[Federal Register Volume 76, Number 135 (Thursday, July 14, 2011)]
[Rules and Regulations]
[Pages 41375-41392]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-17514]



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  Federal Register / Vol. 76, No. 135 / Thursday, July 14, 2011 / Rules 
and Regulations  

[[Page 41375]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 48

[Docket ID OCC-2011-0010]
RIN 1557-AD42


Retail Foreign Exchange Transactions

AGENCY: Office of the Comptroller of the Currency, Department of the 
Treasury.

ACTION: Final rule.

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SUMMARY: The Office of the Comptroller of the Currency (OCC) is 
adopting a final rule authorizing national banks, Federal branches and 
agencies of foreign banks, and their operating subsidiaries to engage 
in off-exchange transactions in foreign currency with retail customers. 
The rule also describes various requirements with which national banks, 
Federal branches and agencies of foreign banks, and their operating 
subsidiaries must comply to conduct such transactions.

DATES: This rule is effective July 15, 2011.

FOR FURTHER INFORMATION CONTACT: Tena Alexander, Senior Counsel, or 
Roman Goldstein, Attorney, Securities and Corporate Practices Division, 
(202) 874-5120.

SUPPLEMENTARY INFORMATION: 

I. Background

    On July 21, 2010, President Obama signed into law the Dodd-Frank 
Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).\1\ As 
amended by the Dodd-Frank Act,\2\ the Commodity Exchange Act (CEA) 
provides that a United States financial institution \3\ for which there 
is a Federal regulatory agency \4\ shall not enter into, or offer to 
enter into, a transaction described in section 2(c)(2)(B)(i)(I) of the 
CEA with a retail customer \5\ except pursuant to a rule or regulation 
of a Federal regulatory agency allowing the transaction under such 
terms and conditions as the Federal regulatory agency shall prescribe 
\6\ (a ``retail forex rule''). Section 2(c)(2)(B)(i)(I) includes ``an 
agreement, contract, or transaction in foreign currency that * * * is a 
contract of sale of a commodity for future delivery (or an option on 
such a contract) or an option (other than an option executed or traded 
on a national securities exchange registered pursuant to section 6(a) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)).'' \7\ A 
Federal regulatory agency's retail forex rule must treat similarly all 
such futures and options and all agreements, contracts, or transactions 
that are functionally or economically similar to such futures and 
options.\8\
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    \1\ Public Law 111-203, 124 Stat. 1376.
    \2\ Dodd-Frank Act Sec.  742(c)(2) (to be codified at 7 U.S.C. 
2(c)(2)(E)). In this preamble, citations to the retail forex 
statutory provisions are to the sections in which the provisions 
will be codified in the CEA.
    \3\ The CEA defines ``financial institution'' as including ``a 
depository institution (as defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813)).'' 7 U.S.C. 1a(21)(E). 
National banks are depository institutions. See 12 U.S.C. 1813(a)(1) 
and (c)(1).
    \4\ For purposes of the retail forex rules, ``Federal regulatory 
agency'' includes ``an appropriate Federal banking agency.'' 7 
U.S.C. 2(c)(2)(E)(i)(III). The OCC is the appropriate Federal 
banking agency for national banks and Federal branches and agencies 
of foreign banks. 12 U.S.C. 1813(q)(1); Dodd-Frank Act Sec.  
721(a)(2) (amending 7 U.S.C. 1a to define ``appropriate Federal 
banking agency'' by reference to 12 U.S.C. 1813).
    \5\ A retail customer is a person that is not an ``eligible 
contract participant'' under the CEA.
    \6\ 7 U.S.C. 2(c)(2)(E)(ii)(I).
    \7\ 7 U.S.C. 2(c)(2)(B)(i)(II).
    \8\ 7 U.S.C. 2(c)(2)(E)(iii)(II).
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    Retail forex rules must prescribe appropriate requirements with 
respect to disclosure, recordkeeping, capital and margin, reporting, 
business conduct, and documentation requirements and may include such 
other standards or requirements as the Federal regulatory agency 
determines to be necessary.\9\ This Dodd-Frank Act amendment to the CEA 
takes effect 360 days from the enactment of the Act.\10\ Therefore, as 
of July 16, 2011, national banks, Federal branches and agencies of 
foreign banks, and operating subsidiaries of the foregoing 
(collectively, national banks) may not engage in a retail forex 
transaction except pursuant to retail forex rules issued by the OCC.
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    \9\ 7 U.S.C. 2(c)(2)(E)(iii)(I).
    \10\ See Dodd-Frank Act Sec.  754.
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    In addition, on July 21, 2011, the OCC will become the appropriate 
Federal banking agency for Federal savings associations.\11\ The OCC 
plans to regulate retail forex transactions conducted by Federal 
savings associations under the same terms as in this rule. However, the 
OCC cannot issue regulations governing Federal savings associations 
until July 21, 2011. Therefore, the OCC anticipates issuing on that 
date an interim final rule with request for public comment that would 
expand the scope of this regulation to cover Federal savings 
associations.
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    \11\ Dodd-Frank Act Sec.  312.
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II. Overview of the Proposed Rule and Related Actions

    On September 10, 2010, the Commodity Futures Trading Commission 
(CFTC) issued a retail forex rule for persons subject to its 
jurisdiction.\12\ On April 22, 2011, the OCC proposed a retail forex 
rule for national banks modeled on the CFTC's retail forex rule.\13\ 
The OCC decided to model its retail forex rule on the CFTC's rule to 
promote regulatory comparability and because the CFTC developed its 
retail forex rule with the benefit of over 9,100 comments from a range 
of commenters, including individuals who trade forex, intermediaries, 
CFTC registrants currently serving as counterparties in retail forex 
transactions, trade associations or coalitions of industry 
participants, one committee of a county lawyers' association, a 
registered futures association, and numerous law firms representing 
institutional clients. The OCC proposed to authorize national banks to 
engage in retail forex transactions and subject those transactions to 
requirements relating to disclosure, record keeping, capital and 
margin, reporting, business conduct, and documentation.
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    \12\ Regulation of Off-Exchange Retail Foreign Exchange 
Transactions and Intermediaries, 75 FR 55409 (Sept. 10, 2010) (Final 
CFTC Retail Forex Rule). The CFTC proposed these rules prior to the 
enactment of the Dodd-Frank Act. Regulation of Off-Exchange Retail 
Foreign Exchange Transactions and Intermediaries, 75 FR 3281 (Jan. 
20, 2010) (Proposed CFTC Retail Forex Rule).
    \13\ Retail Foreign Exchange Transactions, 76 FR 22633 (Apr. 22, 
2011) (Proposed OCC Retail Forex Rule).
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    On May 17, 2011, the Federal Deposit Insurance Corporation (FDIC) 
proposed

[[Page 41376]]

a retail forex rule for entities for which it is the appropriate 
Federal banking agency under the Federal Deposit Insurance Act.\14\ The 
OCC's and the FDIC's proposals were substantially similar.
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    \14\ Retail Foreign Exchange Transactions, 76 FR 28358 (May 17, 
2011) (Proposed FDIC Retail Forex Rule).
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III. Comments on the Proposed Rule

    The comment period for the proposed OCC retail forex rule ended on 
May 23, 2011. The OCC received a total of three comments by that date. 
Of these, one was submitted by a large bank that engages in retail 
forex transactions (the commenter) and two were submitted by 
individuals. The latter two comments did not relate to the proposal. 
The commenter generally supported the OCC's proposed rule while 
requesting certain clarifications and changes. The commenter's comments 
to specific sections of the proposal are addressed in the Section-by-
Section Analysis below. In light of the comments received, the final 
rule, for the most part, is similar to the proposed rule; the 
significant changes are described in the Section-by-Section analysis.
    In the preamble to the proposal, the OCC indicated that retail 
forex transactions are subject to the Interagency Statement on Retail 
Sales of Nondeposit Investment Products (NDIP Policy Statement).\15\ 
The NDIP Policy Statement sets out guidance regarding the OCC's 
expectations when a national bank engages in the sale of nondeposit 
investment products to retail customers. The NDIP Policy Statement 
addresses issues such as disclosure, suitability, sales practices, 
compensation, and compliance.
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    \15\ See OCC Bulletin 94-13 (Feb. 24, 1994); see also OCC 
Bulletin 1995-52 (Sept. 22, 1995).
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    In the proposal, the OCC asked for comment on whether application 
of the NDIP Policy Statement created issues that the OCC should 
address.
    The commenter said that the NDIP Policy Statement should not apply 
to retail forex transactions, asserting that the retail forex rule, 
alone, would be sufficient to protect retail customers, and the 
imposition of the NDIP Policy Statement on retail forex transactions 
would create confusion and ambiguity. No specific provisions were 
identified, however, that create confusion or ambiguity. The commenter 
further argued that because the NDIP Policy Statement does not apply to 
CFTC registrants, its application to retail forex transactions would 
not promote consistent regulatory treatment of retail forex 
transactions.
    The OCC believes that it is appropriate to apply the NDIP Policy 
Statement to retail forex transactions. The consumer protections that 
the NDIP Policy Statement provides are no less important for retail 
forex transactions than for other nondeposit investment products. 
Moreover, there is no direct conflict between this rule and the NDIP 
Policy Statement because the statement requires national banks to 
develop policies and procedures to ensure that nondeposit investment 
product sales are conducted in compliance with applicable laws and 
regulations.\16\ If a national bank has questions regarding how the 
NDIP Policy Statement applies to its retail forex business, it should 
seek clarification from its examiners.
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    \16\ There are, of course, differences in the regulations that 
generally govern national banks versus those that govern CFTC 
registrants, such as capital rules. The NDIP Policy Statement, 
because it governs bank activities more generally, is similar to 
capital rules.
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IV. Section-by-Section Analysis

Section 48.1--Authority, Purpose, and Scope

    This section authorizes a national bank to conduct retail forex 
transactions.
    The OCC requested comment on whether the retail forex rule should 
apply to national banks' foreign branches conducting retail forex 
transactions abroad, whether with U.S. or foreign customers.
    The commenter responded that there is no U.S. policy interest in 
applying U.S. consumer protection rules to transactions with non-U.S. 
residents conducted by foreign branches. Those transactions are subject 
to foreign regulatory requirements that could be inconsistent with the 
retail forex rule. Subjecting those transactions to two sets of 
regulatory requirements would also place national banks at a 
competitive disadvantage abroad.
    The OCC recognizes the concerns raised by the commenter.
    Retail forex transactions between a foreign branch of a national 
bank and a non-U.S. customer are subject to any applicable disclosure, 
recordkeeping, capital, margin, reporting, business conduct, 
documentation, and other requirements of applicable foreign law. 
Therefore, those transactions are not subject to the requirements of 
Sec. Sec.  48.3 and 48.5 to 48.16.

Section 48.2--Definitions

    This section defines terms specific to retail forex transactions 
and to the regulatory requirements that apply to retail forex 
transactions.
    The definition of ``retail forex transaction'' generally includes 
the following transactions in foreign currency between a national bank 
and a person that is not an eligible contract participant: \17\ (i) A 
future or option on such a future; \18\ (ii) options not traded on a 
registered national securities exchange; \19\ and (iii) certain 
leveraged, margined, or bank-financed transactions,\20\ including 
rolling spot forex transactions. The definition generally tracks the 
statutory language in section 2(c)(2)(B) and (C) of the CEA.\21\
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    \17\ The definition of ``eligible contract participant'' is 
found in the CEA and is discussed below.
    \18\ 7 U.S.C. 2(c)(2)(B)(i)(I).
    \19\ 7 U.S.C. 2(c)(2)(B)(i)(I).
    \20\ 7 U.S.C. 2(c)(2)(C).
    \21\ 7 U.S.C. 2(c)(2)(B) and (C).
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    Certain transactions in foreign currency are not ``retail forex 
transactions.'' For example, a spot forex transaction in which one 
currency is bought for another and the two currencies are exchanged 
within two days would not meet the definition of ``retail forex 
transaction.'' \22\ Similarly, ``retail forex transaction'' does not 
include a forward contract that creates an enforceable obligation to 
make or take delivery, provided that each counterparty has the ability 
to deliver and accept delivery in connection with its line of 
business.\23\ In addition, the definition does not include transactions 
conducted through an exchange, because in those cases the exchange

