[Federal Register Volume 65, Number 197 (Wednesday, October 11, 2000)]
[Rules and Regulations]
[Pages 60560-60564]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-26069]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 30


Foreign Futures and Options Transactions

AGENCY: Commodity Futures Trading Commission.

ACTION: Order.

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SUMMARY: The Commodity Futures Trading Commission (``Commission'' or 
``CFTC'') is amending the orders issued pursuant to Rule 30.10 to the 
New Zealand Futures and Options Exchange, the Montreal Exchange, the 
Sydney Futures Exchange, the U.K. Securities and Futures Authority, the 
U.K. Investment Management Regulatory Organisation Limited, and the 
Singapore Exchange Derivatives Trading Limited. The amendment reflects 
the Commission's revised interpretation of the Rule 30.7 foreign 
futures or foreign options secured amount requirement (``secured amount 
requirement'') as it applies to both futures commission merchants 
(``FCMs'') and certain foreign firms exempt from such registration. 
Specifically, the Commission has determined to revise its 
interpretation of Rule 30.7 to clarify the obligations of an FCM or a 
firm exempt from FCM registration in accordance with Rule 30.10 
concerning the treatment of funds of foreign futures or foreign options 
customers under Rule 30.7. The Commission's revised interpretation of 
the secured amount requirement is set out in a revised appendix issued 
concurrently with this release and published elsewhere in today's 
Federal Register.

EFFECTIVE DATE: October 11, 2000.

FOR FURTHER INFORMATION CONTACT: Lawrence B. Patent, Associate Chief 
Counsel, or Andrew V. Chapin, Staff Attorney, Division of Trading and 
Markets, Commodity Futures Trading Commisison, 1155 21st Street, NW, 
Washington, DC 20581. Telephone: (202) 418-5430.

SUPPLEMENTARY INFORMATION: The Commission has issued the following 
Order:

Order Amending Prior Orders Issued Pursuant to Rule 30.10 to the 
New Zealand Futures and Options Exchange, the Montreal Exchange, 
the Sydney Futures Exchange, the U.K. Securities and Futures 
Authority, the U.K. Investment Management Regulatory Organisation 
Limited, and the Singapore Exchange Derivatives Trading Limited

