[Federal Register Volume 60, Number 237 (Monday, December 11, 1995)]
[Proposed Rules]
[Pages 63472-63476]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30046]



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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 30


Foreign Commodity Options

AGENCY: Commodity Futures Trading Commission.

ACTION: Proposed rule.

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SUMMARY: The Commodity Futures Trading Commission (Commission or CFTC) 
is proposing to amend rule 30.3 to eliminate the requirement that the 
CFTC authorize the offer and sale of a particular foreign commodity 
option before it can be offered or sold in the United States. This 
proposal reflects the Commission's assessment that the continued 
treatment of foreign commodity options differently from foreign futures 
(which do not require a specific authorization order) should be 
reevaluated.

DATES: Comments must be submitted on or before January 10, 1996.

ADDRESSES: Comments should be sent to the Secretariat, Commodity 
Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, 
N.W., Washington, D.C. 20581. Reference should be made to ``Rule 30.3--
Foreign commodity options.''

FOR FURTHER INFORMATION CONTACT: Jane C. Kang, Esq., or Robert H. 
Rosenfeld, Esq., Division of Trading and Markets, Commodity Futures 
Trading Commission, Three Lafayette Centre, 1155 21st Street, N.W., 
Washington, D.C. 20581; telephone (202) 418-5435.

SUPPLEMENTARY INFORMATION:

Background

    Commission rule 30.3(a) of the Commission's Part 30 rules governing 
the offer and sale of foreign futures and option transactions makes it 
unlawful for any person to engage in the domestic offer or sale of any 
foreign commodity option contract until the Commission, by order, 
authorizes the foreign option to be offered or sold in the United 
States.1 A Commission order is not required with respect to 
foreign futures. However, an option on a foreign stock-index futures 
contract will not be approved unless, among other things, the 
Commission's Office of the General Counsel has issued a no-action 
letter authorizing the offer and sale in the United States of the 
underlying foreign stock-index futures contract. In addition, debt 
obligations of a foreign country must be designated as an exempted 
security by the SEC under its rule 3a12-8, 17 CFR 240.3a12-8, before a 
futures contract based on such debt obligation (or an option on such a 
futures contract) may be offered or sold to a U.S. person.2

    \1\ The Commission previously made clear that subject to certain 
conditions applicable to transactions involving stock indexes and 
foreign government debt, a rule 30.3 order would not be necessary 
for transactions effected by U.S. futures commission merchants (FCM) 
on behalf of foreign customers. See 57 FR 36369 (August 13, 1992).
    \2\ Consistent with section 2(a)(1)(B) of the CEA, this proposed 
rulemaking would not be applicable to commodity options based on or 
involving a foreign futures contract based on a foreign stock index 
unless the foreign stock index futures contract has been approved 
for offer or sale in the United States through the issuance of a no-
action letter by the Commission's Office of the General Counsel. 
Further, this proposed rulemaking would not be applicable to 
commodity options based on a foreign government debt which has not 
been designated as an exempted security under SEC rule 3a12-8.
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    The Commission is proposing to eliminate the specific authorization 
requirement of rule 30.3 thereby permitting, subject to existing 
prohibitions with respect to stock index futures and options and 
foreign government debt futures and options products, the offer and 
sale of foreign commodity options in the same manner as currently 
applies to the offer and sale of foreign futures. The Commission would, 
however, continue to monitor the situation and take appropriate action 
should it determine that U.S. investors, or the Commission, are not 
able to obtain appropriate information related to the option 
transactions of a specific exchange or are otherwise being adversely 
affected by the rule change. Moreover, the proposal would not affect 
the existing regulatory requirements applicable to the manner in which 
appropriate products may be offered or sold to U.S. persons, e.g., 
registration of intermediaries, requirements related to sales practices 
(including appropriate disclosures), availability to the Commission of 
books and records and prohibitions on fraudulent activities.
    The Commission's determination to propose modifications to the 
current procedure of regulation 30.3(a) for approval of foreign option 
products for sale to U.S. persons is based on its experiences with the 
regulations governing options generally, and, in particular, with the 
initial regulations imposed on foreign options trading. This proposal 
reflects the Commission's assessment that the continued treatment of 
foreign commodity options differently from foreign futures (which do 
not require a specific authorization order) should be reevaluated.