[[Page 41377]]

would be the counterparty to both the national bank and the retail 
forex customer, rather than the national bank directly facing the 
retail forex customer.
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    \22\ See generally CFTC v. Int'l Fin. Servs. (New York), Inc., 
323 F. Supp. 2d 482, 495 (S.D.N.Y. 2004) (distinguishing between 
foreign exchange futures contracts and spot contracts in foreign 
exchange, and noting that foreign currency trades settled within two 
days are ordinarily spot transactions rather than futures 
contracts); see also Bank Brussels Lambert v. Intermetals Corp., 779 
F. Supp. 741, 748 (S.D.N.Y. 1991).
    \23\ See 7 U.S.C. 2(c)(2)(C)(i)(II)(bb)(BB); CFTC v. Int'l Fin. 
Servs. (New York), Inc., 323 F. Supp. 2d 482, 495 (S.D.N.Y. 2004) 
(distinguishing between forward contracts in foreign exchange and 
foreign exchange futures contracts); see also William L. Stein, The 
Exchange-Trading Requirement of the Commodity Exchange Act, 41 Vand. 
L. Rev. 473, 491 (1988). In contrast to forward contracts, futures 
contracts generally include several or all of the following 
characteristics: (i) Standardized nonnegotiable terms (other than 
price and quantity); (ii) parties are required to deposit initial 
margin to secure their obligations under the contract; (iii) parties 
are obligated and entitled to pay or receive variation margin in the 
amount of gain or loss on the position periodically over the period 
the contract is outstanding; (iv) purchasers and sellers are 
permitted to close out their positions by selling or purchasing 
offsetting contracts; and (v) settlement may be provided for by 
either (a) cash payment through a clearing entity that acts as the 
counterparty to both sides of the contract without delivery of the 
underlying commodity; or (b) physical delivery of the underlying 
commodity. See Edward F. Greene et al., U.S. Regulation of 
International Securities and Derivatives Markets Sec.  14.08[2] (8th 
ed. 2006).
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    The proposed rule sought comment on whether leveraged, margined, or 
bank-financed forex transactions, including rolling spot forex 
transactions (so-called Zelener \24\ contracts), should be regulated as 
retail forex transactions; the OCC preliminary believed that they 
should.\25\
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    \24\ CFTC v. Zelener, 373 F.3d 861 (7th Cir. 2004); see also 
CFTC v. Erskine, 512 F.3d 309 (6th Cir. 2008).
    \25\ 7 U.S.C. 2(c)(2)(E)(iii) (requiring that retail forex rules 
treat all functionally or economically similar transactions 
similarly); see 17 CFR 5.1(m) (defining ``retail forex transaction'' 
for CFTC-registered retail forex dealers).
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    The commenter supported the inclusion of rolling spot forex 
transactions in the definition of ``retail forex transaction.'' A 
rolling spot forex transaction nominally requires delivery of currency 
within two days, like spot transactions. However, in practice, the 
contracts are indefinitely renewed every other day and no currency is 
actually delivered until one party affirmatively closes out the 
position.\26\ Therefore, the contracts are economically more like 
futures than spot contracts, although courts have held them to be spot 
contracts in form.\27\ Like the CFTC's retail forex rule and the FDIC's 
proposed retail forex rule, the final rule's definition of ``retail 
forex transaction'' includes leveraged, margined, or bank-financed 
rolling spot forex transactions, as well as certain other leveraged, 
margined, or bank-financed forex transactions.
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    \26\ For example, in Zelener, the retail forex dealer retained 
the right, at the date of delivery of the currency to deliver the 
currency, roll the transaction over, or offset all or a portion of 
the transaction with another open position held by the customer. See 
CFTC v. Zelener, 373 F.3d 861, 868 (7th Cir. 2004).
    \27\ See, e.g., CFTC v. Erskine, 512 F.3d 309, 326 (6th Cir. 
2008); CFTC v. Zelener, 373 F.3d 861, 869 (7th Cir. 2004).
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    The commenter sought clarification that forex forwards would not be 
included in the definition, because transactions that convert or 
exchange actual currencies for any commercial or investment purpose are 
a traditional product offered by national banks and do not raise the 
consumer protection issues associated with futures or rolling spot 
forex transactions.
    The OCC agrees that a forex forward that is not leveraged, 
margined, or financed by the national bank does not meet the definition 
of ``retail forex transaction.'' However, a leveraged, margined, or 
bank-financed forex forward is a retail forex transaction unless it 
creates an enforceable obligation to deliver between a seller and a 
buyer that have the ability to deliver and accept delivery, 
respectively, in connection with their line of business \28\ or the OCC 
determines that the forward is not functionally or economically similar 
to a forex future or option, as described below.
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    \28\ See 7 U.S.C. 2(c)(2)(C)(i)(II)(bb)(BB).
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    The final rule contains a provision that allows the OCC to exempt 
specific transactions or kinds of transaction from the third prong of 
the ``retail forex transaction'' definition. The OCC is concerned that 
certain traditional banking products, which are distinguishable from 
speculative rolling spot forex transactions, may inadvertently fall 
within the definition of ``retail forex transaction'' as leveraged, 
margined, or bank-financed forex transactions. This result was not 
intended by the Dodd-Frank Act, which requires retail forex rules to 
treat similarly transactions that are functionally or economically 
similar to forex futures or options.\29\ National banks may seek a 
determination that a given transaction or kind of transaction does not 
fall within the third prong of the ``retail forex transaction'' 
definition by submitting a written request to the OCC.
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    \29\ 7 U.S.C. 2(c)(2)(E)(iii)(II).
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    The commenter asked for confirmation that deposit accounts with 
foreign exchange features are outside the scope of the rule.
    The Legal Certainty for Bank Products Act of 2000, as amended by 
the Dodd-Frank Act, generally exempts ``identified banking products'' 
from the CEA.\30\ Identified banking products include: Deposit 
accounts, savings accounts, certificates of deposit, or other deposit 
instruments issued by a bank; banker's acceptances; letters of credit 
issued or loans made by a bank; debit accounts at a bank arising from a 
credit card or similar arrangement; and certain loan 
participations.\31\ Because identified banking products are not subject 
to the CEA, they are not prohibited by section 2(c)(2)(E)(ii) of the 
CEA. To provide clarity, the final rule excludes identified banking 
products from the definition of ``retail forex transaction.'' 
Identified banking products that have embedded foreign exchange 
features, for example a deposit account in which the customer may 
deposit funds in one currency and withdraw funds in another, are not 
retail forex transactions.
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    \30\ 7 U.S.C. 27a(a)(1). An identified banking product offered 
by a national bank could become subject to the CEA if the OCC 
determines, in consultation with the CFTC and the Securities and 
Exchange Commission, that the product would meet the definition of a 
``swap'' under the CEA or a ``security-based swap'' under Securities 
Exchange Act of 1934 and has become known to the trade as a swap or 
security-based swap, or otherwise has been structured as an 
identified banking product for the purpose of evading the provisions 
of the CEA, the Securities Act of 1933, or the Securities Exchange 
Act of 1934. 7 U.S.C. 27a(b).
    \31\ 7 U.S.C. 27(b) (citing Gramm-Leach-Bliley Act Sec.  
206(a)(1) to (5)).
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    This section defines several terms by reference to the CEA, the 
most important of which is ``eligible contract participant.'' Foreign 
currency transactions with eligible contract participants are not 
considered retail forex transactions and are therefore not subject to 
this rule. In addition to a variety of financial entities, certain 
governmental entities, businesses, and individuals may be eligible 
contract participants.\32\
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    \32\ The term ``eligible contract participant'' is defined at 7 
U.S.C. 1a(18), and for purposes most relevant to this rule generally 
includes:
    (a) A corporation, partnership, proprietorship, organization, 
trust, or other entity--
    (1) That has total assets exceeding $10,000,000;
    (2) The obligations of which under an agreement, contract, or 
transaction are guaranteed or otherwise supported by a letter of 
credit or keepwell, support, or other agreement by certain other 
eligible contract participants; or
    (3) That--
    (i) Has a net worth exceeding $1,000,000; and
    (ii) Enters into an agreement, contract, or transaction in 
connection with the conduct of the entity's business or to manage 
the risk associated with an asset or liability owned or incurred or 
reasonably likely to be owned or incurred by the entity in the 
conduct of the entity's business;
    (b) Subject to certain exclusions,
    (1) A governmental entity (including the United States, a State, 
or a foreign government) or political subdivision of a governmental 
entity;
    (2) A multinational or supranational governmental entity; and
    (3) An instrumentality, agency, or department of an entity 
described in (b)(1) or (2); and
    (c) An individual who has amounts invested on a discretionary 
basis, the aggregate of which is in excess of--
    (1) $10,000,000; or
     (2) $5,000,000 and who enters into the agreement, contract, or 
transaction in order to manage the risk associated with an asset 
owned or liability incurred, or reasonably likely to be owned or 
incurred, by the individual.
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Section 48.3--Prohibited Transactions

    This section prohibits a national bank and its institution-
affiliated parties from engaging in fraudulent conduct in connection 
with retail forex transactions. This section also prohibits a national 
bank from acting as a counterparty to a retail forex transaction if the 
national bank or its affiliate exercises discretion over the customer's 
retail forex account because the OCC views such self-dealing as 
inappropriate.
    The OCC received no comments to this section and adopts it as 
proposed.

[[Page 41378]]

Section 48.4--Supervisory Non-Objection

    This section requires a national bank to obtain a written 
supervisory non-objection prior to engaging in a retail forex business. 
To obtain such non-objection, the national bank will have to provide 
such information as the OCC deems necessary to determine that the 
national bank would satisfy the requirements of the rule. This 
information will include information on: Customer due diligence 
(including credit evaluations, customer appropriateness, and ``know 
your customer'' documentation); new product approvals; haircuts for 
noncash margin; and conflicts of interest. In addition, the national 
bank must establish that it has adequate written policies, procedures, 
and risk measurement and management systems and controls.
    National banks engaged in retail forex transactions as of the 
effective date of this rule that promptly request the OCC's review of 
their retail forex business will have six months, or a longer period 
provided by the OCC, to bring their operations into conformance with 
the rule. Under this rule, a national bank that requests the OCC's 
review within 30 days of the effective date of the final retail forex 
rule and submits such information as the OCC may request within the 
timeframe the OCC provides will be deemed to be operating its retail 
forex business pursuant to a rule or regulation of a Federal regulatory 
agency, as required under the CEA, for such period.\33\
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    \33\ 7 U.S.C. 2(c)(2)(E)(ii)(I).
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    A national bank need not join a futures self-regulatory 
organization as a condition of conducting a retail forex business.
    The commenter supported the adoption of this section, and the OCC 
adopts it as proposed.

Section 48.5--Application and Closing Out of Offsetting Long and Short 
Positions

    This section requires a national bank to close out offsetting long 
and short positions in a retail forex account. The national bank would 
have to offset such positions regardless of whether the customer has 
instructed otherwise. The CFTC concluded that keeping open long and 
short positions in a retail forex customer's account removes the 
opportunity for the customer to profit on the transactions, increases 
the fees paid by the customer, and invites abuse.\34\ The OCC agreed 
with this concern in the notice of proposed rulemaking.
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    \34\ Proposed CFTC Retail Forex Rule, 75 FR at 3287 n.54.
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    The commenter stated that a customer should be permitted to provide 
instructions with respect to the manner in which the customer's retail 
forex transaction are offset when: (i) The customer maintains separate 
accounts managed by different advisors; (ii) the customer maintains 
separate accounts using different trading strategies; or (iii) the 
customer employs different trading strategies in one account and 
applies certain orders to risk-manage that exposure. The commenter also 
sought clarification that a customer could provide specific offset 
instructions in writing or orally, and that those instructions can be 
made on a blanket basis.
    The OCC agrees that a customer should be able to offset retail 
forex transactions in a particular manner, if he or she so chooses. 
Paragraph (c) has been modified to provide that, notwithstanding the 
default offset rules in paragraphs (a) and (b), the national bank must 
offset retail forex transactions pursuant to a customer's specific 
instructions. Blanket instructions are not sufficient for this purpose, 
as they could obviate the default rule. However, offset instructions 
need not be given separately for each pair of orders in order to be 
``specific.'' Instructions that apply to sufficiently defined sets of 
transactions could be specific enough. Finally, consistent with the 
changes to Sec.  48.12, retail forex customers may make offset 
instructions in writing or orally. The national bank must create and 
maintain a record of each offset instruction.\35\
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    \35\ See Sec.  48.7(a)(6) and (g).
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Section 48.6--Disclosure

    This section requires a national bank to provide retail forex 
customers with a risk disclosure statement similar to the one required 
by the CFTC's retail forex rule but tailored to address certain unique 
characteristics of retail forex in national banks. The prescribed risk 
disclosure statement would describe the risks associated with retail 
forex transactions.
    The commenter agreed with the need for a robust risk disclosure 
statement but suggested that a shorter, clearer, more direct, and less 
redundant statement would be more effective. The final rule 
incorporates several changes to the disclosures to eliminate 
redundancies, address ambiguities, and convey the information more 
clearly.
    The proposal requested comment on whether the risk disclosure 
statement should disclose the percentage of profitable retail forex 
accounts.
    The commenter said that disclosing the ratio of profitable to 
nonprofitable retail forex accounts is not useful because those ratios 
depend on many factors (including the trading expertise of customers) 
and could suggest one national bank is a more attractive retail forex 
counterparty than another.
    In its retail forex rule, the CFTC requires its registrants to 
disclose to retail customers the percentage of retail forex accounts 
that earned a profit and the percentage of such accounts that 
experienced a loss during each of the most recent four calendar 
quarters.\36\ The CFTC explained that the vast majority of retail 
customers who enter these transactions do so solely for speculative 
purposes and that relatively few of these participants trade 
profitably.\37\ In its final rule, the CFTC found this requirement 
appropriate to protect retail customers from inherent conflicts 
embedded in the operations of the retail over-the-counter forex 
industry.\38\ The OCC agrees with the CFTC and the final rule requires 
this disclosure.
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    \36\ 17 CFR 5.5(e)(1).
    \37\ Proposed CFTC Retail Forex Rule, 75 FR at 3289.
    \38\ Final CFTC Retail Forex Rule, 75 FR at 55412.
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    The proposal requested comment on whether the risk disclosure 
statement should include a disclosure that when a retail customer loses 
money trading, the dealer makes money.
    The commenter said that this disclosure is inaccurate because the 
bank immediately hedges retail forex transactions or nets them with 
similar transactions and therefore does not profit from exchange rate 
fluctuations. The commenter argued it is more accurate to inform 
customers that the bank may or does mark-up (or mark-down) transactions 
or apply commission rates to transactions that will create income for 
the bank.
    The OCC understands that the economic model of a retail forex 
business may be to profit from spreads, fees, and commissions. 
Nonetheless, because a national bank engaging in retail forex 
transactions is trading as principal, by definition, when the retail 
forex customer loses money on a retail forex transaction, the national 
bank makes money on that transaction. The OCC therefore believes that 
this disclosure is accurate and helps potential retail forex customers 
understand the nature of retail forex transactions. Similarly, the 
CFTC's retail forex rule requires a disclosure that when a retail 
customer loses money

