ 52 FR 28980, 28981 and 29002.
---------------------------------------------------------------------------
By letter dated May 14, 1993, as supplemented, counsel for the
Exchange requested that the Commission: (1) Authorize the offer and
sale of option contracts traded on the Exchange to persons located in
the United States under rule 30.3(a); and (2) exercise its authority
under Commission rule 30.10 to exempt certain members of the Exchange
from compliance with Part 30's registration and other requirements with
respect to brokerage activities undertaken on behalf of customers in
the United States 7 with respect to transactions on or subject to
the rules of MEFF Renta Fija, and which U.S. customers may trade.
8 The Exchange also has requested that the Commission confirm the
application of the Commission's Limited Marketing Orders to MEFF Renta
Fija member firms designated by the Exchange for rule 30.10 relief, and
this request will be addressed separately. 9
\7\ See Letter dated May 14, 1993, from Philip McBride Johnson,
Esq., to Jean A. Webb, Commission, Re: Petition for Authorization of
the Offer and Sale in the United States of Futures and Options
Contracts Traded on the MEFF Renta Fija (``Petition'').
By letter dated August 26, 1994, MEFF confirmed that it seeks
initial authorization for the following contracts: options on the
three year Spanish government bond futures contracts, monthly and
quarterly options on the ten year Spanish government bond futures
contracts and options on the MIBOR '90 futures contract. Spanish
government debt obligations have been designated by the U.S.
Securities and Exchange Commission as ``exempted securities'' under
SEC rule 3a12-8, a prerequisite before an option product based on
such a foreign government debt futures contract may be offered or
sold in the United States. See 59 FR 54812 (November 2, 1994).
\8\ The Part 30 rules apply solely with respect to foreign
futures and foreign options, which are defined by reference to the
term ``foreign board of trade.'' See note 1 above. For purposes of
this Order, the term ``foreign board of trade'' shall mean any board
of trade, exchange or market located outside the United States, its
territories or possessions, whether incorporated or unincorporated,
where foreign futures or foreign options transactions are entered
into. Commission rule 1.3(ss), 17 CFR 1.3(ss). Thus, contracts that
are traded on a market that has been designated as a contract market
pursuant to section 5a of the Commodity Exchange Act (CEA) are not
within the scope of this Order.
\9\ See letter dated January 31, 1995 from Philip McBride
Johnson, Skadden, Arps, Slate, Meagher & Flom, to Jane C. Kang,
CFTC. The Commission has authorized, subject to certain conditions,
direct limited marketing activities from within the United States by
rule 30.10 firms. See 57 FR 49644 (November 3, 1992), and 59 FR
42156 (August 17, 1994) (``Limited Marketing Orders'').
Order
The Commission is hereby issuing the following order:
ORDER UNDER CFTC RULE 30.3 PERMITTING OPTION CONTRACTS TRADED ON
MEFF RENTA FIJA TO BE OFFERED OR SOLD IN THE UNITED STATES THIRTY DAYS
AFTER PUBLICATION OF THE TERMS AND CONDITIONS OF THE PARTICULAR
EXCHANGE OPTION CONTRACT IN THE FEDERAL REGISTER, UNLESS PRIOR TO THAT
DATE THE COMMISSION RECEIVES ANY COMMENTS WHICH MAY RESULT IN THE
DETERMINATION TO DELAY THE EFFECTIVE DATE OF THE ORDER; AND
ORDER UNDER CFTC RULE 30.10 EXEMPTING DESIGNATED MEMBERS OF THE
MEFF RENTA FIJA FROM THE APPLICATION OF CERTAIN OF THE FOREIGN FUTURES
AND OPTION RULES THE LATER OF THIRTY DAYS AFTER PUBLICATION OF THE
ORDER HEREIN IN THE FEDERAL REGISTER OR AFTER THE FILING OF RELEVANT
CONSENTS BY MEMBERS OF THE EXCHANGE AND EXCHANGE UNDER THE TERMS AND
CONDITIONS OF THIS ORDER.