History of Options Regulation

    The regulatory approach to commodity options in the United States 

[[Page 63473]]
    has been particularly cautious due to the history of abuses which had 
been associated with such transactions.3

    \3\ The Commission notes that the abuses which characterized the 
offer and sale of commodity options in the past generally involved 
sales practices, 46 FR 54500, 54503 (November 3, 1981), including 
sales activity with respect to alleged ``London options'' (which 
appeared to have been perpetrated exclusively by sales persons or 
organizations in the United States, and did not involve any improper 
activities on the part of foreign exchanges), see 42 FR 18246, 18249 
(April 5, 1977).
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    Unsatisfactory experiences with what essentially were unregulated 
sales of options on commodities in the early 1970's, and further abuses 
under interim regulations adopted in 1976 ultimately resulted in the 
Commission's suspension of the offer and sale of all commodity options 
as of June 1, 1978 and the codification of that suspension by Congress 
in the Commodity Exchange Act of 1978. See 46 FR 54500, 54502 (November 
3, 1981). The suspension codified by Congress permitted the Commission 
to introduce option trading, but only if the Commission could document 
to its Congressional oversight committee its ability to regulate 
successfully such transactions.4

    \4\ See section 4c(c) of the CEA, as amended by the 1978 Act. 
See 46 FR 33293, 33294 (June 29, 1981).
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    Mindful of this history, in proposing a pilot program for the offer 
and sale of options in 1981, the Commission expressly stated that it 
was: 5

    \5\ See 46 FR 33293, 33294 (June 29, 1981).

    Cognizant of the need to exercise a strong degree of control 
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over all aspects of commodity option trading.

Thus, the final domestic exchange-traded commodity option rules adopted 
in 1981 authorized the introduction of options under a limited pilot 
program which permitted only one option contract per exchange, did not 
permit either foreign options or options on physical commodities to be 
offered, and placed significantly greater self-regulatory 
responsibilities on boards of trade than was then required for futures 
trading, particularly with respect to the protection of the public from 
sales practice abuses.6

    \6\ See 46 FR 54500, 54502 (November 3, 1981).
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Evolution of Domestic Option Regulations

    Although starting narrowly and cautiously, the Commission's options 
regulations have evolved consistently with the acquisition of an 
operational history under those regulations. Thus, in December 1982 the 
Commission expanded the pilot program to permit each exchange to trade 
one option on a futures contract and one option contract on a non-
agricultural physical commodity.7 The Commission continued to 
expand the pilot program in a controlled and orderly manner so that 
both the Commission and the exchanges would obtain greater experience 
with the trading of options,8 subsequently expanding the pilot 
program to permit more option contracts per exchange,9 to include 
option contracts on futures contracts on agricultural 
commodities,10 and ultimately, to eliminate the pilot status of 
the option regulations.11

    \7\ 47 FR 56996 (December 22, 1982).
    \8\ Id. at 56997.
    \9\ See, e.g., 49 FR 33641 (August 24, 1984) (permitting each 
exchange to trade five contracts); 50 FR 45811 (November 4, 1985) 
(increasing from five to eight the number of contracts permitted per 
exchange).
    \10\ 49 FR 2752 (January 23, 1984). The pilot program was 
established after the statutory bar to trading options on domestic 
agricultural commodities was repealed by section 206 of the Futures 
Trading Act of 1982, Pub. L. 97-444, 96 Stat. 2294, 2301 (1983). The 
Commission limited the pilot program to options on futures contracts 
on agricultural products. The Commission noted that industry 
commenters generally favored such a restriction and the Commission's 
cautious approach. See 49 FR at 2754.
    \11\ See 51 FR 17464 (May 13, 1986) (termination of pilot status 
for non-agricultural options); 53 FR 777 (January 9, 1987) 
(termination of pilot status for options on non-agricultural 
physical commodities and on agricultural futures contracts).
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    The Commission's incremental expansion of the domestic exchange-
traded options program was validated by Congress in 1986 when Congress 
amended section 4c of the CEA to make permanent the program of 
exchange-traded commodity options. As stated in the House Report on the 
1986 legislation: 12

    \12\ See H. Rep. 99-624, 99th Cong., 2d Sess. 15 (1986).

    The Committee's amendment coincides with a recent decision by 
the Commission to terminate the pilot status of the program for 
trading options on futures contracts other than those on domestic 
agricultural commodities and make the trading of such options 
permanent. * * *
    The Committee believes the Commission has practiced good 
judgment in its regulation and oversight of both agricultural and 
the nonagricultural options programs. Furthermore, the Committee is 
satisfied that the overall experience with both of these pilot 
programs indicates that few regulatory problems have arisen, and 
that the exchanges have discharged their responsibilities 
adequately. Additionally, the Commission has detected no adverse 
effects on the underlying futures markets resulting from such option 
trading.