[[Page 41379]]

trading, the dealer makes money on such trades, in addition to any 
fees, commissions, or spreads.\39\ The final rule includes this 
disclosure requirement.
---------------------------------------------------------------------------

    \39\ 17 CFR 5.5(b).
---------------------------------------------------------------------------

    The proposal asked whether it would be convenient to national banks 
and retail forex customers to allow the retail forex risk disclosure to 
be combined with other disclosures that national banks make to their 
customers.
    The commenter asked the OCC to confirm that national banks may add 
topics to the risk disclosure statement.
    The OCC is concerned that the effectiveness of the disclosure could 
be diminished if surrounded by other topics. Therefore, the final rule 
requires the risk disclosure statement to be given to potential retail 
forex customers as set forth in the rule. National banks may describe 
and provide additional information on retail forex transactions in a 
separate document.
    The commenter further asked the OCC to confirm that the risk 
disclosure statement may be appended to account opening agreements or 
forms and that a single signature by the customer on a combined account 
agreement and disclosure form can be used as long as the customer is 
directed to and acknowledges the risk disclosure statement immediately 
prior to the signature line.
    The OCC believes that a separate risk disclosure document 
appropriately highlights the risks in retail forex transactions and 
that requiring a separate signature for the separate risk disclosure 
appropriately calls a potential retail forex customer's attention to 
the risk disclosure statement. However, a national bank may attach the 
risk disclosure to a related document, such as the account agreement.
    The proposal requested comment on whether the risk disclosure 
statement should include a disclosure of fees that the national bank 
charges to retail forex customers.
    The commenter agreed that the disclosure of fees is appropriate, 
but should not include income from hedging retail forex customers' 
positions or income streams not charged to the customer. Moreover, the 
commenter stated that it is impractical to numerically state the bid/
ask spread given that it may vary.
    The final rule, like the proposed rule, does not require national 
banks to disclose income streams not charged to the retail forex 
customer. However, a national bank must do more than simply describe 
the means by which it earns revenue. To the extent practical, it must 
quantify the fees, charges, spreads, or commissions that the national 
bank may impose on the retail forex customer in connection with the 
customer's retail forex account or a retail forex transaction.\40\ The 
OCC further believes that disclosure of the bid/ask spread is possible 
in a variety of ways. If a national bank bases its prices off of the 
prices provided by a third party, then the national bank may disclose 
the use of the third party's pricing and the markup charged to retail 
forex customers. Alternatively, the national bank may disclose the bid/
ask spread by quoting both the bid and ask prices to retail forex 
customers prior to entering into a retail forex transaction. These 
quotes may be provided as part of an electronic trading platform or, 
after a retail forex customer calls the national bank for a retail 
forex transaction, by providing both a bid and ask price for the 
transaction.
---------------------------------------------------------------------------

    \40\ The final rule clarifies that a national bank must disclose 
spreads in addition to fees, commissions, and charges.
---------------------------------------------------------------------------

    The commenter read the disclosure to suggest that the national bank 
cannot seek to recover losses not covered by a customer's margin 
account via an appropriate dispute resolution forum and asked the OCC 
to confirm that this was not the case.
    Section 48.9(d)(4) requires a national bank, in the event that a 
retail forex customer's margin falls below the amount needed to satisfy 
the margin requirement to either: (1) Collect sufficient margin from 
the retail forex customer; or (2) liquidate the retail forex customer's 
retail forex transactions. The final rule does not forbid a national 
bank from seeking to recover a deficiency from a retail forex customer 
in an appropriate venue. The disclosure has been revised to make this 
fact clear.
    Finally, the commenter said that the disclosure regarding the 
availability of FDIC-insurance for retail forex transactions should be 
clarified.
    The disclosure requires a national bank to state that retail forex 
transactions are not FDIC-insured. The commenter agreed with that 
statement. It noted, however, that margin funds may be insured 
deposits. The FDIC-insured status of funds held in a retail forex 
margin account will depend on whether such funds are held in a manner 
that meets the requirements of the Federal Deposit Insurance Act and 
its implementing regulations. National banks may accurately disclose 
the availability of FDIC insurance for retail forex margin accounts in 
a separate document as permitted by law.

Section 48.7--Recordkeeping

    This section specifies which documents and records that a national 
bank engaged in retail forex transactions must retain for examination 
by the OCC. This section also prescribes document maintenance 
standards. The OCC notes that records may be kept electronically as 
permitted under the Electronic Signatures in Global and National 
Commerce Act.\41\
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 7001(d).
---------------------------------------------------------------------------

    The OCC received no comments on this section. Recordkeeping 
requirements found in Sec.  48.13(a)(3) of the proposed rule were moved 
into this section to centralize recordkeeping requirements in one 
section. Furthermore, the recordkeeping requirements have been modified 
to accommodate oral orders and offset instructions. A national bank 
must create an audio recording of oral orders and offset instructions.

Section 48.8--Capital Requirements

    This section requires that a national bank that offers or enters 
into retail forex transactions must be ``well capitalized'' as defined 
in the OCC's prompt corrective action regulation.\42\ In addition, a 
national bank must continue to hold capital against retail forex 
transactions as provided in the OCC's capital regulation.\43\ This rule 
does not amend the OCC's prompt corrective action regulation or capital 
regulation.
---------------------------------------------------------------------------

    \42\ 12 CFR part 6.
    \43\ 12 CFR part 3.
---------------------------------------------------------------------------

    The proposed rule contained a provision allowing the OCC to exempt 
a national bank from the well-capitalized requirement. This provision 
has been removed in light of the general reservation of authority in 
Sec.  48.17.

Section 48.9--Margin Requirements

    Paragraph (a) requires a national bank that engages in retail forex 
transactions, in advance of any such transaction, to collect from the 
retail forex customer margin equal to at least 2 percent of the 
notional value of the retail forex transaction if the transaction is in 
a major currency pair and at least 5 percent of the notional value of 
the retail forex transaction otherwise. These margin requirements are 
identical to the requirements imposed by the CFTC's retail forex rule.
    The proposal requested comments on whether it should define the 
major currencies in the final rule but did not receive any. The final 
rule adopts the proposal's approach to identifying the major 
currencies.
    A major currency pair is a currency pair with two major currencies. 
The

[[Page 41380]]

major currencies currently are the U.S. Dollar (USD), Canadian Dollar 
(CAD), Euro (EUR), United Kingdom Pound (GBP), Japanese Yen (JPY), 
Swiss Franc (CHF), New Zealand Dollar (NZD), Australian Dollar (AUD), 
Swedish Kronor (SEK), Danish Kroner (DKK), and Norwegian Krone 
(NOK).\44\ An evolving market could change the major currencies, so the 
OCC is not proposing to define the term ``major currency,'' but rather 
expects that national banks will obtain an interpretive letter from the 
OCC prior to treating any currency other than those listed above as a 
``major currency.'' \45\
---------------------------------------------------------------------------

    \44\ See National Futures Association, Forex Transactions: A 
Regulatory Guide 17 (Feb. 2011); Federal Reserve Bank of New York, 
Survey of North American Foreign Exchange Volume tbl. 3e (Jan. 
2011); Bank for International Settlements, Report on Global Foreign 
Exchange Market Activity in 2010 at 15 tbl. B.6 (Dec. 2010).
    \45\ The Final CFTC Retail Forex Rule similarly does not define 
``major currency.''
---------------------------------------------------------------------------

    For retail forex transactions, margin protects the retail forex 
customer from the risks related to trading with excessive leverage. The 
volatility of the foreign currency markets exposes retail forex 
customers to substantial risk of loss. High leverage ratios can 
significantly increase a customer's losses and gains. Even a small move 
against a customer's position can result in a substantial loss. Even 
with required margin, losses can exceed the margin posted and, if the 
account is not closed out, and, depending on the specific 
circumstances, the customer could be liable for additional losses. 
Given the risks that are inherent in the trading of retail forex 
transactions by retail customers, the only funds that should be 
invested in such transactions are those that the customer can afford to 
lose.
    Prior to the CFTC's rule, nonbank dealers routinely permitted 
customers to trade with 1 percent margin (leverage of 100:1) and 
sometimes with as little as 0.25 percent margin (leverage of 400:1). 
When the CFTC proposed its retail forex rule in January 2010, it 
proposed a margin requirement of 10 percent (leverage of 10:1). In 
response to comments, the CFTC reduced the required margin in the final 
rule to 2 percent (leverage of 50:1) for trades involving major 
currencies and 5 percent (leverage of 20:1) for trades involving non-
major currencies.
    The proposal requested comment on whether these margin requirements 
were appropriate to protect retail forex customers.
    The commenter did not object to the amount of margin required. 
However, the commenter suggested that the margin required by this 
paragraph should be initial margin rather than maintenance margin. The 
commenter also suggested that national banks be allowed to set 
maintenance margin levels as a matter of the banks' credit and risk 
policies in a manner that balances (i) protecting customers from a 
forced close-put of their positions as soon as an adverse market move 
erodes margin under the 2 or 5 percent minimum level with (ii) the need 
to promptly collect margin and close out positions when a customer 
fails to meet a margin call. The commenter also suggested that 
customers should have some reasonable time to meet margin calls before 
they are deemed to have defaulted and face a forced liquidation of 
their positions.
    Subject to reasonable collection times as described below, a 
national bank must ensure that there is always sufficient margin in a 
retail forex customer's margin account for the customer's open retail 
forex transactions. If the amount of margin in a retail forex 
customer's margin account is insufficient to meet the requirements of 
paragraph (a), then Sec.  48.9(d)(4) requires the national bank to make 
a margin call to replenish the margin account to an acceptable level 
and, if the customer does not comply with the margin call, to liquidate 
the retail forex customer's retail forex transactions. Retail forex 
customers should have a reasonable amount of time to post required 
margin for retail forex transactions. Market practice is for retail 
forex counterparties to make margin calls at the close of trading on a 
trading day based on margin levels at the end of that day or at the 
open of trading on the next trading day based on margin levels at the 
end of that prior day. If the retail forex customer does not post 
sufficient margin by the end of the next close of trading, then the 
retail forex counterparty liquidates the customer's retail forex 
account. In other words, by the close of business on a given trading 
day, the margin account must be sufficient to meet the margin 
requirements as at the end of the prior trading day.
    Paragraph (b) specifies the acceptable forms of margin that 
customers may post. National banks must establish policies and 
procedures providing for haircuts for noncash margin collected from 
customers and must review these haircuts annually. It may be prudent 
for national banks to review and modify the size of the haircuts more 
frequently. The OCC requested comment on whether the final rule should 
specify haircuts for noncash margin. The OCC received no comments on 
this paragraph and adopts this paragraph as proposed.
    Paragraph (c) requires a national bank to hold each retail forex 
customer's retail forex transaction margin in a separate account. This 
paragraph is designed to work with the prohibition on set-off in 
paragraph (e), so that a national bank may not have an account 
agreement that treats all of a retail forex customer's assets held by a 
bank as margin for retail forex transactions.
    The commenter requested clarification that this paragraph allows 
national banks to place margin into an omnibus or commingled account 
for operational convenience, provided that the bank keeps records of 
each customer's margin balance.
    A national bank may place margin collected from retail forex 
customers into an omnibus or commingled account if the bank keeps 
records of each retail forex customer's margin balance. A ``separate 
account'' is one separate from the retail forex customer's other 
accounts at the bank. For example, margin for retail forex transactions 
cannot be held in a retail forex customer's savings account. Funds in a 
savings account pledged as retail forex margin must be transferred to a 
separate margin account, which could be an individual or an omnibus 
margin account. The final rule contains slightly modified language to 
clarify this intent. The FDIC-insured status of funds held in an 
omnibus account will depend on whether such funds are held in a manner 
that meets the requirements of the Federal Deposit Insurance Act and 
its implementing regulations.
    Paragraph (d) requires a national bank to collect additional margin 
from the customer or to liquidate the customer's position if the amount 
of margin held by the national bank fails to meet the requirements of 
paragraph (a). The proposed rule would have required the national bank 
to mark the customer's open retail forex positions and the value of the 
customer's margin to the market daily to ensure that a retail forex 
customer does not accumulate substantial losses not covered by margin.
    The proposal requested comment on how frequently retail forex 
customers' margin accounts should be marked to market.
    The commenter asked that the final rules permit marking to market 
more frequently than daily if the national bank's systems and customer 
agreements permit. The final rule, like the proposed rule, requires 
marking to market at least once per day. Nothing in paragraph (d) 
forbids a more frequent schedule.