I. Background

    Part 30 of the Commission's rules sets forth rules governing 
foreign futures \1\ and foreign option \2\ transactions. Under Rule 
30.10, the Commission may exempt a foreign firm acting in the capacity 
of a futures commission merchant (``FCM'') from registration under the 
Commodity Exchange Act (``Act'') and compliance with certain Commission 
rules based upon the firm's compliance with comparable regulatory 
requirements imposed by the firm's home-country regulator or self-
regulatory organization (``SRO'').\3\ Once the Commission determines 
that the foreign jurisdiction's regulatory structure offers comparable 
regulatory oversight, the Commission may issue an Order granting 
general relief subject to certain conditions.\4\ Firms seeking 
confirmation of relief (referred to herein as ``Rule 30.10 firms'') 
must make certain representations set forth in the Rule 30.10 Order 
issued to the regulator or SRO from the firm's home country.\5\
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    \1\ ``Foreign futures'' as defined in Part 30 means ``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.'' Rule 30.1(a). Commission rules referred to 
herein are found at 17 CFR Ch. I (2000).
    \2\ ``Foreign option'' as defined in Part 30 means ``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 or to be made on or subject 
to the rules of any foreign board of trade.'' Rule 30.1(b).
    \3\ The specific elements examined by the Commission in 
evaluating whether the particular foreign regulatory program 
provides a basis for issuing an order pursuant to Rule 30.10 are set 
forth in Appendix A to Part 30. See 52 FR 28990, 29001 (August 5, 
1987).
    \4\ These conditions require the regulator or SRO responsible 
for monitoring the compliance of the firm with the regulatory 
requirements described in the Rule 30.10 petition to make certain 
representations regarding the fitness of each firm seeking to 
receive confirmation of Rule 30.10 relief, the protections to be 
afforded to U.S. Customers, and the exchange of information with the 
Commission. See 62 FR 47792, 47793, n.7 (September 11, 1997).
    \5\ For a list of representations typically required of each 
Rule 30.10 firm, see 62 FR 47792, 47793, n.8.
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    In certain cases, where a foreign regulator or SRO has requested 
that firms subject to its jurisdiction to be granted broader relief to 
engage in transaction on exchanges other than in its home jurisdiction 
(referred to herein as ``expanded relief''), the relief has been 
granted where the relevant authority has represented that it will 
monitor its firms for compliance with the terms of the order in 
connection with such offshore transactions.\6\ Although Rule 30.10 
orders generally exempt foreign intermediaries from compliance with the 
secured amount requirement under Rule 30.7, firms seeking confirmation 
of the expanded relief must represent that, with respect to 
transactions entered into on behalf of U.S. customers on any non-U.S. 
exchange located outside their home country, they will treat U.S. 
customer funds in a manner consistent with the provisions of Rule 30.7.
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    \6\ The Commission has issued orders granting expanded relief to 
the U.K. Investment Management Regulatory Organisation (``IMRO'') 62 
FR 10449 (March 7, 1997), the U.K. Securities and Futures 
Association (``SFA'') 62 FR 10447 (March 7, 1997, New Zealand 
Futures and Options Exchange (``NZFOE''), 61 FR 64985 (December 10, 
1996), the Montreal Exchange, 62 FR 8875 (February 27, 1997) and the 
Sydney Futures Exchange (``SFE''), 62 FR 10445 (March 7, 1997). In 
addition, the Commission has authorized members of the Singapore 
International Monetary Exchange, now known as the Singapore Exchange 
Derivatives Trading Limited (``SGX-DT''), to solicit and accept 
orders from U.S. customers for otherwise permitted transactions on 
Eurex Deutschland, 64 FR 50248 (September 16, 1999). Although 
applicants for Rule 30.10 orders generally have obtained relief from 
transactions entered into from within their home country before 
seeking expanded relief applicable to transactions entered into on 
an exchange located outside their borders, e.g., IMRO, the 
Commission has combined the two forms of relief into one single 
order, e.g.,  NZFOE.
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    The orders granting expanded relief require Rule 30.10 firms to 
either set aside funds constituting the secured amount requirement in a 
separate account: (1) As set forth in the relevant order for expanded 
relief (see below), (2) as set forth in Rule 30.7 (treating those funds 
in the manner prescribed by that rule), or (3) in compliance with 
either of the above procedures, with the amount required to be 
segregated under local law to be substituted for the secured amount. 
The alternative secured amount requirement described within each order 
for expanded relief states, in relevant part:

    The separate account or accounts referred to [herein] may be 
deemed a good secured amount depository only if the [firm] obtains 
and retains in its files for the period required by applicable law 
and [exchange or SRO] rules, a written acknowledgment from such 
separate account depository that:

[[Page 60561]]

     It was informed that such money, securities or property 
are held for or on behalf of customers of the [firm]; and
     It will ensure that such money, securities or property 
will be held and treated in accordance with the provisions of this 
paragraph; and, provided further, that the [firm] assures itself 
that such separate account depository will not pass on such money, 
securities or property to any other depository unless the [firm] has 
assured itself that all such other separate account depositories 
will treat such funds in a manner consistent with the procedures 
described [herein]. (emphasis added)

    In other words, the Commission required each Rule 30.10 firm with 
expanded relief to perform an inquiry before customer funds were sent 
to another intermediary, and to take appropriate action (i.e., set 
aside funds in a ``mirror'' account) in the event that it became aware 
of facts leading it to conclude that U.S. customer funds were not being 
handled consistent with this requirement by any intermediary or 
exchange clearing organization beyond the initial depository. The 
Commission further stated that ``[the secured amount] requirement [set 
forth herein] is intended to ensure that funds provided by U.S. 
customers for foreign futures and options transactions, whether held at 
a U.S. FCM under Rule 30.7(c) or a firm exempted from registration as 
an FCM under CFTC Rule 30.10, will receive equivalent protection at all 
intermediaries and exchange clearing organizations.'' \7\
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    \7\ For the most recent order, see 64 FR 50248, 50251, n.19 
(SGX-DT).
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II. Amendment