    Moreover, based on its administration of the option pilot program 
for more than ten years, the Commission has previously determined to 
eliminate certain provisions that were originally part of its options 
designation requirements for which there were not comparable futures 
regulation, such as:

    --Rule 33.4(b)(9) which required a board of trade applying for 
designation as a contract market with respect to commodity option 
transactions to adopt special rules governing the handling by its 
member FCMs of discretionary accounts in option transactions; 
13

    \13\ 58 FR 30701 (May 27, 1993). The Commission based this rule 
change on its belief that compliance with the supervisory 
requirements of rule 166.3, the requirements of rule 166.2 
concerning authorization to trade, other Commission rules of general 
applicability, and SRO rules such as NFA compliance rule 2-8, should 
be adequate to address the regulatory concerns applicable to both 
option and futures customer discretionary accounts. See 58 FR 30701, 
30702.
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    --rules which require boards of trade designated as contract 
markets for options to adopt rules requiring FCMs that engage in the 
offer or sale of commodity options regulated under Part 33 to send 
copies of customer complaints and their resolutions and copies of 
all promotional materials to the members' designated self-regulatory 
organization (DSRO); 14 and

    \14\ See 57 FR 58976, 58977 (December 14, 1992) (such records 
must however be maintained by the FCM for review as part of the 
routine audit process); see generally 56 FR 43694 (September 4, 
1991).
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    --rules which required a specified volume of trading in the 
underlying futures contract prior to designation; established a 
delisting criterion for the trading of low-volume contracts; and 
required exchanges to provide a comprehensive list of occupational 
categories of commercial users of the commodity underlying the 
option.15

    \15\ 56 FR 43694 (September 4, 1991). The Commission also 
revised rule 33.4(d) which had required exchanges to justify 
expiration dates of less than 10 days before first notice day or 
last trading day of the future, whichever comes first.
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History of Foreign Options Rules.

    As noted above, the Commission's initial pilot programs did not 
include foreign options.16 Thus the ban contained in section 4c of 
the CEA remained in effect with respect to foreign options. A program 
to authorize the offer and sale of foreign exchange-traded commodity 
options was not implemented until 1987 with the general adoption of the 
part 30 rules governing foreign futures and option transactions 
generally.17 The Part 30 rules, among other things, provided a 
mechanism for lifting the ban with respect to foreign exchange-traded 
options. Under rule 30.3(a), foreign exchange-traded commodity options 
are prohibited from being offered or sold in the United States unless 
the Commission issues a product-specific order. The part 30 rules did 
not similarly require a product-specific order for foreign futures 
transactions.

    \16\ See 46 FR 33293, 33294 (June 29, 1981).
    \17\ 52 FR 28980 (August 5, 1987). 
    
[[Page 63474]]

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    As with the Commission's pilot program for domestic exchange-traded 
options, the program for foreign exchange-traded commodity options also 
has proceeded cautiously. Thus, in issuing the order for any foreign 
market, the Commission has considered: (1) The availability of certain 
information relevant to preventing abuses including, but not limited to 
trade confirmation data; (2) the arrangements in place for assuring 
that sales practice abuses do not occur; (3) the arrangements for U.S. 
customers to redress grievances; and (4) the regulatory environment in 
which such options are traded.18

    \18\ See, e.g., 53 FR 28840 (July 29, 1988).
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    In particular, the Commission placed great stress initially on its 
ability to obtain information from the foreign exchange with respect to 
transactions entered into on that exchange on behalf of U.S. 
customers.19 As stated in the final rules: 20

    \19\ See 52 FR 28980, 28988 (August 5, 1987).
    \20\ Id.

    In order to ensure that foreign commodity exchanges are both 
willing and able to share appropriate information with the 
Commission * * * the Commission has determined to make the issuance 
of a Commission order a prerequisite to the lawful offer and sale of 
such products.

Reevaluation of foreign options rules.