[[Page 41381]]

    Paragraph (e) prohibits a national bank from applying a retail 
forex customer's retail forex obligations against any asset or 
liability of the retail forex customer other than money or property 
pledged as margin.\46\ A national bank's relationship with a retail 
forex customer may evolve out of a prior relationship of providing 
financial services or may evolve into such a relationship. Thus, it is 
more likely that a national bank acting as a retail forex counterparty 
will hold other assets or liabilities of a retail forex customer, for 
example a deposit account or mortgage, than a retail forex dealer 
regulated by the CFTC. The OCC believes that it is inappropriate to 
allow a national bank to leave trades open and allow additional 
obligations to accrue that can be applied against a retail forex 
customer's other assets or liabilities held by the national bank. 
However, should a retail forex customer's retail forex obligations 
exceed the amount of margin he or she has pledged, this rule does not 
forbid a national bank from seeking to recover the deficiency in an 
appropriate forum, such as a court of law. Paragraph (e) does not apply 
to debts a retail forex customer owes to a national bank as recognized 
in a judgment of a court of competent jurisdiction.
---------------------------------------------------------------------------

    \46\ The final rule clarifies that the prohibition on setting 
off retail forex ``losses'' in the proposed rule was meant to 
include costs related to retail forex transactions, such as fees, 
spreads, charges, and commissions.
---------------------------------------------------------------------------

    The commenter suggested that retail forex customers should be able 
to pledge assets other than those held in the customer's margin 
account. For example, a customer could nominate a deposit account as 
containing margin for its retail forex transactions.
    Nothing in this rule prevents retail forex customers from pledging 
other assets they have at the bank as margin for retail forex 
transactions. However, once those assets are pledged as margin, the 
national bank must transfer them to the separate margin account. For 
example, if a retail forex customer pledges $500 in her checking 
account as margin, then the bank must deduct $500 from the checking 
account and place $500 in the margin account. The OCC believes this 
transfer appropriately alerts retail forex customers to the nature of 
the pledge. A national bank may not evade this requirement by merely 
taking a security interest in assets pledged as margin: pledged assets 
must be placed in a separate margin account.

Section 48.10--Required Reporting to Customers

    This section requires a national bank engaging in retail forex 
transactions to provide each retail forex customer a monthly statement 
and confirmation statements.
    The proposal sought comment on whether this section provides for 
statements that would be useful and meaningful to retail forex 
customers or whether other information would be more appropriate.
    The commenter sought clarification that the statements may be 
provided electronically, and also suggested that retail forex customers 
would be better served with continuous online access to account 
information rather than monthly statements.
    The OCC encourages national banks to provide real-time, continuous 
access to account information. This rule does not prevent national 
banks from doing so. However, the OCC believes it is valuable to 
require national banks to provide retail forex account information to 
retail forex customers at least once per month. Monthly statements may 
be provided electronically as permitted under the Electronic Signatures 
in Global and National Commerce Act.\47\
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 7001(c).
---------------------------------------------------------------------------

Section 48.11--Unlawful Representations

    This section prohibits a national bank and its institution-
affiliated parties from representing that the Federal government, the 
OCC, or any other Federal agency has sponsored, recommended, or 
approved retail forex transactions or products in any way. This section 
also prohibits a national bank from implying or representing that it 
will guarantee against or limit retail forex customer losses or not 
collect margin as required by Sec.  48.9. This section does not 
prohibit a national bank from sharing in a loss resulting from error or 
mishandling of an order. Guaranties entered into prior to effectiveness 
of the prohibition would only be affected if an attempt is made to 
extend, modify, or renew them. This section also does not prohibit a 
national bank from hedging or otherwise mitigating its own exposure to 
retail forex transactions or any other foreign exchange risk.
    The OCC received no comments to this section and adopts it as 
proposed.

Section 48.12--Authorization to Trade

    The proposed rule required national banks to have specific written 
authorization from a retail forex customer before effecting a retail 
forex transaction.
    The commenter said that requiring specific written authorization 
from a retail forex customer before effecting a retail forex 
transaction for that customer would be burdensome and detrimental to 
the customer's interests, if, for example, the customer cannot convey 
written instructions because of technical difficulties.
    The OCC agrees with this concern and further notes that the CFTC's 
retail forex rule does not require written authorization for each 
retail forex transaction. The final rule requires a national bank to 
obtain a retail forex customer's specific authorization (written or 
oral) to effect a particular trade. National banks must keep records of 
authorizations to trade pursuant to this rule.

Section 48.13--Trading and Operational Standards

    This section largely follows the trading standards of the CFTC's 
retail forex rule, which were developed to prevent some of the 
deceptive or unfair practices identified by the CFTC and the National 
Futures Association.
    Under paragraph (a), a national bank engaging in retail forex 
transactions is required to establish and enforce internal rules, 
procedures, and controls (1) to prevent front running, a practice in 
which transactions in accounts of the national bank or its related 
persons are executed before a similar customer order; and (2) to 
establish settlement prices fairly and objectively.
    The commenter requested clarification that the prohibition on front 
running applies only when the person entering orders for the bank's 
account or the account of related persons has knowledge of unexecuted 
retail customer orders, and that a national bank may comply with this 
provision by erecting a firewall between the retail forex order book 
and other forex trading desks.
    The final rule requires national banks to establish reasonable 
policies, procedures, and controls to address front running. This 
provision is designed to prevent the national banks from unfairly 
taking advantage of information they gain from customer trades. 
Effective firewalls and information barriers are reasonable policies, 
procedures, and controls to ensure that a national bank does not take 
unfair advantage of its retail forex customers. The final rule 
clarifies paragraph (a) accordingly.
    Paragraph (b) prohibits a national bank engaging in retail forex 
transactions from disclosing that it

[[Page 41382]]

holds another person's order unless disclosure is necessary for 
execution or is made at the OCC's request. The OCC received no comments 
on this paragraph and adopts this paragraph as proposed.
    Paragraph (c) ensures that related persons of another retail forex 
counterparty do not open accounts with a national bank without the 
knowledge and authorization of the account surveillance personnel of 
the other retail forex counterparty with which they are affiliated. 
Similarly, paragraph (d) ensures that related persons of a national 
bank do not open accounts with other retail forex counterparties 
without the knowledge and authorization of the account surveillance 
personnel of the national bank with which they are affiliated.
    The commenter requested confirmation that national banks may rely 
on a representation of potential customers that they are not affiliated 
with a retail forex counterparty. Paragraph (c) prohibits a national 
bank from knowingly handling the retail forex account of a related 
person of a retail forex counterparty. To the extent reasonable, 
national banks may rely on representations of potential retail forex 
customers. If, however, a national bank has actual knowledge that a 
retail forex customer is a related person of a retail forex 
counterparty, then no representation by the customer will allow the 
bank to handle that retail forex account. A national bank should 
inquire as to whether a potential retail forex customer is related to a 
retail forex counterparty to avoid violating paragraph (c) through 
willful ignorance.
    The commenter also requested clarification that these paragraphs 
apply only to employees of firms that offer retail forex transactions, 
and, in the case of banks, only employees of the retail forex business 
and not any employee of the bank that offers retail forex transactions. 
The OCC agrees that the prohibitions in paragraph (c) and (d) should 
only apply to employees working in the retail forex business; 
paragraphs (c) and (d) are designed to prevent evasion of the 
prohibition against front running. The final rule clarifies this point.
    Paragraph (e) prohibits a national bank engaging in retail forex 
transactions from (1) entering a retail forex transaction to be 
executed at a price that is not at or near prices at which other retail 
forex customers have executed materially similar transactions with the 
national bank during the same time period, (2) changing prices after 
confirmation, (3) providing a retail forex customer with a new bid 
price that is higher (or lower) than previously provided without 
providing a new ask price that is similarly higher (or lower) as well, 
and (4) establishing a new position for a retail forex customer (except 
to offset an existing position) if the national bank holds one or more 
outstanding orders of other retail forex customers for the same 
currency pair at a comparable price.
    Paragraph (e)(3) does not prevent a national bank from changing the 
bid or ask prices of a retail forex transaction to respond to market 
events. The OCC understands that market practice among CFTC-registrants 
is not to offer requotes but to simply reject orders and advise 
customers they may submit a new order (which the dealer may or may not 
accept). Similarly, a national bank may reject an order and advise 
customers that they may submit a new order.
    The proposal sought comment on whether paragraph (e)(3) 
appropriately protected retail forex customers or whether a prohibition 
on re-quoting would be simpler.
    The commenter argued that the prohibition on re-quoting in 
paragraph (e)(3) is overly broad and should permit new bids or offers 
to reflect updated spreads. In the alternative, the commenter suggested 
prohibiting re-quoting and requiring that, in the event an order is not 
confirmed, the customer must submit a new order at the then-currently 
displayed price. As stated above, rather than allowing requotes, a 
national bank may reject orders and request that customers submit a new 
order. Paragraph (e)(3) is consistent with the CFTC's retail forex rule 
and the OCC adopts it as proposed.
    Paragraph (e)(4) requires a national bank engaging in retail forex 
transactions to execute similar orders in the order they are received. 
The prohibition prevents a national bank from offering preferred 
execution to some of its retail forex customers but not others.

Section 48.14--Supervision

    This section imposes on a national bank and its agents, officers, 
and employees a duty to supervise subordinates with responsibility for 
retail forex transactions to ensure compliance with the OCC's retail 
forex rule.
    The proposal requested comment on whether this section imposed 
requirements not already encompassed by safety and soundness standards. 
Having received no comments to this section, the OCC adopts it as 
proposed.

Section 48.15--Notice of Transfers

    This section describes the requirements for transferring a retail 
forex account. Generally, a national bank must provide retail forex 
customers 30 days' prior notice before transferring or assigning their 
account. Affected customers may then instruct the national bank to 
transfer the account to an institution of their choosing or liquidate 
the account. There are three exceptions to the above notice 
requirement: a transfer in connection with the receivership or 
conservatorship under the Federal Deposit Insurance Act; a transfer 
pursuant to a retail forex customer's specific request; and a transfer 
otherwise allowed by applicable law. A national bank that is the 
transferee of retail forex accounts must generally provide the 
transferred customers with the risk disclosure statement of Sec.  48.6 
and obtain each affected customer's written acknowledgement within 60 
days.
    The OCC received no comments to this section and adopts it as 
proposed.

Section 48.16--Customer Dispute Resolution

    This section imposes limitations on how a national bank may handle 
disputes arising out of a retail forex transaction. For example, this 
section would restrict a national bank's ability to require mandatory 
arbitration for such disputes.
    The OCC received no comments to this section and adopts is as 
proposed.

Section 48.17--Reservation of Authority

    This section allows the OCC to modify certain requirements of this 
rule consistent with safety and soundness and the protection of retail 
forex customers. The OCC understands the need for flexibility as 
foreign exchange products or foreign exchange trading procedures 
develop and to ensure that such products or trading procedures are 
subject to appropriate customer protection and safety and soundness 
standards.

V. Regulatory Analysis

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., 
generally requires an agency that is issuing a proposed rule to prepare 
and make available for public comment an initial regulatory flexibility 
analysis that describes the impact of the proposed rule on small 
entities. The RFA provides that an agency is not required to prepare 
and publish an initial regulatory flexibility analysis if the agency 
certifies that the proposed rule will not, if promulgated as a final 
rule, have a significant economic impact on a substantial number of 
small entities. Under regulations issued by the

[[Page 41383]]

Small Business Administration, a small entity includes a commercial 
bank with assets of $175 million or less.\48\ This rule as proposed 
would impose recordkeeping and disclosure requirements on banks, 
including small banks, which engage in retail forex transactions with 
their customers.
---------------------------------------------------------------------------

    \48\ Small Business Administration regulations define ``small 
entities'' to include banks with a four-quarter average of total 
assets of $175 million or less. 13 CFR 121.201.
---------------------------------------------------------------------------

    Pursuant to section 605(b) of the RFA, the OCC certified that this 
rule, as proposed, would not have a significant economic impact on a 
substantial number of the small entities it supervises. Accordingly, a 
regulatory flexibility analysis was not required. In making this 
determination, the OCC estimated that there were no small banking 
organizations currently engaging in retail forex transactions with 
their customers. Therefore, the OCC estimates that no small banking 
organizations under its supervision would be affected by this final 
rule.

B. Paperwork Reduction Act

    In conjunction with the Notice of Proposed Rulemaking (NPRM),\49\ 
the OCC submitted the information collection requirements contained 
therein to OMB for review under the Paperwork Reduction Act (PRA). In 
response, the Office of Management and Budget (OMB) filed comments with 
the OCC in accordance with 5 CFR 1320.11(c). The comments indicated 
that OMB was withholding approval at that time. The Agencies were 
directed to examine public comment in response to the NPRM and include 
in the supporting statement of the information collection request (ICR) 
to be filed at the final rule stage a description of how the agency has 
responded to any public comments on the ICR, including comments 
maximizing the practical utility of the collection and minimizing the 
burden. The OCC received one comment addressing the substance and/or 
method of the disclosure and reporting requirements contained in the 
proposed rule. This comment and the OCC's response to the comment is 
included in the preamble discussion and in a revised Supporting 
Statement submitted to OMB.
---------------------------------------------------------------------------

    \49\ 76 FR 22633 (April 22, 2011).
---------------------------------------------------------------------------

    The information collection requirements contained in this final 
rule have been submitted by the OCC to OMB for review and approval 
under 44 U.S.C. 3506 and 5 CFR part 1320. In accordance with section 
3512 of the PRA, 44 U.S.C. 3512, the OCC may not conduct or sponsor, 
and a respondent is not required to respond to, an information 
collection unless it displays a currently valid OMB control number. The 
information collection requirements are found in Sec. Sec.  48.4-48.7, 
48.9-48.10, 48.13, and 48.15-48.16.
    Comments continue to be invited on:
    (a) Whether the collection of information is necessary for the 
proper performance of the OCC's functions, including whether the 
information has practical utility;
    (b) The accuracy of the estimate of the burden of the information 
collection, including the validity of the methodology and assumptions 
used;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of information collection on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    (e) Estimates of capital or startup costs and costs of operation, 
maintenance, and purchase of services to provide information.
    All comments will become a matter of public record. Comments should 
be addressed to: Communications Division, Office of the Comptroller of 
the Currency, Public Information Room, Mailstop 2-3, Attention: 1557-
0250, 250 E Street, SW., Washington, DC 20219. In addition, comments 
may be sent by fax to 202-874-5274, or by electronic mail to 
[email protected]. You may personally inspect and photocopy 
comments at the OCC, 250 E Street, SW., Washington, DC 20219. For 
security reasons, the OCC requires that visitors make an appointment to 
inspect comments. You may do so by calling 202-874-4700. Upon arrival, 
visitors will be required to present valid government-issued photo 
identification and submit to security screening in order to inspect and 
photocopy comments.
    Additionally, you should send a copy of your comments to the OMB 
Desk Officer, by mail to U.S. Office of Management and Budget, 725 17th 
Street, NW., 10235, Washington, DC 20503, or by fax to 202-395-6974.

