[Federal Register Volume 59, Number 83 (Monday, May 2, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10267]


[[Page Unknown]]

[Federal Register: May 2, 1994]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 30

 

Foreign Futures and Option Transactions

AGENCY: Commodity Futures Trading Commission.

ACTION: Order amending part 30 order.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is amending condition (2)(f) of the part 30 Order issued on 
February 17, 1993 to the Tokyo Grain Exchange (the ``Exchange'' or 
``TGE'') to provide that TGE member firms granted relief under rule 
30.10 may require its customers resident in the United States who, in 
connection with disputes arising under transactions subject to part 30, 
elect arbitration at the National Futures Association (``NFA'') to 
exhaust certain mediation procedures made available by the TGE prior to 
initiating such arbitration proceeding.

EFFECTIVE DATE: May 2, 1994.

FOR FURTHER INFORMATION CONTACT: Jane C. Kang, Esq., or Francey L. 
Youngberg, Esq., Division of Trading and Markets, Commodity Futures 
Trading Commission, 2033 K Street NW., Washington, DC 20581; Telephone: 
(202) 254-8955.

SUPPLEMENTARY INFORMATION: On February 17, 1993, the Commission issued 
an Order under rules 30.3(a) and 30.10:\1\
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    \1\58 FR 10953 (February 23, 1993).
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    (1) Authorizing certain option contracts traded on the Exchange to 
be offered or sold to persons located in the United States; and
    (2) Granting an exemption to designated members of the Exchange 
from the application of certain of the foreign futures and option rules 
based on substituted compliance with certain comparable regulatory and 
self-regulatory requirements of a foreign regulatory authority.
    Among other conditions, the Order required that members of the TGE 
seeking rule 30.10 relief consent to the following:

    (f) [the Firm] [c]onsents 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 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 * * *. 58 FR 10956.

    By letter dated March 31, 1994, the Exchange through its counsel, 
requested that the Commission amend the Order to accommodate mediation 
procedures available at the Exchange.\2\ In particular, it has 
requested that customers resident in the United States who elect to 
arbitrate a dispute involving transactions subject to part 30 at NFA be 
required to exhaust certain mediation procedures made available by the 
Exchange prior to initiating such NFA arbitration proceeding.
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    \2\See letter dated March 1, 1994 from John V. Rainbolt, counsel 
for the Exchange to Jean A. Webb, Commission.
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    Upon consideration of the matter, the CFTC is amending condition 
2(f) of the Order issued on February 17, 1993 as follows (new language 
is underlined) and approving the form of consent set forth below as 
Exhibit A:\3\
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    \3\The requirement for U.S. customers to first exhaust mediation 
procedures before proceeding to NFA arbitration is contained in 
other part 30 orders. For example, a part 30 order issued by the 
Commission to the Securities and Investments Board (``SIB'') on May 
15, 1989 allows firms to require U.S. customers to first exhaust 
certain mediation and conciliation procedures made available by the 
SIB prior to bringing an NFA arbitration proceeding. 54 FR 21599, 
21601 (May 19, 1989). See also part 30 orders issued on the same day 
to the Association of Futures Brokers and Dealers, 54 FR 21604, The 
Securities Association, 54 FR 21609 and the Investment Management 
Regulatory Organization Limited, 54 FR 21614.

    (f) [the Firm] [c]onsents 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 TGE 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 and documentation of the commencement of 
such procedures pursuant to the consent attached hereto as Exhibit 
A; 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 * * *.''

Exhibit A--Form of Consent

    In the event that a dispute arises between you [name of customer 
resident in the United States] and [name of TGE 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 Japan and arbitration programs made available both in the 
United States and Japan. 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 Tokyo Grain Exchange (``TGE''), information on which is provided 
to you herewith. The outcome of such TGE mediation is nonbinding. You 
may subsequently accept this resolution, or you may proceed either to 
binding arbitration under the rules of the TGE 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 the Tokyo Grain Exchange:
    (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.

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Customer

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Date

    In all other respects, the terms and conditions of the Commission's 
part 30 Order issued to the TGE on February 17, 1993 remain unchanged.

List of Subjects in 17 CFR Part 30

    Commodity futures, Commodity options, Foreign transactions.

    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 C to Part 30 is amended by revising the entry ``Firms 
Designated by the Tokyo Grain Exchange'' to read as follows:

Appendix C to Part 30

* * * * *
    Firms designated by the Tokyo Grain Exchange.
    FR date and citation: Feb. 23, 1993, 58 FR 10957; May 2, 1994.

    Issued in Washington, DC, on April 22, 1994.
Lynn K. Gilbert,
Deputy Secretary of the Commission.
[FR Doc. 94-10267 Filed 4-29-94; 8:45 am]
BILLING CODE 6351-01-P