96-16979. Coffee, Sugar & Cocoa Exchange, Inc., Proposed Rule Amendments to Require that Membership Lessees Soliciting or Executing Customer Orders Affiliate with Member Firms  

  • [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
    
    
    

Document Information

Published:
07/03/1996
Department:
Commodity Futures Trading Commission
Entry Type:
Notice
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\
Document Number:
96-16979
Dates:
Comments must be received on or before August 2, 1996.
Pages:
34802-34802 (1 pages)
PDF File:
96-16979.pdf