Proposed Information Collection

    Title of Information Collection: Retail Foreign Exchange 
Transactions.
    Frequency of Response: On occasion.
    Affected Public: Businesses or other for-profit.
    Respondents: National banks and Federal branches and agencies of 
foreign banks.

Reporting Requirements

    The reporting requirements in Sec.  48.4 require that, prior to 
initiating a retail forex business, a national bank provide the OCC 
with prior notice and obtain a written supervisory non-objection 
letter. In order to obtain a supervisory non-objection letter, a 
national bank must have written policies and procedures and risk 
measurement and management systems and controls in place to ensure that 
retail forex transactions are conducted in a safe and sound manner. The 
national bank must also provide other information required by the OCC, 
such as documentation of customer due diligence, new product approvals, 
and haircuts applied to noncash margins. A national bank already 
engaging in a retail forex business may continue to do so, provided it 
requests an extension of time.

Disclosure Requirements

    Section 48.5, regarding the application and closing out of 
offsetting long and short positions, requires a national bank to 
promptly provide the customer with a statement reflecting the financial 
result of the transactions and the name of the introducing broker to 
the account. The customer provides specific written instructions on how 
the offsetting transaction should be applied.
    Section 48.6 requires that a national bank furnish a retail forex 
customer with a written disclosure before opening an account that will 
engage in retail forex transactions for a retail forex customer and 
receive an acknowledgment from the customer that it was received and 
understood. It also requires the disclosure by a national bank of its 
fees and other charges and its profitable accounts ratio.
    Section 48.10 requires a national bank to issue monthly statements 
to each retail forex customer and to send confirmation statements 
following transactions.
    Section 48.13(b) allows disclosure by a national bank that an order 
of another person is being held by them only when necessary to the 
effective execution of the order or when the disclosure is requested by 
the OCC. Section 48.13(c) prohibits a national bank engaging in retail 
forex transactions from knowingly handling the account of any related 
person of another retail forex counterparty unless it receives proper 
written authorization, promptly prepares a written record of the order, 
and transmits to the counterparty copies all statements and written 
records. Section 48.13(d) prohibits a related person of a national bank 
engaging in forex transactions from having an account with another 
retail forex counterparty unless the counterparty receives proper 
written authorization and transmits copies of all statements

[[Page 41384]]

and written records for the related person's retail forex accounts to 
the national bank.
    Section 48.15 requires a national bank to provide a retail forex 
customer with 30 days' prior notice of any assignment of any position 
or transfer of any account of the retail forex customer. It also 
requires a national bank to which retail forex accounts or positions 
are assigned or transferred to provide the affected customers with risk 
disclosure statements and forms of acknowledgment and receive the 
signed acknowledgments within 60 days.
    The customer dispute resolution provisions in Sec.  48.16 requires 
certain endorsements, acknowledgments, and signature language. Section 
48.16 also requires that within 10 days after receipt of notice from 
the retail forex customer that the customer intends to submit a claim 
to arbitration, the national bank provides to the customer a list of 
persons qualified in the dispute resolution, and that the customer must 
notify the national bank of the person selected within 45 days of 
receipt of such list.

Policies and Procedures; Recordkeeping

    Sections 48.7 and 48.13(a) require that a national bank engaging in 
retail forex transactions keep full, complete, and systematic records 
and establish and implement internal rules, procedures, and controls. 
Section 48.7 also requires that a national bank keep account, financial 
ledger, transaction and daily records; price logs; records of methods 
used to determine bids or asked prices; memorandum orders; post-
execution allocation of bunched orders; records regarding its ratio of 
profitable accounts and possible violations of law; records for noncash 
margin; order tickets; and monthly statements and confirmations. 
Section 48.9 requires policies and procedures for haircuts for noncash 
margin collected under the rule's margin requirements and annual 
evaluations and modifications of the haircuts.
Estimated PRA Burden
    Estimated Number of Respondents: 42 national banks; 3 service 
providers.
    Total Reporting Burden: 672 hours.
    Total Disclosure Burden: 54,166 hours.
    Total Recordkeeping Burden: 12,416 hours.
    Total Annual Burden: 67,254 hours.

C. Unfunded Mandates Reform Act of 1995

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded 
Mandates Act), 2 U.S.C. 1532, requires that an agency prepare a 
budgetary impact statement before promulgating any rule likely to 
result in a Federal mandate that may result in the expenditure by 
State, local, and tribal governments, in the aggregate, or by the 
private sector, of $100 million or more in any one year. If a budgetary 
impact statement is required, section 205 of the Unfunded Mandates Act 
also requires an agency to identify and consider a reasonable number of 
regulatory alternatives before promulgating a rule. The OCC has 
determined that this rule will not result in expenditures by State, 
local, and tribal governments, or by the private sector, of $100 
million or more in any one year.\50\ Accordingly, this final rule is 
not subject to section 202 of the Unfunded Mandates Act.
---------------------------------------------------------------------------

    \50\ In particular, the OCC notes that forex transactions 
between national banks and governmental entities are not retail 
forex transactions subject to this rule, because governmental 
entities are eligible contract participants. See 7 U.S.C. 
1a(18)(A)(vii).
---------------------------------------------------------------------------

D. Effective Date Under the Administrative Procedures Act

    This final rule takes effect on July 15, 2011. 5 U.S.C. 553(d)(1) 
requires publication of a substantive rule not less than 30 days before 
its effective date, except in cases in which the rule grants or 
recognizes an exemption or relieves a restriction. Section 
2(c)(2)(E)(ii) of the CEA would prohibit national banks from engaging 
in retail forex transactions unless this final rule becomes effective 
on July 16, 2011. This final rule would relieve that restriction and 
allow national banks to continue to engage in retail forex transactions 
without delay. Furthermore, under 5 U.S.C. 553(d)(3), an agency may 
find good cause to publish a rule less than 30 days before its 
effective date. The OCC finds such good cause, as the 30-day delayed 
effective date is unnecessary under the provisions of the final rule. 
In Sec.  48.4(c) of the final rule, the OCC allows national banks a 30-
day grace period to inform the OCC of its retail forex activity, along 
with up to a six-month window to comply with the provisions of the 
retail forex rule.

E. Effective Date Under the CDRI Act

    The Riegle Community Development and Regulatory Improvement Act of 
1994 (CDRI Act), 12 U.S.C. 4801 et seq., provides that new regulations 
that impose additional reporting or disclosure requirements on insured 
depository institutions do not take effect until the first day of a 
calendar quarter after the regulation is published, unless the agency 
determines there is good cause for the regulation to become effective 
at an earlier date. The OCC finds good cause that this final rule 
should become effective on July 15, 2011, as it would be in the public 
interest to require the disclosure and consumer protection provisions 
in this rule to take effect at this earlier date. If the rule did not 
become effective until October 1, 2011, then national banks would not 
be able to provide retail forex transactions to customers to meet their 
financial needs.

List of Subjects in 12 CFR Part 48

    Banks, Consumer protection, Definitions, Federal branches and 
agencies, Foreign currencies, Foreign exchange, National banks, 
Reporting and recordkeeping requirements.

    For the reasons stated in the preamble, part 48 to Title 12, 
Chapter I of the Code of Federal Regulations is added to read as 
follows:

PART 48--RETAIL FOREIGN EXCHANGE TRANSACTIONS

Sec.
48.1 Authority, purpose, and scope.
48.2 Definitions.
48.3 Prohibited transactions.
48.4 Supervisory non-objection.
48.5 Application and closing out of offsetting long and short 
positions.
48.6 Disclosure.
48.7 Recordkeeping.
48.8 Capital requirements.
48.9 Margin requirements.
48.10 Required reporting to customers.
48.11 Unlawful representations.
48.12 Authorization to trade.
48.13 Trading and operational standards.
48.14 Supervision.
48.15 Notice of transfers.
48.16 Customer dispute resolution.
48.17 Reservation of authority.

    Authority:  7 U.S.C. 27 et seq.; 12 U.S.C. 1 et seq., 24, 93a, 
161, 1813(q), 1818, 1831o, 3102, 3106a, 3108.


Sec.  48.1  Authority, purpose, and scope.

    (a) Authority. A national bank may engage in retail foreign 
exchange transactions. A national bank engaging in such transactions 
must comply with the requirements of this part.
    (b) Purpose. This part establishes rules applicable to retail 
foreign exchange transactions engaged in by national banks and applies 
on or after the effective date.
    (c) Scope. Except as provided in paragraph (d) of this section, 
this part applies to national banks.
    (d) International applicability. Sections 48.3 and 48.5 to 48.16 do 
not apply to retail foreign exchange transactions between a foreign 
branch of a national bank and a non-U.S. customer. With respect to 
those transactions, the foreign branch remains

[[Page 41385]]

subject to any disclosure, recordkeeping, capital, margin, reporting, 
business conduct, documentation, and other requirements of foreign law 
applicable to the branch.


Sec.  48.2  Definitions.

    In addition to the definitions in this section, for purposes of 
this part, the following terms have the same meaning as in the 
Commodity Exchange Act: ``Affiliated person of a futures commission 
merchant''; ``associated person''; ``contract of sale''; ``commodity''; 
``eligible contract participant''; ``futures commission merchant''; 
``future delivery''; ``option''; ``security''; and ``security futures 
product''.
    Affiliate has the same meaning as in section 2(k) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1841(k)).
    Commodity Exchange Act means the Commodity Exchange Act (7 U.S.C. 1 
et seq.).
    Forex means foreign exchange.
    Identified banking product has the same meaning as in section 
401(b) of the Legal Certainty for Bank Products Act of 2000 (7 U.S.C. 
27(b)).
    Institution-affiliated party or IAP has the same meaning as in 
section 3(u)(1), (2), or (3) of the Federal Deposit Insurance Act (12 
U.S.C. 1813(u)(1), (2), or (3)).
    Introducing broker means any person that solicits or accepts orders 
from a retail forex customer in connection with retail forex 
transactions.
    National bank means:
    (1) A national bank;
    (2) A Federal branch or agency of a foreign bank, each as defined 
in 12 U.S.C. 3101; and
    (3) An operating subsidiary of a national bank or an operating 
subsidiary of a Federal branch or agency of a foreign bank.
    Related person, when used in reference to a retail forex 
counterparty, means:
    (1) Any general partner, officer, director, or owner of 10 percent 
or more of the capital stock of the retail forex counterparty;
    (2) An associated person or employee of the retail forex 
counterparty, if the retail forex counterparty is not a national bank;
    (3) An IAP of the retail forex counterparty, if the retail forex 
counterparty is a national bank; and
    (4) A relative or spouse of any of the foregoing persons, or a 
relative of such spouse, who shares the same home as any of the 
foregoing persons.
    Retail foreign exchange dealer means any person other than a retail 
forex customer that is, or that offers to be, the counterparty to a 
retail forex transaction, except for a person described in item (aa), 
(bb), (cc)(AA), (dd), or (ff) of section 2(c)(2)(B)(i)(II) of the 
Commodity Exchange Act (7 U.S.C. 2(c)(2)(B)(i)(II)).
    Retail forex account means the account of a retail forex customer, 
established with a national bank, in which retail forex transactions 
with the national bank as counterparty are undertaken, or the account 
of a retail forex customer that is established in order to enter into 
such transactions.
    Retail forex account agreement means the contractual agreement 
between a national bank and a retail forex customer that contains the 
terms governing the customer's retail forex account with the national 
bank.
    Retail forex business means engaging in one or more retail forex 
transactions with the intent to derive income from those transactions, 
either directly or indirectly.
    Retail forex counterparty includes, as appropriate:
    (1) A national bank;
    (2) A retail foreign exchange dealer;
    (3) A futures commission merchant; and
    (4) An affiliated person of a futures commission merchant.
    Retail forex customer means a customer that is not an eligible 
contract participant, acting on his, her, or its own behalf and 
engaging in retail forex transactions.
    Retail forex obligation means an obligation of a retail forex 
customer with respect to a retail forex transaction, including trading 
losses, fees, spreads, charges, and commissions.
    Retail forex proprietary account means: A retail forex account 
carried on the books of a national bank for one of the following 
persons; a retail forex account of which 10 percent or more is owned by 
one of the following persons; or a retail forex account of which an 
aggregate of 10 percent or more of which is owned by more than one of 
the following persons:
    (1) The national bank;
    (2) An officer, director, or owner of 10 percent or more of the 
capital stock of the national bank; or
    (3) An employee of the national bank, whose duties include:
    (i) The management of the national bank's business;
    (ii) The handling of the national bank's retail forex transactions;
    (iii) The keeping of records, including without limitation the 
software used to make or maintain those records, pertaining to the 
national bank's retail forex transactions; or
    (iv) The signing or co-signing of checks or drafts on behalf of the 
national bank;
    (4) A spouse or minor dependent living in the same household as any 
of the foregoing persons; or
    (5) An affiliate of the national bank.
    Retail forex transaction means an agreement, contract, or 
transaction in foreign currency, other than an identified banking 
product or a part of an identified banking product, that is offered or 
entered into by a national bank with a person that is not an eligible 
contract participant and that is:
    (1) A contract of sale of a commodity for future delivery or an 
option on such a contract;
    (2) An option, other than an option executed or traded on a 
national securities exchange registered pursuant to section 6(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78(f)(a)); or
    (3) Offered or entered into on a leveraged or margined basis, or 
financed by a national bank, its affiliate, or any person acting in 
concert with the national bank or its affiliate on a similar basis, 
other than:
    (i) A security that is not a security futures product as defined in 
section 1a(47) of the Commodity Exchange Act (7 U.S.C. 1a(47)); or
    (ii) A contract of sale that:
    (A) Results in actual delivery within two days; or
    (B) Creates an enforceable obligation to deliver between a seller 
and buyer that have the ability to deliver and accept delivery, 
respectively, in connection with their line of business; or
    (iii) An agreement, contract, or transaction that the OCC 
determines is not functionally or economically similar to:
    (A) A contract of sale of a commodity for future delivery or an 
option on such a contract; or
    (B) An option, other than an option executed or traded on a 
national securities exchange registered pursuant to section 6(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78(f)(a)).