    Upon further analysis and reconsideration of this matter, the 
Commission has determined to revise its interpretation of the secured 
amount requirement set forth in Rule 30.7 and the orders for expanded 
relief. As set forth in Appendix B to Part issued concurrently with 
this order, the Commission believes that existing written risk 
disclosures provide foreign futures and foreign options customers with 
notice that the treatment of customer funds outside the U.S. may differ 
from the treatment of customer funds inside the U.S. The Commission 
also believes that the initial depository's ability to identify 
customer funds affords foreign futures and foreign options customers a 
measure of protection in the event that the intermediating firm becomes 
insolvent. Accordingly, the Commission believes that the Rule 30.7 
acknowledgment required of certain Rule 30.10 firms should apply only 
to the maintenance of the account or accounts containing foreign 
futures and foreign options customer funds by the initial depository.
    Appendix B provides that FCMs and certain Rule 30.10 firms need not 
maintain mirror accounts, provided that they obtain from the initial 
depository the acknowledgment described in Rule 30.7 and that they 
furnish a written disclosure statement to customers concerning 
treatment of customer funds by other jurisdictions set forth either in 
Rule 1.55(b)(7) or paragraphs 6 and 8 of Appendix A to Rule 1.55(c), or 
in a comparable disclosure statement prescribed by the firm's home 
country regulator. The Commission believes that Rule 30.10 firms 
transacting business for foreign futures and foreign option customers 
outside of the firms' jurisdictions should be able to operate in a 
similar fashion. Accordingly, if a Rule 30.10 firm operating pursuant 
to an order for expanded relief receives from the initial depository 
the acknowledgment described in Rule 30.7 and furnishes to foreign 
futures and foreign option customers the written disclosure statement 
set forth either in Rule 1.55(b)(7) or paragraphs 6 and 8 of Appendix A 
to Rule 1.55(c), or a comparable disclosure statement prescribed by its 
home country regulator, then it may include all funds maintained in the 
account or accounts in calculating its secured amount requirement. 
Should a Rule 30.10 firm fail to receive from the initial depository 
the required acknowledgment or to furnish the required risk disclosure, 
then it must set aside funds with an acceptable depository and receive 
from such depository the required acknowledgment.

III. Conclusion and Order

    The Commission has determined to revise its interpretation of the 
secured amount requirement. For drafting purposes, the Commission has 
determined to amend the alternative secured amount requirement set 
forth in prior Rule 30.10 orders for expanded relief to track as 
closely as possible the language of Rule 30.7. In addition, the 
Commission is adding to each order the requirement that each Rule 30.10 
firm furnish to each foreign futures and foreign option customer a risk 
disclosure statement containing the language set forth either in Rule 
1.55(b)(7) or paragraphs 6 and 8 of Appendix A to Rule 1.55(c), or a 
comparable disclosure statement prescribed by the firm's home country 
regulator. For the sake of clarity, the Commission also is deleting 
from each order granting expanded relief the footnote describing the 
obligation to perform an inquiry with respect to depositories beyond 
the initial depository and, if necessary, to set aside funds. These 
amendments are made to the following orders:

NZFOE (61 FR 64988-89)

    The text of paragraphs describing the secured amount requirement is 
amended to read:

    II. Each Dealer seeking rule 30.10 relief hereunder must apply 
in writing whereby it:
* * * * *
    K. With respect to transactions effected on behalf of U.S. 
customers on any non-U.S. futures and options exchange other than 
the NZFOE and the SFE \20\ [footnote unchanged], whether by the 
Dealer directly as a clearing member of such other exchange or 
through the intermediation of one or more intermediaries, complies 
with paragraphs 1 or 2 below:
    1.a. Must maintain in a separate account or accounts money, 
securities and property in an amount at least sufficient to cover or 
satisfy all of its current obligations to U.S. customers denominated 
as the foreign futures or foreign options secured amount;
* * * * *
    e. Each Member must obtain and retain in its files for the 
period required by applicable law and Exchange rules an 
acknowledgment from a depository identified in paragraph d.(1)-(4) 
above that the depository was informed that such money, securities 
or property are held for or on behalf of foreign futures and foreign 
options customers and are being held in accordance with the 
provision of these regulations.
    f. Each Member must provide each foreign futures and foreign 
options customer with one of the written disclosure statements in 
(1), (2) or (3) below:

    (1) Foreign futures transactions involve executing and clearing 
trades on a foreign exchange. This is the case even if the foreign 
exchange is formally ``linked'' to a domestic exchange whereby a 
trade executed on one exchange liquidates or establishes a position 
on the other exchange. No domestic organization regulates the 
activities of a foreign exchange, including the execution, delivery 
and clearing of transactions on such exchange, and no domestic 
regulator has the power to compel enforcement of the rules of the 
foreign exchange or the laws of the foreign country. Moreover, such 
laws or regulations will vary depending on the foreign country in 
which the transaction occurs. For these reasons, customers who trade 
on foreign exchanges may not be afforded certain of the protections 
which apply to domestic transactions, including the right to use 
alternative dispute resolution. In particular, funds received from 
customers to margin foreign futures transactions may not be provided 
the same protections as funds received to margin futures 
transactions on domestic exchanges. Before you trade, you should 
familiarize yourself with the foreign rules which will apply to your 
particular transaction.

OR


[[Page 60562]]


    (2) You should familiarize yourself with the protections 
accorded money or property you deposit for domestic and foreign 
transactions, particularly in the event of a firm insolvency or 
bankruptcy. The extent to which you may recover your money or 
property may be governed by specified legislation or local rules. In 
some jurisdictions, property which has been specifically 
identifiable as your own will be pro-rated in the same manner as 
cash for purposes of distribution in the event of a shortfall.
    Transactions on markets in other jurisdictions, including 
markets formally linked to a domestic market, may expose you to 
additional risk. Such markets may be subject to regulation which may 
offer different or diminished investor protection. Before you trade 
you should enquire about any rules relevant to your particular 
transactions. You local regulatory authority will be unable to 
compel the enforcement of the rules of the regulatory authorities or 
markets in other jurisdictions where your transactions have been 
effected. You should ask the firm with which you deal for details 
about the types of redress available in both your home jurisdiction 
and other relevant jurisdictions before you start to trade

OR

    (3) A comparable disclosure statement prescribed by the NZFOE; 
or

    2. Must comply with the terms and procedures of paragraph 1, 
with the amount required to be segregated under NZFOE rules and New 
Zealand laws to be substituted for the secured amount requirement as 
set forth in paragraph 1.\21\ [formerly footnote 22]
* * * * *
    For the sake of clarity, the Commission notes that language 
similar to the following HAS BEEN STRICKEN from each order, using 
the NZFOE order as an example:
    1. * * *
    e. The separate account or accounts referred to in paragraph 
1.a. may be deemed to be a good secured amount depository only if 
the Dealer obtains and retains in its files for the period required 
by Exchange rules, a written acknowledgment from such separate 
account depository that:
    (1) It was informed that such money, securities or property are 
held for or on behalf of customers of the Dealer; and
    (2) It will ensure that such money, securities or property will 
be held and treated at all times effectively in accordance with the 
provisions of this paragraph; and, provided further, that the Dealer 
assures itself that such separate account depository will not pass 
on such money, securities, or property to any other depository 
unless the Dealer has assured itself that all such other separate 
account depositories will treat such funds in a manner consistent 
with the procedures described in this paragraph 1 herein; \21\ 
[footnote 21 deleted]
    2. Must set aside funds constituting the entire secured amount 
requirement in a separate account as set forth in Commission rule 
30.7, 17 CFR 30.7 (2000), and treat those funds in the manner 
described by that rule.

* * * * *

The Montreal Exchange (62 FR 8875, 8876)

    The text of paragraphs describing the secured amount requirement is 
amended to read:


    Accordingly, the expanded relief permitted Montreal Exchange 
Member firms to engage in foreign futures and [foreign] options 
transactions for U.S. customers other than on the Montreal Exchange 
under this Supplemental Order will be contingent upon compliance by 
the Exchange Member firm with the following additional conditions:
* * * * *
    (6) With respect to transactions effected on any non-U.S. 
futures and options exchange on behalf of U.S. customers, whether by 
the Montreal Exchange Member directly as a clearing member of such 
other exchange or through the intermediation of one or more 
intermediaries, complies with paragraph 1 below:
    1.a. Must maintain in a separate account or accounts money, 
securities and property in an amount at least sufficient to cover or 
satisfy all of its current obligations to U.S. customers denominated 
as the foreign futures or foreign options secured amount;
* * * * *
    e. Each Member must obtain and retain in its files for the 
period required by applicable law and Exchange rules an 
acknowledgement from a depository identified in paragraph d.(1)-(4) 
above that the depository was informed that such money, securities 
or property are held for or on behalf of foreign futures and foreign 
options customers and are being held in accordance with the 
provision of these regulations.
    f. Each Member must provide each foreign futures and foreign 
options customers with one of the written disclosure statements in 
(1), (2) or (3) below:

    (1) Foreign futures transactions involve executing and clearing 
trades on a foreign, exchange. This is the case even if the foreign 
exchange is formally ``linked'' to a domestic exchange whereby a 
trade executed on exchange liquidates or establishes a position on 
the other exchange. No domestic organization regulates the 
activities of a foreign exchange, including the execution, delivery 
and clearing of transactions on such exchange, and no domestic 
regulator has the power to compel enforcement of the rules of the 
foreign exchange or the laws of the foreign country. Moreover, such 
laws or regulations will vary depending on the foreign country in 
which the transaction occurs. For these reasons, customers who trade 
on foreign exchanges may not be afforded certain of the protections 
which apply to domestic transactions, including the right to use 
alternative dispute resolution. In particular, refunds received from 
customers to margin foreign futures transactions may not be provided 
the same protections as funds received to margin futures 
transactions on domestic exchanges. Before you trade, you should 
familiarize yourself with the foreign rules which will apply to your 
particular transaction.

OR

    (2) You should familiarize yourself with the protections 
accorded money or property you deposit for domestic and foreign 
transactions, particularly in the event of a firm insolvency or 
bankruptcy. The extent to which you may recover your money or 
property may be governed by specified legislation or local rules. In 
some jurisdictions, property which has been specifically 
identifiable as your own will be pro-rated in the same manner as 
cash for purposes of distribution in the event of a shortfall.
    Transactions on markets in other jurisdictions, including 
markets formally linked to a domestic market, may expose you to 
additional risk. Such markets may be subject to regulation which may 
offer different or diminished investor protection. Before you trade 
you should enquire about any rules relevant to your particular 
transactions. Your local regulatory authority will be unable to 
compel the enforcement of the rules of the regulatory authorities or 
markets in other jurisdictions where your transactions have been 
effected. You should ask the firm with which you deal for details 
about the types of redress available in both your home jurisdiction 
and other relevant jurisdictions before you start to trade.

    OR

    (3) A comparable disclosure statement prescribed by the 
Exchange; or

* * * * *

SFE (62 FR 10445, 1044)

    The text of paragraphs describing the secured amount requirement is 
amended to read:

    Accordingly, the Commission has determined to clarify that the 
relief set forth in the expanded relief authorized pursuant to the 
1993 Order is applicable only if the Exchange Member firm complies 
with the following procedures, which are consistent with the 
requirements applicable to commission registered FCMs concerning the 
protection of customer funds under the provisions of [Rule 30.7]:\\ 
[footnote 6 unchanged]
    With respect to transactions effected on behalf of U.S. 
customers on any non-U.S. futures and options exchange other than 
the NZFOE \7\ [footnote 7 unchanged] and the SFE, whether by the SFE 
member directly as a clearing member of such other exchange or 
through the intermediation of one or more intermediaries, the SFE 
member complies with paragraphs a or b below:
    a.(1) Must maintain in a separate account or accounts money, 
securities and property in an amount denominated as the foreign 
futures or foreign options secured amount, at least sufficient to 
cover or satisfy all of its current obligations to U.S. customers;
* * * * *
    (5) Each member must obtain and retain in its files for the 
period required by applicable law and Exchange rules an 
acknowledgment from a depository identified in paragraph (4)(a)-(d) 
above that the depository was informed that such money, securities 
or property are held for or on behalf of foreign futures and foreign 
options customers and

[[Page 60563]]

are being held in accordance with the provision of these 
regulations.
    (6) Each member must provide each foreign futures and foreign 
options customer with one of the written disclosure statements in 
(a), (b) or (c) below:

    (a) Foreign futures transactions involve executing and clearing 
trades on a foreign exchange. This is the case even if the foreign 
exchange is formally ``linked'' to a domestic exchange whereby a 
trade executed on one exchange liquidates or establishes a position 
on the other exchange. No domestic organization regulates the 
activities of a foreign exchange, including the execution, delivery 
and clearing of transactions on such exchange, and no domestic 
regulator has the power to compel enforcement of the rules of the 
foreign exchange or the laws of the foreign country. Moreover, such 
laws or regulations will vary depending on the foreign country in 
which the transaction occurs. For these reasons, customers who trade 
on foreign exchanges may not be afforded certain of the protections 
which apply to domestic transactions, including the right to use 
alternative dispute resolution. In particular, funds received from 
customers to margin foreign futures transactions may not be provided 
the same protections as funds received to margin futures 
transactions on domestic exchanges. Before you trade, you should 
familiarize yourself with the foreign rules which will apply to your 
particular transaction.