The Commission has reviewed the information and representations
contained in, among other things, the following submissions:
--Petition dated May 14, 1993;
--The Spanish Securities Market Act 24/1988;
--Royal Decree 1814 Governing Official Futures and Options Markets;
--Royal Decree 629/1993 of May 3, 1993 ``Concerning the Regulations
Governing Participation in the Stock Markets and Obligatory Registers
of Transactions;''
--MEFF Renta Fija Articles of Association (1992);
--MEFF Renta Fija Rules and Regulations;
--Letters dated October 1, 8, and 15 1993; December 23, 1993; August
26, 1994; December 20, 1994; and January 31, 1995, from Philip McBride
Johnson, Skadden, Arps, Slate, Meagher & Flom, counsel for the
Exchange;
--Letters dated May 19, 1994 and September 28, 1994 from the Comision
Nacional del Mercado de Valores (``CNMV''); and
--Letter dated January 12, 1995 from MEFF Renta Fija.
Based upon its review of the above supporting materials, and the
memorandum from the Division of Trading and Markets dated April 24,
1995 (the ``Staff Memorandum'') and subject to the conditions set forth
below, the Commission has determined to issue this Order which: 10
\10\ Although the Commission in the past has issued separate
orders under rules 30.3(a) and 30.10 as requested by the
petitioners, there are many issues common to the consideration of
the two types of petitions such that the review of one would
facilitate the review of the other.
(a) As to matters subject to rule 30.3(a), will become effective
thirty days after publication of the terms and conditions of the
particular Exchange option contract in the Federal Register, unless
prior to that date the Commission receives any comments which may
result in the determination to delay the effective date of the Order
pending review of such comments (under such circumstances, the
Commission will provide notice); and [[Page 30464]]
(b) As to matters subject to rule 30.10, will become effective
the later of thirty days after publication of this Order in the
Federal Register or the filing of consents by members of the
Exchange and the Exchange to the terms and conditions of the Order
herein.
In particular, pursuant to Commission rule 30.3(a), the Commission
authorizes the offer and sale in the United States of options traded on
the Exchange subject to the conditions described below:
(1) Except as otherwise permitted under the Commodity Exchange
Act and regulations thereunder, that no offer or sale of any MEFF
Renta Fija option product in the United States shall be made until
thirty days after publication in the Federal Register of notice
specifying the particular option(s) to be offered or sold pursuant
to this Order, unless prior to that date the Commission receives any
comments which may result in the determination to delay the
effective date of the Order pending review of such comments (under
such circumstances, the Commission will provide notice);
(2) That the CNMV and MEFF Renta Fija represent that all
transactions with respect to the option(s) referenced in such
Federal Register notice will be governed by the Securities Market
Act (``SMA''), Royal Decree 1814 (``R.D. 1814''), Royal Decree 629
(``R.D. 629'') and related statutes and MEFF Renta Fija rules as
more particularly discussed in the Staff Memorandum and that the
CNMV and/or MEFF Renta Fija will provide the Commission with
information as to all material changes thereto promptly;
(3) That options on futures on stock indices 11 and options
on futures on foreign government debt securities 12 will not be
permitted to be offered or sold hereunder absent certain additional
procedures;
\11\ See 52 FR 28980, 28982 n. 6 and section 2a(1) of the CEA.
\12\ See section 2a(1) of the CEA, section 3(a)(12) of the
Securities Exchange Act of 1934 and Rule 3a12-8 promulgated
thereunder. As previously noted, Spanish government debt obligations
have been designated as ``exempted securities'' by the SEC.
---------------------------------------------------------------------------
(4) That options traded pursuant to this Order may only be
offset on the MEFF Renta Fija or another market with respect to
which the Commission has issued an order under Commission rule
30.3(a) authorizing its option products to be offered or sold in the
United States; and
(5) That options traded pursuant to this Order herein may only
be offered or sold by persons registered in the appropriate capacity
under the Act or by persons who have been granted an exemption from
registration under rule 30.10 based on substituted compliance with
the terms of that exemption order and relevant laws of the
jurisdiction, provided such persons also provide customers resident
in the United States with the options risk disclosure statement in
Commission rule 33.7, 17 CFR 33.7, or the generic risk disclosure
statement approved by the Commission pursuant to Commission rule
1.55(c).13
\13\ 59 FR 34376, 34379 (July 5, 1994).