Sec.  48.3  Prohibited transactions.

    (a) Fraudulent conduct prohibited. No national bank or its IAPs 
may, directly or indirectly, in or in connection with any retail forex 
transaction:
    (1) Cheat or defraud or attempt to cheat or defraud any person;
    (2) Willfully make or cause to be made to any person any false 
report or statement or cause to be entered for any person any false 
record; or

[[Page 41386]]

    (3) Willfully deceive or attempt to deceive any person by any means 
whatsoever.
    (b) Acting as counterparty and exercising discretion prohibited. If 
a national bank can cause retail forex transactions to be effected for 
a retail forex customer without the retail forex customer's specific 
authorization, then neither the national bank nor its affiliates may 
act as the counterparty for any retail forex transaction with that 
retail forex customer.


Sec.  48.4  Supervisory non-objection.

    (a) Supervisory non-objection required. Before commencing a retail 
forex business, a national bank must provide the OCC with prior notice 
and obtain from the OCC a written supervisory non-objection.
    (b) Requirements for obtaining supervisory non-objection.
    (1) In order to obtain a written supervisory non-objection, a 
national bank must:
    (i) Establish to the satisfaction of the OCC that the national bank 
has established and implemented written policies, procedures, and risk 
measurement and management systems and controls for the purpose of 
ensuring that it conducts retail forex transactions in a safe and sound 
manner and in compliance with this part; and
    (ii) Provide such other information as the OCC may require.
    (2) The information provided under paragraph (b)(1) of this section 
must include, without limitation, information regarding:
    (i) Customer due diligence, including without limitation credit 
evaluations, customer appropriateness, and ``know your customer'' 
documentation;
    (ii) New product approvals;
    (iii) The haircuts that the national bank will apply to noncash 
margin as provided in Sec.  48.9(b)(2); and
    (iv) Conflicts of interest.
    (c) Treatment of existing retail forex businesses. A national bank 
that is engaged in a retail forex business on July 15, 2011, may 
continue to do so for up to six months, subject to an extension of time 
by the OCC, if it requests the supervisory non-objection required by 
paragraph (a) of this section within 30 days of July 15, 2011, and 
submits the information required to be submitted under paragraph (b) of 
this section.
    (d) Compliance with the Commodity Exchange Act. A national bank 
that is engaged in a retail forex business on July 15, 2011 and 
complies with paragraph (c) of this section will be deemed, during the 
six-month or extended period described in paragraph (c) of this 
section, to be acting pursuant to a rule or regulation described in 
section 2(c)(2)(E)(ii)(I) of the Commodity Exchange Act (7 U.S.C. 
2(c)(2)(E)(ii)(I)).


Sec.  48.5  Application and closing out of offsetting long and short 
positions.

    (a) Application of purchases and sales. Any national bank that--
    (1) Engages in a retail forex transaction involving the purchase of 
any currency for the account of any retail forex customer when the 
account of such retail forex customer at the time of such purchase has 
an open retail forex transaction for the sale of the same currency;
    (2) Engages in a retail forex transaction involving the sale of any 
currency for the account of any retail forex customer when the account 
of such retail forex customer at the time of such sale has an open 
retail forex transaction for the purchase of the same currency;
    (3) Purchases a put or call option involving foreign currency for 
the account of any retail forex customer when the account of such 
retail forex customer at the time of such purchase has a short put or 
call option position with the same underlying currency, strike price, 
and expiration date as that purchased; or
    (4) Sells a put or call option involving foreign currency for the 
account of any retail forex customer when the account of such retail 
forex customer at the time of such sale has a long put or call option 
position with the same underlying currency, strike price, and 
expiration date as that sold must:
    (i) Immediately apply such purchase or sale against such previously 
held opposite transaction; and
    (ii) Promptly furnish such retail forex customer with a statement 
showing the financial result of the transactions involved and the name 
of any introducing broker to the account.
    (b) Close-out against oldest open position. In all instances in 
which the short or long position in a customer's retail forex account 
immediately prior to an offsetting purchase or sale is greater than the 
quantity purchased or sold, the national bank must apply such 
offsetting purchase or sale to the oldest portion of the previously 
held short or long position.
    (c) Transactions to be applied as directed by customer. 
Notwithstanding paragraphs (a) and (b) of this section, to the extent 
the national bank allows retail forex customers to use other methods of 
offsetting retail forex transactions, the offsetting transaction must 
be applied as directed by a retail forex customer's specific 
instructions. These instructions may not be made by the national bank 
or an IAP of the national bank.


Sec.  48.6  Disclosure.

    (a) Risk disclosure statement required. No national bank may open 
or maintain open an account that will engage in retail forex 
transactions for a retail forex customer unless the national bank has 
furnished the retail forex customer with a separate written disclosure 
statement containing only the language set forth in paragraph (d) of 
this section and the disclosures required by paragraphs (e) and (f) of 
this section.
    (b) Acknowledgment of risk disclosure statement required. The 
national bank must receive from the retail forex customer a written 
acknowledgment signed and dated by the customer that the customer 
received and understood the written disclosure statement required by 
paragraph (a) of this section.
    (c) Placement of risk disclosure statement. The disclosure 
statement may be attached to other documents as the initial page(s) of 
such documents and as the only material on such page(s).
    (d) Content of risk disclosure statement. The language set forth in 
the written disclosure statement required by paragraph (a) of this 
section is as follows:

Risk Disclosure Statement

    Retail forex transactions involve the leveraged trading of 
contracts denominated in foreign currency with a national bank as 
your counterparty. Because of the leverage and the other risks 
disclosed here, you can rapidly lose all of the funds or property 
you pledge to the national bank as margin for retail forex trading. 
You may lose more than you pledge as margin.
    If your margin falls below the required amount, and you fail to 
provide the required additional margin, your national bank is 
required to liquidate your retail forex transactions. Your national 
bank cannot apply your retail forex losses to any of your assets or 
liabilities at the bank other than funds or property that you have 
pledged as margin for retail forex transactions. However, if you 
lose more money than you have pledged as margin, the bank may seek 
to recover that deficiency in an appropriate forum, such as a court 
of law.
    You should be aware of and carefully consider the following 
points before determining whether retail forex trading is 
appropriate for you.
    (1) Trading is not on a regulated market or exchange--your 
national bank is your trading counterparty and has conflicting 
interests. The retail forex transaction you are entering into is not 
conducted on an interbank market nor is it conducted on a futures 
exchange subject to regulation as a designated contract market by 
the Commodity Futures Trading Commission. The foreign currency 
trades you transact are trades with your national bank as

[[Page 41387]]

the counterparty. When you sell, the national bank is the buyer. 
When you buy, the national bank is the seller. As a result, when you 
lose money trading, your national bank is making money on such 
trades, in addition to any fees, commissions, or spreads the 
national bank may charge.
    (2) An electronic trading platform for retail foreign currency 
transactions is not an exchange. It is an electronic connection for 
accessing your national bank. The terms of availability of such a 
platform are governed only by your contract with your national bank. 
Any trading platform that you may use to enter into off-exchange 
foreign currency transactions is only connected to your national 
bank. You are accessing that trading platform only to transact with 
your national bank. You are not trading with any other entities or 
customers of the national bank by accessing such platform. The 
availability and operation of any such platform, including the 
consequences of the unavailability of the trading platform for any 
reason, is governed only by the terms of your account agreement with 
the national bank.
    (3) You may be able to offset or liquidate any trading positions 
only through your banking entity because the transactions are not 
made on an exchange or regulated contract market, and your national 
bank may set its own prices. Your ability to close your transactions 
or offset positions is limited to what your national bank will offer 
to you, as there is no other market for these transactions. Your 
national bank may offer any prices it wishes, including prices 
derived from outside sources or not in its discretion. Your national 
bank may establish its prices by offering spreads from third-party 
prices, but it is under no obligation to do so or to continue to do 
so. Your national bank may offer different prices to different 
customers at any point in time on its own terms. The terms of your 
account agreement alone govern the obligations your national bank 
has to you to offer prices and offer offset or liquidating 
transactions in your account and make any payments to you. The 
prices offered by your national bank may or may not reflect prices 
available elsewhere at any exchange, interbank, or other market for 
foreign currency.
    (4) Paid solicitors may have undisclosed conflicts. The national 
bank may compensate introducing brokers for introducing your account 
in ways that are not disclosed to you. Such paid solicitors are not 
required to have, and may not have, any special expertise in trading 
and may have conflicts of interest based on the method by which they 
are compensated. You should thoroughly investigate the manner in 
which all such solicitors are compensated and be very cautious in 
granting any person or entity authority to trade on your behalf. You 
should always consider obtaining dated written confirmation of any 
information you are relying on from your national bank in making any 
trading or account decisions.
    (5) Retail forex transactions are not insured by the Federal 
Deposit Insurance Corporation.
    (6) Retail forex transactions are not a deposit in, or 
guaranteed by, a national bank.
    (7) Retail forex transactions are subject to investment risks, 
including possible loss of all amounts invested.
    Finally, you should thoroughly investigate any statements by any 
national bank that minimize the importance of, or contradict, any of 
the terms of this risk disclosure. These statements may indicate 
sales fraud.
    This brief statement cannot, of course, disclose all the risks 
and other aspects of trading off-exchange foreign currency with a 
national bank.
    I hereby acknowledge that I have received and understood this 
risk disclosure statement.

-----------------------------------------------------------------------
Date

-----------------------------------------------------------------------
Signature of Customer

    (e)(1) Disclosure of profitable accounts ratio. Immediately 
following the language set forth in paragraph (d) of this section, the 
statement required by paragraph (a) of this section must include, for 
each of the most recent four calendar quarters during which the 
national bank maintained retail forex customer accounts:
    (i) The total number of retail forex customer accounts maintained 
by the national bank over which the national bank does not exercise 
investment discretion;
    (ii) The percentage of such accounts that were profitable for 
retail forex customer accounts during the quarter; and
    (iii) The percentage of such accounts that were not profitable for 
retail forex customer accounts during the quarter.
    (2) The national bank's statement of profitable trades must include 
the following legend: ``Past performance is not necessarily indicative 
of future results.'' Each national bank must provide, upon request, to 
any retail forex customer or prospective retail forex customer the 
total number of retail forex accounts maintained by the national bank 
for which the national bank does not exercise investment discretion, 
the percentage of such accounts that were profitable, and the 
percentage of such accounts that were not profitable for each calendar 
quarter during the most recent five-year period during which the 
national bank maintained such accounts.
    (f) Disclosure of fees and other charges. Immediately following the 
language required by paragraph (e) of this section, the statement 
required by paragraph (a) of this section must include:
    (1) The amount of any fee, charge, spread, or commission that the 
national bank may impose on the retail forex customer in connection 
with a retail forex account or retail forex transaction;
    (2) An explanation of how the national bank will determine the 
amount of such fees, charges, spreads, or commissions; and
    (3) The circumstances under which the national bank may impose such 
fees, charges, spreads, or commissions.
    (g) Future disclosure requirements. If, with regard to a retail 
forex customer, the national bank changes any fee, charge, or 
commission required to be disclosed under paragraph (f) of this 
section, then the national bank must mail or deliver to the retail 
forex customer a notice of the changes at least 15 days prior to the 
effective date of the change.
    (h) Form of disclosure requirements. The disclosures required by 
this section must be clear and conspicuous and designed to call 
attention to the nature and significance of the information provided.
    (i) Other disclosure requirements unaffected. This section does not 
relieve a national bank from any other disclosure obligation it may 
have under applicable law.


Sec.  48.7  Recordkeeping.