OR

    (b) You should familiarize yourself with the protections 
accorded money or property you deposit for domestic and foreign 
transactions, particularly in the event of a firm insolvency or 
bankruptcy. The extent to which you may recover your money or 
property may be governed by specified legislation or local rules. In 
some jurisdictions, property which has been specifically 
identifiable as your own will pro-rated in the same manner as cash 
for purposes of distribution in the event of a shortfall.
    Transactions on markets in other jurisdictions, including 
markets formally linked to a domestic market, may expose you to 
additional risk. Such markets may be subject to regulation which may 
offer different or diminished investor protection. Before you trade 
you should enquire about any rules relevant to your particular 
transactions. Your local regulatory authority will be unable to 
compel the enforcement of the rules of the regulatory authorities or 
markets in other jurisdictions where your transactions have been 
effected. You should ask the firm with which you deal for details 
about the types of redress available in both your home jurisdiction 
and other relevant jurisdictions before you start to trade.

OR

    (c) A comparable disclosure statement prescribed by SFE; or

    b. Complies with the terms and procedures of paragraph a, except 
that the amount required to be segregated under SFE rules and 
Australian laws may be substituted for the secured amount 
requirement as set forth in such paragraphs.\8\ [formerly footnote 
9]

* * * * *

SFA (62 FR 10448, 10449)

    The text of paragraphs describing the secured amount requirement is 
amended to read:

    Accordingly, the Commission has determined to clarify that the 
relief authorized in its Original Order with respect to transactions 
on [an exchange other than a U.K. Recognized Investment Exchange] is 
applicable only if an SFA member firm complies with the following 
procedures, which are consistent with the requirements applicable to 
Commission registered futures commission merchants (``FCMs'') 
concerning the protection of customer funds under the provisions of 
[Rule 30.7]:\6\ [footnote 6 unchanged]
    With respect to transactions effected on behalf of U.S. 
customers on any non-U.S. futures and options exchange which is a 
DIE, whether by the SFA Member directly as a clearing member of such 
other exchange or through the intermediation of one or more 
intermediaries, the SFA member complies with paragraphs a or b 
below:
    a.(1) Maintains in a separate account or accounts money, 
securities and property in an amount denominated as the foreign 
futures or foreign options secured amount, at least sufficient to 
cover or satisfy all of its current obligations to U.S. customers;
* * * * *
    (5) Each member must obtain and retain in its files for the 
period required by applicable law and Exchange rules an 
acknowledgment from a depository identified in paragraph (4)(a)-(d) 
above that the depository was informed that such money, securities 
or property are held for or on behalf of foreign futures and foreign 
options customers and are being held in accordance with the 
provision of these regulations.
    (6) Each member must provide each foreign futures and foreign 
options customer with one of the written disclosure statements in 
(a), (b) or (c) below:

    (a) Foreign futures transactions involve executing and clearing 
trades on a foreign exchange. This is the case even if the foreign 
exchange is formally ``linked'' to a domestic exchange whereby a 
trade executed on one exchange liquidates or establishes a position 
on the other exchange. No domestic organization regulates the 
activities of a foreign exchange, including the execution, delivery 
and clearing of transactions on such exchange, and no domestic 
regulator has the power to compel enforcement of the rules of the 
foreign exchange or the laws of the foreign country. Moreover, such 
laws or regulations will vary depending on the foreign country in 
which the transaction occurs. For these reasons, customers who trade 
on foreign exchanges may not be afforded certain of the protections 
which apply to domestic transactions, including the right to use 
alternative dispute resolution. In particular, funds received from 
customers to margin foreign futures transactions may not be provided 
the same protections as funds received to margin futures 
transactions on domestic exchanges. Before you trade, you should 
familiarize yourself with the foreign rules which will apply to your 
particular transaction.

