RegAlert2005-11-10 | CFTC Staff Letter 05-22Added · Updated
CFTC Staff Letter 05-22: No-Action Position for Third-Party Trading System Developer with Common Principals as Introducing Broker
The Division of Clearing and Intermediary Oversight grants a no-action position to entity X, a third-party trading system developer, exempting it from Commodity Trading Advisor registration under Section 4m(1) of the Commodity Exchange Act, provided that its affiliated introducing broker Y registers as a CTA and provides required Disclosure Documents to clients. This relief applies solely to the Broker-Assisted Trading Program where X and Y share common principals, and Y exercises discretionary authority over all client accounts using X's trading signals. Entity Y must register as a CTA and furnish each participating client with a Disclosure Document containing past performance disclosures as specified by Part 4 of the Commission’s regulations. The Division will not recommend enforcement against X for failing to register, but X remains subject to all other applicable antifraud, reporting, and regulatory requirements.
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U.S. COMMODITY FUTURES TRADING COMMISSION
Three Lafayette Centre
1155 21st Street, NW, Washington, DC 20581
Telephone: (202) 418-5430
Facsimile: (202) 418-5547 aradhakrishnan@cftc.gov Division of Clearing and Intermediary Oversight Ananda Radhakrishnan Director CFTC letter No. 05-22 November 10, 2005 Exemption Division of Clearing and Intermediary Oversight Re: Section 4m(1) – Request for Relief From the Commodity Trading Advisor Registration Requirement Where Third-Party System Developer and Registered Introducing Broker Have Common Principals Dear :
This is in response to your letter dated March 1, 2005, to the Commodity Futures Trading Commission (the “Commission”), which has been referred to the Division of Clearing and Intermediary Oversight (the “Division”) for response. By your letter, subsequent emails, and telephone conversations with Division staff (collectively, the “correspondence”), you have requested that the Division not recommend that the Commission commence any enforcement action against “X” for failure to register as a commodity trading advisor (“CTA”) under Section 4m(1) of the Commodity Exchange Act (the “Act”).1 Based on the correspondence, we understand the facts to be as follows. You are the President of “X”, and you and your wife, “A”, are the sole owners of “X”. “X” has developed and sells various trading systems that are supported by a computerized software platform that generates trading signals. In connection with purchasing “X’s” trading systems, “X’s” clients execute a “letter of direction” authorizing “Y”, a registered introducing broker (“IB”), to trade their accounts in accordance with “X’s” trading signals. “X” markets this service on its website as the “Broker-Assisted Trading Program.”2 You and “A” are also the sole principals, and registered associated persons (“APs”), of “Y”. All of “Y’s” customers have issued a letter of direction in favor of “Y” authorizing “Y” to place trades in accordance with “X’s” trading
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Source: Commodity Futures Trading Commission — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works
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CFTC published 6 documents in the last 30 days. We email you each new one the day it's published.