Furthermore, subject to the conditions set forth below, the
Commission concludes that the standards for relief set forth in
Commission rule 30.10 and, in particular, Appendix A thereof, have
generally been satisfied and that compliance with the SMA, R.D. 1814,
R.D. 629 and MEFF Renta Fija and CNMV rules may be substituted for
compliance with certain sections of the Act as more particularly set
forth herein. By this Order, the Commission hereby exempts, subject to
specified conditions, those firms identified to the Commission as
---------------------------------------------------------------------------
eligible for the rule 30.10 relief granted herein from:
(1) Registration with the Commission;
(2) Certain sections of Part 1 of the Commission's rules
relating to financial regulations and books and records that apply
to foreign futures and options sold in the United States as set
forth in Part 30;
based upon substituted compliance by such persons with the applicable
statutes and relevant Exchange and other rules in effect in Spain.
This determination to permit substituted compliance is based on,
among other things, the Commission's finding that the regulatory scheme
governing the persons trading on the Exchange who would be exempted
hereunder provides:
(1) A system of qualification or licensing of firms and persons
who deal in transactions subject to regulation under Part 30 that
includes, for example, criteria and procedures for granting,
monitoring, suspending and revoking licenses, and provisions for
requiring and obtaining access to information about licensees;
(2) Financial requirements for licensees;
(3) A system for the protection of customer funds that applies
to all customers and which requires the separate accounting for such
funds, augmented by funds designed to compensate customers who have
suffered a loss as a result of fraud or insolvency or other failure
of an Exchange member;
(4) Recordkeeping and reporting requirements pertaining to
financial and trade information including, without limitation, order
tickets, trade confirmations, customer account statements,
customers' deposit records, and accounting records for customer and
proprietary trades;
(5) Sales practice standards for licensees which include, for
example, required disclosures to prospective customers and
prohibitions on (a) certain representations, (b) conflicts of
interest, and (c) improper trading activities;
(6) Procedures to audit for compliance with, and to redress
violations of, customer protection and sales practice requirements
including, without limitation, a surveillance program and the
existence of broad powers to conduct investigations and to impose
sanctions; and
(7) Mechanisms for sharing information between the Exchange and
the CNMV and the Commission on an ``as needed'' basis including,
without limitation, confirmation data, data necessary to trace
funds, position data, data on firms' standing to do business and
financial condition, and mechanisms for cooperating with the
Commission in inquiries, compliance matters, investigations and
enforcement proceedings.14
\14\ The Exchange and its regulator, CNMV, have provided
assurances to the Commission, subject to certain agreed upon
principles, regarding the availability of information relevant to
Part 30 on an ``as needed'' basis. See Letter dated October 1, 1993
from Philip McBride Johnson, Skadden, Arps, Slate, Meagher & Flom
(Skadden); and letter May 19, 1994 from Eudald Canadell, CNMV, to
Andrea M. Corcoran, CFTC (confirming that information may be shared
between the CFTC and the CNMV pursuant to the Memorandum of
Understanding on Mutual Assistance and Exchange of Information of
October 1992. See also letter dated January 31, 1995 from Philip
McBride Johnson, Skadden, Arps, Slate, Meagher & Flom to Jane C.
Kang, CFTC Division of Trading and Markets.
This Order does not provide an exemption from any provision of the
Act or regulations thereunder not specified herein, for example,
without limitation, the antifraud provision in Commission rule 30.9, 17
CFR 30.9, or the disclosure provisions of Commission rules 1.55, 30.6
and 33.7, 17 CFR 1.55, 30.6 and 33.7, including the requirements of
rule 1.55(f), 30.6(e) and 33.7(f).15 Moreover, the relief granted
is limited to brokerage activities undertaken on behalf of customers in
the United States with respect to transactions on or subject to the
rules of MEFF Renta Fija, and which U.S. customers may trade.
\15\ These rules essentially provide that delivery of a mandated
risk disclosure statement does not eliminate any obligation under
the Act to disclose all material information to existing or
prospective customers even if the information is not specifically
required by the applicable risk disclosure rule.
---------------------------------------------------------------------------
The relief does not extend to rules or regulations relating to
trading, directly or indirectly, on United States exchanges. For
example, such a firm trading in United States markets for its own
account would be subject to the Commission's large trader reporting
requirements. See, e.g., 17 CFR Part 18. Similarly, if such a firm were
carrying a position on a United States exchange on behalf of foreign
clients, it would be subject to the reporting requirements applicable
to foreign brokers. See, e.g., 17 CFR parts 17 and 21. The relief
herein does not apply to firms that solicit United States customers for
transactions on United States markets.
