CFTC Staff Letter 06-20: No-Action Relief for Institutional Customers Trading Certain Index Futures

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. 06-20
September 7, 2006
No-Action
Division of Clearing and Intermediary Oversight

Re:
Dear :
This is in response to your letter dated March 23, 2006, to the Division of Clearing and Intermediary Oversight (the “Division”) of the Commodity Futures Trading Commission (the “Commission” or “CFTC”), as supplemented by telephone conversations with Division staff. By your correspondence, you request, on behalf of “A”, that the Division modify its prior relief, as set forth in CFTC Staff Letter 02-22 (the “Prior Letter”).1 Specifically, you request that the Division confirm that it will not recommend that the Commission take any enforcement action against registered broker-dealers (“BDs”) or their registered representatives (“RRs”) if they give “institutional customers” (as defined in the Prior Letter) executing transactions in “B”2 the option either:

1. to maintain a traditional futures account at a registered introducing broker (“IB”) or
   futures commission merchant (“FCM”), place orders with an associated person (“AP”) of the IB or FCM or directly through “C”, and to comply with “A”’s standard performance bond and settlement variation requirements; or [2002 Transfer Binder] Comm. Fut. L. Rep. (CCH) ¶28,955 (July 11, 2001). Pursuant to the Prior Letter, an “institutional customer” is anyone who would qualify as a “qualified institutional buyer” under Securities and Exchange Commission Rule 144A, 17 C.F.R. §230.144A, or who is a “A” member registered with the CFTC as a floor broker or as a floor trader. “B” are cash-settled, electronically-traded futures contracts on broad-based, dynamic indices of stocks, bonds, currencies and other financial instruments. “B” are more fully described in the Prior Letter. Both terms are service marks of “D”