OR

    (b) You should familiarize yourself with the protections 
accorded money or property you deposit for domestic and foreign 
transactions, particularly in the event of a firm insolvency or 
bankruptcy. The extent to which you may recover your money or 
property may be governed by specified legislation or local rules. In 
some jurisdictions, property which has been specifically 
identifiable as your own will be pro-rated in the same manner as 
cash for purposes of distribution in the event of a shortfall.
    Transactions on markets in other jurisdictions, including 
markets formally linked to a domestic market, may expose you to 
additional risk. Such markets may be subject to regulation which may 
offer different or diminished investor protection. Before you trade 
you should enquire about any rules relevant to your particular 
transactions. Your local regulatory authority will be unable to 
compel the enforcement of the rules of the regulatory authorities or 
markets in other jurisdictions where your transactions have been 
effected. You should ask the firm with which you deal for details 
about the types of redress available in both your home jurisdiction 
and other relevant jurisdictions before you start to trade.

OR

    (c) A comparable disclosure statement prescribed by SFA; or

    b. Complies with the terms and procedures of paragraph a, except 
that the amount required to be segregated under SFA rules and United 
Kingdom laws may be substituted for the secured amount requirement 
as set forth in paragraph a.\8\ [formerly footnote 9]

* * * * *

IMRO (62 FR 10449, 10450)

    The text of paragraphs describing the secured amount requirement is 
amended to read:

    Accordingly, the Commission has determined to clarify that the 
relief authorized in its Original Order with respect to transactions 
on [an exchange other than a U.K. Recognized Investment Exchange] is 
applicable only if an IMRO member firm complies with the following 
procedures, which are consistent with the requirements applicable to 
Commission registered futures commission merchants (``FCMs'') 
concerning the protection of customer funds under the provisions of 
[Rule 30.7]: \6\ [footnote 6 unchanged]
    With respect to transactions effected on behalf of U.S. 
customers on any non-U.S. futures and options exchange which is a 
DIE, whether by the IMRO Member directly as a clearing member of 
such other exchange or through the intermediation of one or more 
intermediaries, the IMRO member complies with paragraphs a or b 
below:
    a.(1) Maintains in a separate account or accounts money, 
securities and property in

[[Page 60564]]

an amount denominated as the foreign futures or foreign options 
secured amount, at least sufficient to cover or satisfy all of its 
current obligations to U.S. customers;
* * * * *
    (5) Each member must obtain and retain in its files for the 
period required by applicable law and IMRO rules an acknowledgment 
from a depository identified in paragraph (4)(a)-(d) above that the 
depository was informed that such money, securities or property are 
held for or on behalf of foreign futures and foreign options 
customers and are being held in accordance with the provision of 
these regulations.
    (6) Each member must provide each foreign futures and foreign 
options customer with one of the written disclosure statements in 
(a), (b) or (c) below:

    (a) Foreign futures transactions involve executing and clearing 
trades on a foreign exchange. This is the case even if the foreign 
exchange is formally ``linked'' to a domestic exchange whereby a 
trade executed on one exchange liquidates or establishes a position 
on the other exchange. No domestic organization regulates the 
activities of a foreign exchange, including the execution, delivery 
and clearing of transactions on such exchange, and no domestic 
regulator has the power to compel enforcement of the rules of the 
foreign exchange or the laws of the foreign country. Moreover, such 
laws or regulations will vary depending on the foreign country in 
which the transaction occurs. For these reasons, customers who trade 
on foreign exchanges may not be afforded certain of the protections 
which apply to domestic transactions, including the right to use 
alternative dispute resolution. In particular, funds received from 
customers to margin foreign futures transactions may not be provided 
the same protections as funds received to margin futures 
transactions on domestic exchanges. Before you trade, you should 
familiarize yourself with the foreign rules which will apply to your 
particular transaction.

OR

    (b) You should familiarize yourself with the protections 
accorded money or property you deposit for domestic and foreign 
transactions, particularly in the event of a firm insolvency or 
bankruptcy. The extent to which you may recover your money or 
property may be governed by specified legislation or local rules. In 
some jurisdictions, property which has been specifically 
identifiable as your own will be pro-rated in the same manner as 
cash for purposes of distribution in the event of a shortfall.
    Transactions on markets in other jurisdictions, including 
markets formally linked to a domestic market, may expose you to 
additional risk. Such markets may be subject to regulation which may 
offer different or diminished investor protection. Before you trade 
you should enquire about any rules relevant to your particular 
transactions. Your local regulatory authority will be unable to 
compel the enforcement of the rules of the regulatory authorities or 
markets in other jurisdictions where your transactions have been 
effected. You should ask the firm with which you deal for details 
about the types of redress available in both your home jurisdiction 
and other relevant jurisdictions before you start to trade.