The eligibility of any firm to seek rule 30.10 relief under this
exemptive Order is subject to the following conditions:
(1) The regulatory or self-regulatory organization responsible
for monitoring the compliance of such firm with the regulatory
requirements described in the rule 30.10 petition must represent in
writing to the CFTC that: [[Page 30465]]
(a) Each firm for which relief is sought is registered, licensed
or authorized, as appropriate, and is otherwise in good standing
under the standards in place in Spain; such firm is engaged in
business with customers located in Spain as well as in the United
States; and, such firm would not be statutorily disqualified from
registration under section 8a(2) of the CEA, 7 U.S.C. 12(a)(2);
(b) It will monitor firms to which relief is granted for
compliance with the regulatory requirements for which substituted
compliance is accepted and will promptly notify the Commission or
NFA of any change in status of a firm which would affect its
continued eligibility for the exemption granted hereunder, including
the termination of its activities in the United States;
(c) All transactions on the Exchange with respect to customers
resident in the United States will be made on or subject to the
rules of the Exchange and the Commission will receive prompt notice
of all material changes to MEFF Renta Fija rules, the SMA and other
laws relevant to futures and options (e.g., Royal Decree 1814 and
Royal Decree 629);
(d) Customers resident in the United States will be provided no
less stringent regulatory protection than Spanish customers under
all relevant provisions of Spanish law; and
(e) It will cooperate with the Commission with respect to any
inquiries concerning any activity subject to regulation under the
Part 30 rules, including sharing the information specified in
Appendix A to the Part 30 rules on an ``as needed'' basis in
accordance with the agreed information sharing arrangement and will
use its best efforts to notify the Commission if it becomes aware of
any information which in its judgment affects the financial or
operational viability of a Spanish-domiciled firm doing business in
the United States under the exemption granted by this Order.
(2) Each firm seeking rule 30.10 relief hereunder must apply in
writing whereby it:
(a) Consents to jurisdiction in the United States under the Act
and files a valid and binding appointment of an agent in the United
States for service of process in accordance with the requirements
set forth in Commission rule 30.5, 17 CFR 30.5;
(b) Acknowledges that it can be required by the Exchange to
provide the Exchange immediate access to its books and records
related to transactions under Part 30 required to be maintained
under the applicable laws and Exchange rules in effect in Spain and
that the Exchange will cooperate in providing access to such books
and records to the Commission in accordance with the agreed upon
information sharing arrangement;
(c) Represents that no principal, and no employee who solicits
or accepts orders from United States customers, would be
disqualified from directly applying to do business in the United
States under section 8a(2) of the CEA, 7 USC 12a(2), and consents to
notify the Commission promptly of any change in that representation
based on a change in control as generally defined in Commission rule
3.32, 17 CFR 3.32;
(d) Consents that all futures or options transactions for
customers located in the United States will be undertaken from a
location in Spain (except as otherwise permitted by the Commission)
solely with respect to transactions on or subject to the rules of
MEFF Renta Fija, and which U.S. customers may trade;
(e)(1) If a Clearing Member of the Exchange which carries the
accounts of customers located in the United States: agrees to
maintain funds equivalent to the aggregate ``secured amount''
(described in Commission rule 1.3(rr), 17 CFR 1.3(rr)), for all
United States customers in a separate account as set forth in
Commission rule 30.7, 17 CFR 30.7, and to treat those funds in the
manner described by that rule;
(e)(2) If a Non-Clearing Member of the Exchange: agrees to
comply with relevant Spanish laws and Exchange rules prohibiting
them from accepting or otherwise handling customer funds;
(f) Agrees to provide customers with account statements on at
least a monthly basis;
(g) Discloses the identity of each subsidiary or affiliate
domiciled in the United States with a related business (e.g., banks
and broker/dealer affiliates) and provides a brief description of
such subsidiary's or affiliate's principal business in the United
States;
(h)(1) Consents to participate in any NFA arbitration program
which offers a procedure for resolving customer disputes on the
papers where such disputes involve representations or activities
with respect to transactions under Part 30, and consents to notify
customers resident in the United States of the availability of such
a program; provided, however, that the firm may require its
customers resident in the United States to execute the consent
attached hereto as Exhibit A concerning the exhaustion of certain
mediation procedures made available by the Exchange prior to
bringing an NFA arbitration proceeding; and provided further that