    Since 1987 foreign option sales to U.S. customers have been 
permitted under the Commission's part 30 rules. Such sales have 
occurred without the type of sales abuses that historically had been 
associated with commodity option activities. Contributing to this 
success has been the requirement that foreign options be sold to U.S. 
customers by futures commission merchants (which ensures among other 
things the adequacy of firm capital, fitness of personnel and proper 
supervision of sales practices); the Commission's Part 30 rules, which 
seek to ensure that foreign firms directly soliciting U.S. customers 
for foreign products are otherwise regulated as to their sales 
practices; 21 and the undertaking by the National Futures 
Association (NFA) to audit the foreign options sales practices of 
domestic firms marketing foreign options to domestic customers.22 
In particular, under the current regulatory scheme, firms engaged in 
the offer or sale of foreign commodity options (and futures) to U.S. 
customers must either be a Commission registrant or a foreign firm 
which has qualified to sell foreign products in the United States under 
the Commission's Part 30 rules based on substituted compliance with a 
foreign jurisdiction's licensing and fitness requirements and subject 
to certain other conditions to assure the availability of the firms' 
records and its submission to Commission jurisdiction under the CEA and 
U.S. law otherwise.

    \21\ In reviewing the foreign regulatory program for purposes of 
rule 30.10, the Commission's staff considers the sales practice 
compliance review program in effect in the foreign jurisdiction.
    \22\ Part 33 requires exchanges as a condition of designation as 
a contract market to have specific options sales practice compliance 
responsibilities. NFA and the futures exchanges participate in a 
Joint Audit Plan (Plan) to reduce the duplication of audit and 
financial surveillance work which otherwise could occur with respect 
to FCMs which are members of more than one exchange. The plan 
assigns primary audit and financial surveillance responsibility for 
each FCM, which is a member of more than one of the SROs, to one of 
the Plan participants. The SRO which has the primary responsibility 
is known as that FCM's DSRO. NFA is the DSRO for all FCMs which are 
not members of any commodity exchange and therefore, do not have an 
exchange SRO and, in some cases, NFA by agreement is the DSRO for 
certain exchange member firms. NFA also is the DSRO responsible for 
surveillance over the financial reporting and recordkeeping by all 
member CPOs, and independent introducing brokers (IBs), as well as 
guaranteed IBs whose guaranteeing FCMs have NFA as the DSRO. NFA 
also is charged with auditing for sales practice compliance all 
member IBs, CTAs and CPOs, and branch offices of FCMs for which NFA 
is DSRO, as well as all futures sales practices compliance not 
contracted to another SRO.
    To date, NFA has undertaken, in conjunction with specific 
Commission orders under rule 30.3(a), to conduct sales practice 
compliance auditing of registrants marketing particular foreign 
commodity options under relevant arrangements with such firms' DSRO. 
Therefore, any revisions to Commission rule 30.3 would be premised 
on the existence of an audit program to assure general sales 
practice compliance for all foreign commodity option transactions. 
See also n. 21.
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    In the case of NFA, NFA audits generally include the review and 
analysis of a member firm's trading records, sales materials and 
practices (sales practices compliance audits), and for FCMs and 
independent IBs, accounting procedures, financial statements and 
records (financial audits). NFA's audit programs are designed so that 
the auditors must perform a certain amount of work at the member firm's 
office, testing records and resolving any discrepancies. While all NFA 
members are subject to audit, decisions concerning whether to audit a 
particular firm are based on a number of factors, including NFA's 
review of financial statements, monitoring of media advertising, 
receipt of customer complaints, knowledge of the past history of the 
firm and its principals, the time elapsed since the previous NFA audit, 
potential effects of market movements and referrals outside of NFA.
    NFA compliance audits have two major objectives: to determine 
whether the firm is maintaining records in accordance with NFA rules 
and applicable Commission regulations, and to ascertain that the firm 
is being operated in a professional manner and that customers are 
protected against unscrupulous activities, including fraudulent or 
high-pressure sales practices. The compliance program specifically 
examines the firm's practices in soliciting accounts and audits could 
review, among other things: records of customers' orders; customer 
confirmations and other account statements; records regarding handling 
of discretionary accounts; disclosure documents, advertising and other 
promotional material; records of customer complaints; and records 
relative to the internal supervision of account executives, order 
handling or sales personnel.23