OR

    (c) A comparable disclosure statement prescribed by IMRO.

    b. Complies with the terms and procedures of paragraph a, except 
that the amount required to be segregated under IMRO rules and 
United Kingdom laws may be substituted for the secured amount 
requirement as set forth in paragraph a.\7\ [formerly footnote 8]

* * * * *

SGX-DT (64 FR 50248, 50250-51)

    The text of paragraphs describing the secured amount requirement is 
amended to read:

    The expanded Rule 30.10 relief provided under this Supplemental 
Order, however, is contingent upon SGX-DT's and SGX-DT Member's 
compliance with certain conditions below.
* * * * *
    (5) With respect to transactions effected on Eurex on behalf of 
U.S. customers, whether by the SGX-DT Member directly as a clearing 
member of Eurex or through the intermediation of one or more 
intermediaries, the SGX-DT Member complies with paragraphs 1 or 2 
below:
    1.a. Must remain in a separate account or accounts money, 
securities and property in an amount at least sufficient to cover or 
satisfy all of its current obligations to U.S. customers denominated 
as the foreign futures or foreign options secured amount;
* * * * *
    e. Each Member must obtain and retain in its files for the 
period required by applicable law and Exchange rules an 
acknowledgment from a depository identified in paragraph d.(1)-(4) 
above that the depository was informed that such money, securities 
or property are held for or on behalf of foreign futures and foreign 
options customers and are being held in accordance with the 
provision of these regulations.
    f. Each Member must provide each foreign futures and foreign 
options customer with one of the written disclosure statements in 
(1), (2) or (3) below:

    (1) Foreign futures transactions involve executing and clearing 
trades on a foreign exchange. This is the case even if the foreign 
exchange is formally ``linked'' to a domestic exchange whereby a 
trade executed on one exchange liquidates or establishes a position 
on the other exchange. No domestic organization regulates the 
activities of a foreign exchange, including the execution, delivery 
and clearing of transactions on such exchange, and no domestic 
regulator has the power to compel enforcement of the rules of the 
foreign exchange or the laws of the foreign country. Moreover, such 
laws or regulations will vary depending on the foreign country in 
which the transaction occurs. For these reasons, customers who trade 
on foreign exchanges may not be afforded certain of the protections 
which apply to domestic transactions, including the right to use 
alternative dispute resolution. In particular, funds received from 
customers to margin foreign futures transactions may not be provided 
the same protections as funds received to margin futures 
transactions on domestic exchanges. Before you trade, you should 
familiarize yourself with the foreign rules which will apply to your 
particular transaction.

    OR

    (2) You should familiarize yourself with the protections 
accorded money or property you deposit for domestic and foreign 
transactions, particularly in the event of a firm insolvency or 
bankruptcy. The extent to which you may recover your money or 
property may be governed by specified legislation or local rules. In 
some jurisdictions, property which has been specifically 
identifiable as your own will be pro-rated in the same manner as 
cash for purposes of distribution in the event of a shortfall.
    Transactions on markets in other jurisdictions, including 
markets formally linked to a domestic market, may expose you to 
additional risk. Such markets may be subject to regulation which may 
offer different or diminished investor protection. Before you trade 
you should enquire about any rules relevant to your particular 
transactions. You local regulatory authority will be unable to 
compel the enforcement of the rules of the regulatory authorities or 
markets in other jurisdictions where your transactions have been 
effected. You should ask the firm with which you deal for details 
about the types of redress available in both your home jurisdiction 
and other relevant jurisdictions before you start to trade.

    OR

    (3) A comparable disclosure statement prescribed by SGX-DT.

    2. Complies with the terms and procedures of paragraph 1, except 
that the amount required to be segregated under SGX-DT rules and 
Singapore law may be substituted for the secured amount requirement 
as set forth in paragraph 1.

* * * * *

    Issued in Washington, DC on October 5, 2000.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 00-26069 Filed 10-10-00; 8:45 am]
BILLING CODE 6351-01-M