the firm must undertake to provide the customer with information
concerning how to commence such procedures pursuant to the consent
attached hereto as Exhibit A;
(h)(2) Provided, however, that until the Exchange adopts a
procedure for an ``on the papers'' hearing applicable to all
Exchange arbitrations, consents to notify such customers that if
they elect Exchange arbitration, they or their agent could be
required to appear personally at a hearing, and if the customer
elects NFA arbitration, consents to participate in such proceeding
even in circumstances where the dispute arises primarily out of
delivery, clearing, settlement or floor practices;
(i) Undertakes to comply with the applicable provisions of
Spanish law and Exchange and CNMV rules which form the basis upon
which this exemption from certain provisions of the Act is granted;
and
(j) Agrees to provide to any U.S. customers either the generic
risk disclosure statement approved by the Commission under rule
1.55(c), or the risk disclosure statements mandated by Commission
rules 30.6(a) [i.e., 1.55(a)] and 33.7, and applicable Commission
orders, as appropriate.16
\16\ See, e.g., CFTC Advisory No. 90-1 [1987-1990 Transfer
Binder] Comm. Fut. L. Rep. (CCH) para. 24,597 (disclosure statement
related to the deferred payment of option premiums).
Upon filing of the notice required under paragraph (1)(b) as to any
such firm, the rule 30.10 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 the Exchange and/or any applicable regulatory or self-
regulatory organization.
Any material changes or omissions in the facts and circumstances
pursuant to which this Order is granted might require the Commission to
reconsider its finding that the standards for issuance of an order
under Commission rules 30.3(a) and 30.10, including Appendix A of rule
30.10, have generally been satisfied.
Further, if experience demonstrates that the continued
effectiveness of this Order in general, or with respect to a particular
firm or product, would be contrary to public policy or the public
interest, or that the systems in place for the exchange of information
or other circumstances do not warrant continuation of the exemptive
relief granted herein, the Commission may condition, modify, suspend,
terminate, withhold as to a specific firm or product, or otherwise
restrict the exemptive relief granted in this Order, as appropriate, on
its own motion. If necessary, provisions will be made for servicing
existing client positions.
Terms and Conditions of MEFF Renta Fija Options
Option on the MIBOR'90 Futures
Underlying Asset: MIBOR'90 Futures Contract
Contract Size: 1 futures contract
Exercise Style: American
Traded Options: Options on futures with expiration on the four nearest
months of the quarterly cycle (March, June, September and December)
Last Trading Day: The last business day prior to the expiration date
Expiration Date: Third Wednesday of the underlying futures contract
month (same date and time as the underlying futures expiration date)
Quotation Method: Multiples of Ptas. 250
Tick Value: The minimum fluctuation of the premium is one basis point,
equal to Ptas. 250
Margining: Margin is calculated taking into account the overall futures
and options portfolio
Option on the 3-Year Government Bond Futures
Underlying Asset: 3-year Government Bond Futures
Contract [[Page 30466]]
Contract Size: 1 futures contract
Exercise Style: American
Traded Options: Options on futures with expiration on the two nearest
months of the quarterly cycle (March, June, September and December)
Last Trading Day: Expiration date
Expiration Date: First Wednesday of the underlying futures contract
month (two weeks prior to the underlying futures contract expiration
date)
Quotation Method: In percentage of nominal
Tick Value: The minimum fluctuation of the premiums is one basis point,
equal to Ptas. 1,000
Margining: Margin is calculated taking into account the overall futures
and options portfolio
Monthly Option on the 10-Year Government Bond Futures
Underlying Asset: 10-year Government Bond Futures Contract
Contract Size: 1 futures contract
Exercise Style: American
Traded Options: One spot month on the underlying nearby futures
contract
Last Trading Day: Expiration date
Expiration Date: First Wednesday of each month
Quotation Method: In percentage of nominal
Tick Value: The minimum fluctuation of the premium is one basis point,
equal to Ptas. 1,000
Margining: Margin is calculated taking into account the overall futures
and options portfolio
Quarterly Option on the 10-Year Government Bond Futures
Underlying Asset: 10-year Government Bond Futures Contract
Contract Size: 1 futures contract
Exercise Style: American
Traded Options: Options on futures with expiration on the two nearest
months of the quarterly cycle (March, June, September and December)
Last Trading Day: Expiration date
Expiration Date: First Wednesday of the underlying futures contract
month (two weeks prior to the underlying futures contract expiration
date)
Quotation Method: In percentage of nominal
Tick Value: The minimum fluctuation of the premium is one basis point,
equal to Ptas. 1,000
Margining: Margin is calculated taking into account the overall futures
and options portfolio
List of Subjects in 17 CFR Part 30
Commodity futures, Commodity options, Foreign futures and options.