    (a) General rule. A national bank engaging in retail forex 
transactions must keep full, complete, and systematic records, together 
with all pertinent data and memoranda, pertaining to its retail forex 
business, including the following 6 types of records:
    (1) Retail forex account records. For each retail forex account:
    (i) The name and address of the person for whom the account is 
carried or introduced and the principal occupation or business of the 
person;
    (ii) The name of any other person guaranteeing the account or 
exercising trading control with respect to the account;
    (iii) The establishment or termination of the account;
    (iv) A means to identify the person that has solicited and is 
responsible for the account;
    (v) The funds in the account, net of any commissions and fees;
    (vi) The account's net profits and losses on open trades;
    (vii) The funds in the account plus or minus the net profits and 
losses on open trades, adjusted for the net option value in the case of 
open options positions;
    (viii) Financial ledger records that show all charges against and 
credits to the account, including deposits, withdrawals, and transfers, 
and charges or credits resulting from losses or gains on closed 
transactions; and
    (ix) A list of all retail forex transactions executed for the 
account,

[[Page 41388]]

with the details specified in paragraph (a)(2) of this section.
    (2) Retail forex transaction records. For each retail forex 
transaction:
    (i) The date and time the national bank received the order;
    (ii) The price at which the national bank placed the order, or, in 
the case of an option, the premium that the retail forex customer paid;
    (iii) The customer account identification information;
    (iv) The currency pair;
    (v) The size or quantity of the order;
    (vi) Whether the order was a buy or sell order;
    (vii) The type of order, if the order was not a market order;
    (viii) The size and price at which the order is executed, or in the 
case of an option, the amount of the premium paid for each option 
purchased, or the amount credited for each option sold;
    (ix) For options, whether the option is a put or call, expiration 
date, quantity, underlying contract for future delivery or underlying 
physical, strike price, and details of the purchase price of the 
option, including premium, mark-up, commission, and fees; and
    (x) For futures, the delivery date; and
    (xi) If the order was made on a trading platform:
    (A) The price quoted on the trading platform when the order was 
placed, or, in the case of an option, the premium quoted;
    (B) The date and time the order was transmitted to the trading 
platform; and
    (C) The date and time the order was executed.
    (3) Price changes on a trading platform. If a trading platform is 
used, daily logs showing each price change on the platform, the time of 
the change to the nearest second, and the trading volume at that time 
and price.
    (4) Methods or algorithms. Any method or algorithm used to 
determine the bid or asked price for any retail forex transaction or 
the prices at which customer orders are executed, including, but not 
limited to, any markups, fees, commissions or other items which affect 
the profitability or risk of loss of a retail forex customer's 
transaction.
    (5) Daily records which show for each business day complete details 
of:
    (i) All retail forex transactions that are futures transactions 
executed on that day, including the date, price, quantity, market, 
currency pair, delivery date, and the person for whom such transaction 
was made;
    (ii) All retail forex transactions that are option transactions 
executed on that day, including the date, whether the transaction 
involved a put or call, the expiration date, quantity, currency pair, 
delivery date, strike price, details of the purchase price of the 
option, including premium, mark-up, commission and fees, and the person 
for whom the transaction was made; and
    (iii) All other retail forex transactions executed on that day for 
such account, including the date, price, quantity, currency and the 
person for whom such transaction was made.
    (6) Other records. Written acknowledgments of receipt of the risk 
disclosure statement required by Sec.  48.6(b), offset instructions 
pursuant to Sec.  48.5(c), records required under paragraphs (b) 
through (f) of this section, trading cards, signature cards, street 
books, journals, ledgers, payment records, copies of statements of 
purchase, and all other records, data, and memoranda that have been 
prepared in the course of the national bank's retail forex business.
    (b) Ratio of profitable accounts.
    (1) With respect to its active retail forex customer accounts over 
which it did not exercise investment discretion and that are not retail 
forex proprietary accounts open for any period of time during the 
quarter, a national bank must prepare and maintain on a quarterly basis 
(calendar quarter):
    (i) A calculation of the percentage of such accounts that were 
profitable;
    (ii) A calculation of the percentage of such accounts that were not 
profitable; and
    (iii) Data supporting the calculations described in paragraphs 
(b)(1)(i) and (ii) of this section.
    (2) In calculating whether a retail forex account was profitable or 
not profitable during the quarter, the national bank must compute the 
realized and unrealized gains or losses on all retail forex 
transactions carried in the retail forex account at any time during the 
quarter, subtract all fees, commissions, and any other charges posted 
to the retail forex account during the quarter, and add any interest 
income and other income or rebates credited to the retail forex account 
during the quarter. All deposits and withdrawals of funds made by the 
retail forex customer during the quarter must be excluded from the 
computation of whether the retail forex account was profitable or not 
profitable during the quarter. Computations that result in a zero or 
negative number must be considered a retail forex account that was not 
profitable. Computations that result in a positive number must be 
considered a retail forex account that was profitable.
    (3) A retail forex account must be considered ``active'' for 
purposes of paragraph (b)(1) of this section if and only if for the 
relevant calendar quarter a retail forex transaction was executed in 
that account or the retail forex account contained an open position 
resulting from a retail forex transaction.
    (c) Records related to violations of law. A national bank engaging 
in retail forex transactions must make a record of all communications 
received by the national bank or its IAPs concerning facts giving rise 
to possible violations of law related to the national bank's retail 
forex business. The record must contain: The name of the complainant, 
if provided; the date of the communication; the relevant agreement, 
contract, or transaction; the substance of the communication; the name 
of the person that received the communication; and the final 
disposition of the matter.
    (d) Records for noncash margin. A national bank must maintain a 
record of all noncash margin collected pursuant to Sec.  48.9. The 
record must show separately for each retail forex customer:
    (1) A description of the securities or property received;
    (2) The name and address of such retail forex customer;
    (3) The dates when the securities or property were received;
    (4) The identity of the depositories or other places where such 
securities or property are segregated or held, if applicable;
    (5) The dates in which the national bank placed or removed such 
securities or property into or from such depositories; and
    (6) The dates of return of such securities or property to such 
retail forex customer, or other disposition thereof, together with the 
facts and circumstances of such other disposition.
    (e) Order Tickets.
    (1) Except as provided in paragraph (e)(2) of this section, 
immediately upon the receipt of a retail forex transaction order, a 
national bank must prepare an order ticket for the order (whether 
unfulfilled, executed, or canceled). The order ticket must include:
    (i) Account identification (account or customer name with which the 
retail forex transaction was effected);
    (ii) Order number;
    (iii) Type of order (market order, limit order, or subject to 
special instructions);
    (iv) Date and time, to the nearest minute, that the retail forex 
transaction order was received (as evidenced by time-stamp or other 
timing device);
    (v) Time, to the nearest minute, that the retail forex transaction 
order was executed; and
    (vi) Price at which the retail forex transaction was executed.
    (2) Post-execution allocation of bunched orders. Specific 
identifiers for

[[Page 41389]]

retail forex accounts included in bunched orders need not be recorded 
at time of order placement or upon report of execution as required 
under paragraph (e)(1) of this section if the following requirements 
are met:
    (i) The national bank placing and directing the allocation of an 
order eligible for post-execution allocation has been granted written 
investment discretion with regard to participating customer accounts 
and makes the following information available to retail forex customers 
upon request:
    (A) The general nature of the post-execution allocation methodology 
the national bank will use;
    (B) Whether the national bank has any interest in accounts that may 
be included with customer accounts in bunched orders eligible for post-
execution allocation; and
    (C) Summary or composite data sufficient for that customer to 
compare the customer's results with those of other comparable customers 
and, if applicable, any account in which the national bank has an 
interest.
    (ii) Post-execution allocations are made as soon as practicable 
after the entire transaction is executed;
    (iii) Post-execution allocations are fair and equitable, with no 
account or group of accounts receiving consistently favorable or 
unfavorable treatment; and
    (iv) The post-execution allocation methodology is sufficiently 
objective and specific to permit the OCC to verify the fairness of the 
allocations using that methodology.
    (f) Record of monthly statements and confirmations. A national bank 
must retain a copy of each monthly statement and confirmation required 
by Sec.  48.10.
    (g) Form of record and manner of maintenance. The records required 
by this section must clearly and accurately reflect the information 
required and provide an adequate basis for the audit of the 
information. A national bank must create and maintain audio recordings 
of oral orders and oral offset instructions. Record maintenance may 
include the use of automated or electronic records provided that the 
records are easily retrievable and readily available for inspection.
    (h) Length of maintenance. A national bank must keep each record 
required by this section for at least five years from the date the 
record is created.


Sec.  48.8  Capital requirements.

    A national bank offering or entering into retail forex transactions 
must be well capitalized as defined by 12 CFR part 6.


Sec.  48.9  Margin requirements.

    (a) Margin required. A national bank engaging, or offering to 
engage, in retail forex transactions must collect from each retail 
forex customer an amount of margin not less than:
    (1) Two percent of the notional value of the retail forex 
transaction for major currency pairs and 5 percent of the notional 
value of the retail forex transaction for all other currency pairs;
    (2) For short options, 2 percent for major currency pairs and 5 
percent for all other currency pairs of the notional value of the 
retail forex transaction, plus the premium received by the retail forex 
customer; or
    (3) For long options, the full premium charged and received by the 
national bank.
    (b)(1) Form of margin. Margin collected under paragraph (a) of this 
section or pledged by a retail forex customer for retail forex 
transactions must be in the form of cash or the following financial 
instruments:
    (i) Obligations of the United States and obligations fully 
guaranteed as to principal and interest by the United States;
    (ii) General obligations of any State or of any political 
subdivision thereof;
    (iii) General obligations issued or guaranteed by any enterprise, 
as defined in 12 U.S.C. 4502(10);
    (iv) Certificates of deposit issued by an insured depository 
institution, as defined in section 3(c)(2) of the Federal Deposit 
Insurance Act (12 U.S.C. 1813(c)(2));
    (v) Commercial paper;
    (vi) Corporate notes or bonds;
    (vii) General obligations of a sovereign nation;
    (viii) Interests in money market mutual funds; and
    (ix) Such other financial instruments as the OCC deems appropriate.
    (2) Haircuts. A national bank must establish written policies and 
procedures that include:
    (i) Haircuts for noncash margin collected under this section; and
    (ii) Annual evaluation, and, if appropriate, modification, of the 
haircuts.
    (c) Separate margin account. Margin collected by the national bank 
from a retail forex customer for retail forex transactions or pledged 
by a retail forex customer for retail forex transactions must be placed 
into a separate account.
    (d) Margin calls; liquidation of position.
    (1) For each retail forex customer, at least once per day, a 
national bank must:
    (i) Mark the value of the retail forex customer's open retail forex 
positions to market;
    (ii) Mark the value of the margin collected under this section from 
the retail forex customer to market; and
    (iii) Determine whether, based on the marks in paragraphs (d)(1)(i) 
and (ii) of this section, the national bank has collected margin from 
the retail forex customer sufficient to satisfy the requirements of 
this section.
    (2) If, pursuant to paragraph (d)(1)(iii) of this section, the 
national bank determines that it has not collected margin from the 
retail forex customer sufficient to satisfy the requirements of this 
section then, within a reasonable period of time, the national bank 
must either:
    (i) Collect margin from the retail forex customer sufficient to 
satisfy the requirements of this section; or
    (ii) Liquidate the retail forex customer's retail forex 
transactions.
    (e) Set-off prohibited. A national bank may not:
    (1) Apply a retail forex customer's retail forex obligations 
against any funds or other asset of the retail forex customer other 
than margin in the separate margin account described in paragraph (c) 
of this section;
    (2) Apply a retail forex customer's retail forex obligations to 
increase the amount owed by the retail forex customer to the national 
bank under any loan; or
    (3) Collect the margin required under this section by use of any 
right of set-off.


Sec.  48.10  Required reporting to customers.

    (a) Monthly statements. Each national bank must promptly furnish to 
each retail forex customer, as of the close of the last business day of 
each month or as of any regular monthly date selected, except for 
accounts in which there are neither open positions at the end of the 
statement period nor any changes to the account balance since the prior 
statement period but, in any event, not less frequently than once every 
three months, a statement that clearly shows:
    (1) For each retail forex customer:
    (i) The open retail forex transactions with prices at which 
acquired;
    (ii) The net unrealized profits or losses in all open retail forex 
transactions marked to the market;
    (iii) Any money, securities, or other property in the separate 
margin account required by Sec.  48.9(c); and
    (iv) A detailed accounting of all financial charges and credits to 
the retail forex customer's retail forex accounts during the monthly 
reporting period, including: Money, securities, or property received 
from or disbursed to such customer; realized profits and losses; and 
fees, charges, spreads, and commissions.

