[Federal Register Volume 61, Number 129 (Wednesday, July 3, 1996)]
[Notices]
[Page 34802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16979]
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COMMODITY FUTURES TRADING COMMISSION
Coffee, Sugar & Cocoa Exchange, Inc., Proposed Rule Amendments to
Require that Membership Lessees Soliciting or Executing Customer Orders
Affiliate with Member Firms
AGENCY: Commodity Futures Trading Commission.
ACTION: Notice of proposed rule amendments of the Coffee, Sugar & Cocoa
Exchange, Inc., to require that membership lessees soliciting or
executing customer orders affiliate with member firms.\1\
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SUMMARY: The Coffee, Sugar & Cocoa Exchange, Inc., (``CSC'' or
``Exchange'') has submitted proposed rule amendments and other
materials to require that lessees soliciting or executing customer
orders affiliate with member firms.2 Acting pursuant to the
authority delegated by Commission Regulation 140.96, the Division of
Trading and Markets has determined to publish the CSC proposal for
public comment. The Division believes that publication of the CSC
proposal is in the public interest and will assist the Commission in
considering the views of interested persons.
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\1\ Rule 1.47 of the Coffee, Sugar & Cocoa Exchange, Inc.,
permits a full or associate member to lease his membership to
another individual. Rule 1.47 states, among other things, that ``a
Full Membership so leased shall be utilized for the limited purpose
of trading in commodity contracts and an Associate Membership so
leased shall be utilized for the limited purpose of trading in
options on or subject to the Rules of the [Coffee, Sugar & Cocoa
Exchange, Inc.,] and in such other contracts as may be specified by
the Board from time to time.''
\2\ The CSC proposal includes amended and newly proposed
definitions and amendments to existing Rule 1.47.
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DATES: Comments must be received on or before August 2, 1996.
FOR FURTHER INFORMATION CONTACT: Clarence Sanders, Attorney, Division
of Trading and Markets, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street NW, Washington, DC 20581. Telephone:
(202) 418-5484.
SUPPLEMENTARY INFORMATION:
I. Description of Proposed Rule Amendments
By a letter dated April 18, 1996, the CSC submitted proposed rule
amendments pursuant to Section 5a(a)(12)(A) of the Commodity Exchange
Act (``Act'') and Commission Regulation 1.41(b). The proposed
amendments would require that lessees soliciting or executing customer
orders affiliate as employees or principals of member firms.3
Thus, the proposed affiliation requirement would prohibit a lessee from
soliciting or executing customer orders unless the lessee serves as an
employee or principal of a member firm.
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\3\ Under Exchange Rule 1.21, a partnership, corporation,
limited liability company, or other entity is eligible to apply for
member firm privileges. Applicants for member firm privileges must
meet certain qualifying criteria and are subject to approval by the
Board of the Exchange.
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The Exchange states that the purpose of the proposed affiliation
requirement is ``to [establish] a regulatory structure in which a
member firm is specifically responsible for the lessee's day to day
activities on the Exchange.'' The Exchange asserts that, as mandated by
the proposal, ``the [member] firm with which a lessee is affiliated is
in the best position to effectively supervise [the lessee].''
In further support of the proposal, the Exchange states that a
lessor typically does not employ or have any other relationship with
the individual to whom a membership is leased and, for that reason, is
not in a position to effectively oversee a lessee's trading activities
or practices. The Exchange also notes that a clearing member guarantor
of a lessee is not well situated to carry out supervisory
responsibilities over lessees because the guarantor is functionally
capable of monitoring a lessee's trading activity only after the
fact.4
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\4\ Under CSC Rule 1.14, a clearing member guarantor is
obligated to the Exchange and its members for the performance,
payment, and discharge of all contracts, obligations, and
liabilities of the guaranteed member.
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The Exchange states that it proposes to defer implementation of the
proposal ``in order to give the affected lessees and floor brokerage
firms sufficient time to make appropriate arrangements and to become
member firms.'' Thus, the Exchange proposes to implement the proposal
on September 20, 1996.
II. Request for Comments
The Commission requests comments on any aspect of the CSC's
proposed rule amendments that members of the public believe may raise
issues under the Act or Commission regulations. In particular, the
Commission requests comments regarding the proposal's competitive
effects, impact on supervisory oversight of lessees, and implementation
schedule.
Copies of the proposed rule amendments and related materials are
available for inspection at the Office of the Secretariat, Commodity
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street
NW, Washington, DC 20581. Copies also may be obtained through the
Office of the Secretariat at the above address or by telephoning (202)
418-5100. Some materials may be subject to confidential treatment
pursuant to 17 CFR 145.5 or 145.9.
Any person interested in submitting written data, views, or
arguments on the proposed rule amendments should send such comments to
Jean A. Webb, Secretary, Commodity Futures Trading Commission, Three
Lafayette Centre, 1155 21st Street NW, Washington, DC 20581, by the
specified date.
Issued in Washington, DC, on June 27, 1996.
Alan L. Seifert,
Deputy Director.
[FR Doc. 96-16979 Filed 7-2-96; 8:45 am]
BILLING CODE 6351-01-P