    \23\ See Commission rule 33.4(c); see also n. 22.
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    The Commission believes that its experience since 1987 with foreign 
options justifies a reexamination of the necessity of requiring a 
specific option authorization order for each options contract offered 
and sold in the United States, that is, the continuing need for 
differential treatment of the offer or sale of foreign futures and 
foreign options in the United States. Just as the Commission's domestic 
exchange-traded option program has evolved on the basis of accumulated 
operational experience, the Commission believes that a similar measured 
evolution, based on experience, is warranted with respect to foreign 
commodity options.
    However, as noted above, the Commission believes that its existing 
regulatory scheme governing domestic registered firms which deal 
directly with the public in conjunction with the sales practice program 
of the NFA--all subject to Commission oversight--should provide 
adequate sales practice protections for customers who would engage in 
foreign options transactions through registered FCMs. In this 
connection, prior to adopting any final rules in this regard, the 
Commission would need to be assured that arrangements exist through NFA 
or otherwise to ensure that sales practice compliance audits of 
registrants offering foreign commodity options will be undertaken, 
thereby ensuring complete sales practice compliance audit coverage of 
firms (which heretofore has been mandated on a product-specific basis 
under rule 30.3 orders).
    Similarly, the Commission's rule 30.10 orders permitting foreign 
firms to directly solicit U.S. persons for foreign products address 
options and futures sales practice concerns. In addition, the 
Commission notes that existing 30.10 orders have been accompanied by 
information-sharing arrangements 

[[Page 63475]]
which assure Commission access to relevant information of the type 
which previously may not have been available.24 The Commission 
further recognizes that its ability to obtain information to confirm 
the existence of transactions executed on foreign exchanges 25 has 
been materially enhanced by the numerous information-sharing memoranda 
of understanding and cooperative arrangements that have been entered 
with foreign jurisdictions.\26\

    \24\ Significantly, to date, the Commission has not had occasion 
to request any information under any information sharing arrangement 
in connection with the approval of a particular exchange foreign 
option product.
    \25\ In explaining its decision to suspend the offer and sale of 
foreign commodity options in the United States, the Commission noted 
in 1977, among other things, that:
    The Commission's investigators and auditors have also 
encountered great difficulty in their attempts to verify the details 
of option transactions purportedly effected for Americans on foreign 
exchanges.
    See 43 FR 16153, 16155 (April 17, 1977).
    \26\ For example, such regulatory and enforcement MOUs and 
cooperative arrangements have been entered into with authorities in 
Australia, Argentina, Brazil, Canada, France, Hong Kong, Italy, 
Japan, Mexico, the Netherlands, Singapore, Spain, Taiwan, and the 
United Kingdom.
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    Nor would elimination of the authorization requirement negatively 
affect the access of U.S. customers to existing customer complaint 
procedures, either under existing rule 30.10 orders for customers 
directly solicited by foreign firms or under NFA's arbitration rules 
governing disputes with a foreign party.
    Customers solicited by foreign firms operating under a rule 30.10 
order will, pursuant to the express terms of such orders, have access 
to arbitration procedures both abroad and through NFA. Customers 
transacting through a domestic firm will have the option of electing 
NFA arbitration procedures. NFA rules governing arbitration of disputes 
involving foreign parties provide that disputes involving a foreign 
party may, in the discretion of NFA, be arbitrated if the parties agree 
to such arbitration (see NFA foreign arbitration rule sec. 2(a)(1)). 
Demands for arbitration will be rejected, however, if the claim arises 
primarily out of delivery, clearance, settlement or floor practices of 
a foreign exchange unless the foreign jurisdiction has no program for 
the resolution of disputes, in which case NFA will hear such claims. 
The rule 30.10 order permits the 30.10 firm to require a customer to 
consent to use a foreign regulator's non-binding mediation or 
conciliation service prior to initiating an NFA arbitration case. (See 
NFA Arbitration Policy Statement (March 1, 1989)).
    Thus, whether solicited by Commission registrants or foreign firms 
operating under rule 30.10, the Commission believes that the systems in 
place to address sales practice abuses and information sharing warrant 
reexamination of existing procedures.
    Finally, the Commission notes that FCMs which are not members of 
foreign exchanges should assure themselves that there are no statutory 
or regulatory impediments on their ability to obtain information from 
foreign exchange-members firms necessary to enable such FCMs to comply 
with the CEA and regulations thereunder relative to confirming the 
execution of foreign option transactions.
    In conclusion, the Commission believes that the differential 
treatment of foreign options no longer is justified. Indeed, to the 
extent that such differential treatment continues under circumstances 
when such treatment is not warranted based on existing economic and/or 
regulatory concerns, it risks conveying to traders the incorrect 
impression that the Commission can provide a greater level of 
protection with respect to foreign options than with respect to foreign 
futures. Moreover, as domestic exchanges increasingly seek to link 
their exchanges electronically with other exchanges worldwide, the 
presence of an authorization process for commodity options raises, 
under the current circumstances, an unnecessary obstacle that could 
competitively disadvantage domestic exchanges.