Accordingly, 17 CFR part 30 is amended as set forth below:
PART 30--FOREIGN FUTURES AND FOREIGN OPTION TRANSACTIONS
1. The authority citation for part 30 continues to read as follows:
Authority: Secs. 2(a)(1)(A), 4, 4c, and 8a of the Commodity
Exchange Act, 7 U.S.C. 2, 6, 6c and 12a.
2. Appendix B to part 30 is amended by adding the following entry
alphabetically:
Appendix B--Option Contracts Permitted To Be Offered or Sold in the
U.S. Pursuant to Sec. 30.3(a)
----------------------------------------------------------------------------------------------------------------
Exchange Type of contract FR date and citation
----------------------------------------------------------------------------------------------------------------
* * * * * *
*
MEFF Renta Fija............. Options on the: Mibor'90, 3-Year and monthly June 9, 1995, 60
and quarterly 10-Year Spanish Government Bond FR. ________
futures contracts.
* * * * * *
*
----------------------------------------------------------------------------------------------------------------
3. Appendix C to part 30 is amended by adding the following entry
to read as follows:
Appendix C--Foreign Petitioners Granted Relief From the Application
of Certain of the Part 30 Rules Pursuant to Sec. 30.10
* * * * *
Firms designated by the MEFF Sociedad Rectora de Productos
Financieros Derivados de Renta Fija (``MEFF Renta Fija'').
FR date and citation: June 9, 1995, 60 FR ________.
* * * * *
Issued in Washington, D.C., on June 5, 1995.
Jean A. Webb,
Secretary to the Commission.
Note: The following Exhibit will not be published in the Code of
Federal Regulations.
Exhibit A--Form of Consent to Undertake Mediation Prior to NFA
Arbitration
In the event that a dispute arises between you [name of customer
resident in the United States] and [name of MEFF Renta Fija member
firm] with respect to transactions subject to Part 30 of the
Commodity Futures Trading Commission's rules, various forums may be
available for resolving the dispute, including courts of competent
jurisdiction in the United States and Spain and arbitration programs
made available both in the United States and Spain.
In the event you wish to initiate an arbitration proceeding
against this firm to resolve such dispute under the applicable rules
of the National Futures Association (``NFA'') in the United States,
you hereby consent that you will first commence mediation in
accordance with such procedures as may be made available by the MEFF
Sociedad Rectora de Productos Financieros Derivados de Renta Fija
(``MEFF Renta Fija'' or ``Exchange''), information on which is
provided to you herewith. The outcome of such MEFF Renta Fija
mediation is nonbinding. You may subsequently accept this
resolution, or you may proceed either to binding arbitration under
the rules of the MEFF Renta Fija or to binding arbitration in the
United States under the rules of NFA. If you accept the mediated
resolution or elect to proceed to arbitration, or to any other form
of binding resolution under the rules of the Exchange, you will be
precluded from subsequently initiating an arbitration proceeding at
NFA.
You may initiate an NFA arbitration proceeding upon receipt of
documentation from MEFF Renta Fija:
(1) Evidencing completion of the mediation process and reminding
you of your right of access to NFA's arbitration proceeding; or
(2) Representing that more than nine months have elapsed since
you commenced the mediation process and that such process is not yet
complete and reminding you of your right of access to NFA's
arbitration proceeding.
The documentation referred to above must be presented to NFA at
the time you initiate the NFA arbitration proceeding. NFA will
exercise its discretion not to accept your demand for arbitration
absent such documentation.
By signing this consent you are not waiving any other right to
any other legal remedies available under the law.
----------------------------------------------------------------------
Customer
----------------------------------------------------------------------
Date
[FR Doc. 95-14147 Filed 6-8-95; 8:45 am]
BILLING CODE 6351-01-P