[[Page 41390]]

    (2) For each retail forex customer engaging in retail forex 
transactions that are options:
    (i) All such options purchased, sold, exercised, or expired during 
the monthly reporting period, identified by underlying retail forex 
transaction or underlying currency, strike price, transaction date, and 
expiration date;
    (ii) The open option positions carried for such customer and 
arising as of the end of the monthly reporting period, identified by 
underlying retail forex transaction or underlying currency, strike 
price, transaction date, and expiration date;
    (iii) All such option positions marked to the market and the amount 
each position is in the money, if any;
    (iv) Any money, securities, or other property in the separate 
margin account required by Sec.  48.9(c); and
    (v) A detailed accounting of all financial charges and credits to 
the retail forex customer's retail forex accounts during the monthly 
reporting period, including: Money, securities, or property received 
from or disbursed to such customer; realized profits and losses; 
premiums and mark-ups; and fees, charges, and commissions.
    (b) Confirmation statement. Each national bank must, not later than 
the next business day after any retail forex transaction, send:
    (1) To each retail forex customer, a written confirmation of each 
retail forex transaction caused to be executed by it for the customer, 
including offsetting transactions executed during the same business day 
and the rollover of an open retail forex transaction to the next 
business day;
    (2) To each retail forex customer engaging in forex option 
transactions, a written confirmation of each forex option transaction, 
containing at least the following information:
    (i) The retail forex customer's account identification number;
    (ii) A separate listing of the actual amount of the premium, as 
well as each markup thereon, if applicable, and all other commissions, 
costs, fees, and other charges incurred in connection with the forex 
option transaction;
    (iii) The strike price;
    (iv) The underlying retail forex transaction or underlying 
currency;
    (v) The final exercise date of the forex option purchased or sold; 
and
    (vi) The date that the forex option transaction was executed.
    (3) To each retail forex customer engaging in forex option 
transactions, upon the expiration or exercise of any option, a written 
confirmation statement thereof, which statement must include the date 
of such occurrence, a description of the option involved, and, in the 
case of exercise, the details of the retail forex or physical currency 
position that resulted therefrom including, if applicable, the final 
trading date of the retail forex transaction underlying the option.
    (c) Notwithstanding paragraph (b) of this section, a retail forex 
transaction that is caused to be executed for a pooled investment 
vehicle that engages in retail forex transactions need be confirmed 
only to the operator of such pooled investment vehicle.
    (d) Controlled accounts. With respect to any account controlled by 
any person other than the retail forex customer for whom such account 
is carried, each national bank must promptly furnish in writing to such 
other person the information required by paragraphs (a) and (b) of this 
section.
    (e) Introduced accounts. Each statement provided pursuant to the 
provisions of this section must, if applicable, show that the account 
for which the national bank was introduced by an introducing broker and 
the name of the introducing broker.


Sec.  48.11  Unlawful representations.

    (a) No implication or representation of limiting losses. No 
national bank engaged in retail foreign exchange transactions or its 
IAPs may imply or represent that it will, with respect to any retail 
customer forex account, for or on behalf of any person:
    (1) Guarantee such person or account against loss;
    (2) Limit the loss of such person or account; or
    (3) Not call for or attempt to collect margin as established for 
retail forex customers.
    (b) No implication of representation of engaging in prohibited 
acts. No national bank or its IAPs may in any way imply or represent 
that it will engage in any of the acts or practices described in 
paragraph (a) of this section.
    (c) No Federal government endorsement. No national bank or its IAPs 
may represent or imply in any manner whatsoever that any retail forex 
transaction or retail forex product has been sponsored, recommended, or 
approved by the OCC, the Federal government, or any agency thereof.
    (d) Assuming or sharing of liability from bank error. This section 
does not prevent a national bank from assuming or sharing in the losses 
resulting from the national bank's error or mishandling of a retail 
forex transaction.
    (e) Certain guaranties unaffected. This section does not affect any 
guarantee entered into prior to the effective date of this part, but 
this section does apply to any extension, modification, or renewal 
thereof entered into after such date.


Sec.  48.12  Authorization to trade.

    (a) Specific authorization required. No national bank may directly 
or indirectly effect a retail forex transaction for the account of any 
retail forex customer unless, before the retail forex transaction 
occurs, the retail forex customer specifically authorized the national 
bank to effect the retail forex transaction.
    (b) Requirements for specific authorization. A retail forex 
transaction is ``specifically authorized'' for purposes of this section 
if the retail forex customer specifies:
    (1) The precise retail forex transaction to be effected;
    (2) The exact amount of the foreign currency to be purchased or 
sold; and
    (3) In the case of an option, the identity of the foreign currency 
or contract that underlies the option.


Sec.  48.13  Trading and operational standards.

    (a) Internal rules, procedures, and controls required. A national 
bank engaging in retail forex transactions must establish and implement 
internal policies, procedures, and controls designed, at a minimum, to:
    (1) Ensure, to the extent reasonable, that each retail forex 
transaction that is executable at or near the price that the national 
bank has quoted to the retail forex customer is entered for execution 
before any retail forex transaction for:
    (i) A proprietary account;
    (ii) An account for which a related person may originate orders 
without the prior specific consent of the account owner, if the related 
person has gained knowledge of the retail forex customer's order prior 
to the transmission of an order for a proprietary account;
    (iii) An account in which a related person has an interest, if the 
related person has gained knowledge of the retail forex customer's 
order prior to the transmission of an order for a proprietary account; 
or
    (iv) An account in which a related person may originate orders 
without the prior specific consent of the account owner, if the related 
person has gained knowledge of the retail forex customer's order prior 
to the transmission of an order for a proprietary account;
    (2) Prevent national-bank related persons from placing orders, 
directly or indirectly, with another person in a manner designed to 
circumvent the provisions of paragraph (a)(1) of this section; and
    (3) Fairly and objectively establish settlement prices for retail 
forex transactions.

[[Page 41391]]

    (b) Disclosure of retail forex transactions. No national bank 
engaging in retail forex transactions may disclose that an order of 
another person is being held by the national bank, unless the 
disclosure is necessary to the effective execution of such order or the 
disclosure is made at the request of the OCC.
    (c) Handling of retail forex accounts of related persons of retail 
forex counterparties. No national bank engaging in retail forex 
transactions may knowingly handle the retail forex account of an 
employee of another retail forex counterparty's retail forex business 
unless the national bank:
    (1) Receives written authorization from a person designated by the 
other retail forex counterparty with responsibility for the 
surveillance over the account pursuant to paragraph (a)(2) of this 
section;
    (2) Prepares immediately upon receipt of an order for the account a 
written record of the order, including the account identification and 
order number, and records thereon to the nearest minute, by time-stamp 
or other timing device, the date and time the order was received; and
    (3) Transmits on a regular basis to the other retail forex 
counterparty copies of all statements for the account and of all 
written records prepared upon the receipt of orders for the account 
pursuant to paragraph (c)(2) of this section.
    (d) Related person of national bank establishing account at another 
retail forex counterparty. No related person of a national bank working 
in the national bank's retail forex business may have an account, 
directly or indirectly, with another retail forex counterparty unless 
the other retail forex counterparty:
    (1) Receives written authorization to open and maintain the account 
from a person designated by the national bank with responsibility for 
the surveillance over the account pursuant to paragraph (a)(2) of this 
section; and
    (2) Transmits on a regular basis to the national bank copies of all 
statements for the account and of all written records prepared by the 
other retail forex counterparty upon receipt of orders for the account 
pursuant to paragraph (a)(2) of this section.
    (e) Prohibited trading practices. No national bank engaging in 
retail forex transactions may:
    (1) Enter into a retail forex transaction, to be executed pursuant 
to a market or limit order at a price that is not at or near the price 
at which other retail forex customers, during that same time period, 
have executed retail forex transactions with the national bank;
    (2) Adjust or alter prices for a retail forex transaction after the 
transaction has been confirmed to the retail forex customer;
    (3) Provide to a retail forex customer a new bid price for a retail 
forex transaction that is higher than its previous bid without 
providing a new asked price that is also higher than its previous asked 
price by a similar amount;
    (4) Provide to a retail forex customer a new bid price for a retail 
forex transaction that is lower than its previous bid without providing 
a new asked price that is also lower than its previous asked price by a 
similar amount; or
    (5) Establish a new position for a retail forex customer (except 
one that offsets an existing position for that retail forex customer) 
where the national bank holds outstanding orders of other retail forex 
customers for the same currency pair at a comparable price.


Sec.  48.14  Supervision.

    (a) Supervision by the national bank. A national bank engaging in 
retail forex transactions must diligently supervise the handling by its 
officers, employees, and agents (or persons occupying a similar status 
or performing a similar function) of all retail forex accounts carried, 
operated, or advised by at the national bank and all activities of its 
officers, employees, and agents (or persons occupying a similar status 
or performing a similar function) relating to its retail forex 
business.
    (b) Supervision by officers, employees, or agents. An officer, 
employee, or agent of a national bank must diligently supervise his or 
her subordinates' handling of all retail forex accounts at the national 
bank and all the subordinates' activities relating to the national 
bank's retail forex business.


Sec.  48.15  Notice of transfers.

    (a) Prior notice generally required. Except as provided in 
paragraph (b) of this section, a national bank must provide a retail 
forex customer with 30 days' prior notice of any assignment of any 
position or transfer of any account of the retail forex customer. The 
notice must include a statement that the retail forex customer is not 
required to accept the proposed assignment or transfer and may direct 
the national bank to liquidate the positions of the retail forex 
customer or transfer the account to a retail forex counterparty of the 
retail forex customer's selection.
    (b) Exceptions. The requirements of paragraph (a) of this section 
do not apply to transfers:
    (1) Requested by the retail forex customer;
    (2) Made by the Federal Deposit Insurance Corporation as receiver 
or conservator under the Federal Deposit Insurance Act; or
    (3) Otherwise authorized by applicable law.
    (c) Obligations of transferee national bank. A national bank to 
which retail forex accounts or positions are assigned or transferred 
under paragraph (a) of this section must provide to the affected retail 
forex customers the risk disclosure statements and forms of 
acknowledgment required by this part and receive the required signed 
acknowledgments within 60 days of such assignments or transfers. This 
requirement does not apply if the national bank has clear written 
evidence that the retail forex customer has received and acknowledged 
receipt of the required disclosure statements.


Sec.  48.16  Customer dispute resolution.

    (a) Voluntary submission of claims to dispute or settlement 
procedures. No national bank may enter into any agreement or 
understanding with a retail forex customer in which the customer 
agrees, prior to the time a claim or grievance arises, to submit such 
claim or grievance to any settlement procedure unless the following 
conditions are satisfied:
    (1) Signing the agreement is not a condition for the customer to 
use the services offered by the national bank.
    (2) If the agreement is contained as a clause or clauses of a 
broader agreement, the customer separately endorses the clause or 
clauses.
    (3) The agreement advises the retail forex customer that, at such 
time as the customer notifies the national bank that the customer 
intends to submit a claim to arbitration, or at such time the national 
bank notifies the customer of its intent to submit a claim to 
arbitration, the customer will have the opportunity to choose a person 
qualified in dispute resolution to conduct the proceeding.
    (4) The agreement must acknowledge that the national bank will pay 
any incremental fees that may be assessed in connection with the 
dispute resolution, unless it is determined in the proceeding that the 
retail forex customer has acted in bad faith in initiating the 
proceeding.
    (5) The agreement must include the following language printed in 
large boldface type:

    Two forums exist for the resolution of disputes related to retail 
forex transactions: Civil court litigation and arbitration conducted by 
a private

[[Page 41392]]

organization. The opportunity to settle disputes by arbitration may in 
some cases provide benefits to customers, including the ability to 
obtain an expeditious and final resolution of disputes without 
incurring substantial cost. Each customer must individually examine the 
relative merits of arbitration and consent to this arbitration 
agreement must be voluntary.
    By signing this agreement, you: (1) May be waiving your right to 
sue in a court of law; and (2) are agreeing to be bound by arbitration 
of any claims or counterclaims that you or [insert name of national 
bank] may submit to arbitration under this agreement. In the event a 
dispute arises, you will be notified if [insert name of national bank] 
intends to submit the dispute to arbitration.
    You need not sign this agreement to open or maintain a retail forex 
account with [insert name of national bank].

    (b) Election of forum.
    (1) Within 10 business days after receipt of notice from the retail 
forex customer that the customer intends to submit a claim to 
arbitration, the national bank must provide the customer with a list of 
persons qualified in dispute resolution.
    (2) The customer must, within 45 days after receipt of such list, 
notify the national bank of the person selected. The customer's failure 
to provide such notice must give the national bank the right to select 
a person from the list.
    (c) Enforceability. A dispute settlement procedure may require 
parties using the procedure to agree, under applicable state law, 
submission agreement, or otherwise, to be bound by an award rendered in 
the procedure if the agreement to submit the claim or grievance to the 
procedure complies with paragraph (a) of this section or the agreement 
to submit the claim or grievance to the procedure was made after the 
claim or grievance arose. Any award so rendered by the procedure will 
be enforceable in accordance with applicable law.
    (d) Time limits for submission of claims. The dispute settlement 
procedure used by the parties may not include any unreasonably short 
limitation period foreclosing submission of a customer's claims or 
grievances or counterclaims.
    (e) Counterclaims. A procedure for the settlement of a retail forex 
customer's claims or grievances against a national bank or employee 
thereof may permit the submission of a counterclaim in the procedure by 
a person against whom a claim or grievance is brought if the 
counterclaim:
    (1) Arises out of the transaction or occurrence that is the subject 
of the retail forex customer's claim or grievance; and
    (2) Does not require for adjudication the presence of essential 
witnesses, parties, or third persons over which the settlement process 
lacks jurisdiction.


Sec.  48.17  Reservation of authority.

    The OCC may modify the disclosure, recordkeeping, capital and 
margin, reporting, business conduct, documentation, or other standards 
or requirements under this part for a specific retail forex transaction 
or a class of retail forex transactions if the OCC determines that the 
modification is consistent with safety and soundness and the protection 
of retail forex customers.

    Dated: July 7, 2011.
John Walsh,
Acting Comptroller of the Currency.
[FR Doc. 2011-17514 Filed 7-13-11; 8:45 am]
BILLING CODE 4810-33-P