Proposal

    The Commission is therefore proposing to eliminate rule 30.3's 
requirement that no foreign option may be offered or sold in the United 
States until the Commission, by order, authorizes such foreign 
commodity option to be offered or sold in the United States.
    The Commission notes that the proposed elimination of the specific 
authorization requirement in rule 30.3(a) will not affect the existing 
product restrictions applicable to options on futures contracts based 
on stock index products (i.e., the underlying stock index futures must 
be the subject of a no-action letter issued by the CFTC's Office of the 
General Counsel) and foreign government debt (i.e., the debt product 
must be designated by the SEC as an exempted security under SEC rule 
13a-8) contained in section 2(a)(1)(B)(v) of the CEA.
    Accordingly, the Commission invites comment from interested parties 
on its proposal. Moreover, the Commission specifically invites the 
contract markets to indicate any other areas in which the designation 
requirements for options and futures generally could be further 
harmonized.

Other Matters

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
requires that agencies, in proposing rules, consider the impact of 
those rules on small businesses. The Commission has previously 
determined that FCMs should be excluded from the definition of ``small 
entity'' based upon the fiduciary nature of the FCM/customer 
relationships as well as the fact that FCMs must meet minimum financial 
requirements. 47 FR 18618, 18619 (April 30, 1982). The Commission 
similarly determined that CPOs are not small entities for purposes of 
the RFA. 47 FR 18618, 18620 (April 30, 1982). With respect to CTAs and 
IBs, the Commission has stated that it would evaluate within the 
context of a particular rule proposal whether all or some affected CTAs 
would be considered to be small entities and, if so, the economic 
impact on them of any rule. 47 FR 18618, 18620 (April 30, 1982) (CTAs); 
48 FR 35248, 35276 (August 3, 1983) (IBs).
    The proposed amendment of rule 30.3 is intended to facilitate the 
ability of Commission registrants or exempted firms to provide 
customers with access to desired products by eliminating a current 
product-by-product authorization requirement, thus providing easier 
access to a greater number of persons.
    Accordingly, the Chairman, on behalf of the Commission, hereby 
certifies, pursuant to 5 U.S.C. 605(b), that the proposed rule will not 
have a significant economic impact on a substantial number of small 
entities.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1980 (Act), 44 U.S.C. 3501 et seq., 
imposes certain requirements on federal agencies (including the 
Commission) in connection with their conducting or sponsoring any 
collection of information as defined by the Act. The Commission has 
determined that the proposed amendment does not have any paperwork 
burden.
    Persons wishing to comment on the Commission's determination on the 
paperwork burden concerning this proposed rule should contact Jeff 
Hill, 

[[Page 63476]]
Office of Management and Budget, room 3228, NEOB, Washington, D.C. 
20503, (202) 395-7340. Copies of the information collection submission 
to OMB are available from Joe Mink, CFTC Clearance Officer, Three 
Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581; 
telephone (202) 418-5170.

List of Subjects in 17 CFR Part 30

    Commodity futures.

    In consideration of the foregoing, and pursuant to the authority 
contained in the Commodity Exchange Act and, in particular, sections 
2(a)(1)(A), 4, 4c and 8a of the Commodity Exchange Act, 7 U.S.C. 2, 6, 
6c and 12a, the Commission hereby proposes to amend part 30 of chapter 
I of title 17 of the Code of Federal Regulations as follows:

PART 30--FOREIGN FUTURES AND FOREIGN OPTIONS 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. Section 30.3 is proposed to be amended by revising paragraph (a) 
to read as follows:


Sec. 30.3  Prohibited transactions.

    (a) It shall be unlawful for any person to engage in the offer and 
sale of any foreign futures contract or foreign options transaction for 
or on behalf of a foreign futures or foreign options customer, except 
in accordance with the provisions of this part: Provided, that, with 
the exception of the disclosure and antifraud provisions set forth in 
Secs. 30.6 and 30.9 of this part, the provisions of this part shall not 
apply to transactions executed on a foreign board of trade, and carried 
for or on behalf of a customer at a designated contract market, subject 
to an agreement with and rules of a contract market which permit 
positions in a commodity interest which have been established on one 
market to be liquidated on another market.
* * * * *
    Issued in Washington, D.C. on December 5, 1995 by the 
Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 95-30046 Filed 12-8-95; 8:45 am]
BILLING CODE 6351-01-P