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Sales of Foreign Options and Futures to U.S. Customers

The United States Commodity Futures Trading Commission regulates the offer and sale of foreign futures and options contracts to customers in the United States. Part 30 of rules of the Commission requires that sellers of such contracts must register with the Commission or seek an exemption from registration and that any seller, whether or not registered, must not engage in fraudulent activities.

The Commission has stated that the rules in Part 30 are designed to carry out Congressional intent that sales of foreign futures and options contracts should be subject to the same regulation as domestic futures and options contracts. Rule 30.4 of the Commission requires registration of any person engaged in the activities of a futures commission merchant, introducing broker, commodity pool operator, or commodity trading advisor. Otherwise, such persons must seek an exemption from registration pursuant to Rule 30.5 or 30.10. Rule 30.9 bars fraud by any persons, whether registered or exempted from registration.

Exemptions from registration pursuant to Rule 30.10 usually are sought by foreign government agencies or foreign self-regulatory organizations on behalf of foreign nationals or organization members who seek to offer or sell foreign futures and options contracts within the United States. Those foreign regulators will obtain an exemption if the Commodity Futures Trading Commission determines that the regulatory program of the foreign regulators will provide protection to U.S. customers reasonably equal to protection that compliance with the U.S. regulatory system would provide. The foreign regulators also must enter into an information sharing agreement with the Commission.

Generally, the Commission does not restrict the type of foreign futures or options contracts that may be offered in the U.S. However, there are additional requirements regarding two types of foreign products:

1. Foreign stock index futures may not be offered or sold to U.S. customers before Commission staff issue a no-action letter; and

2. Foreign government debt obligations must first be designated by the U.S. Securities and Exchange Commission as exempt securities before futures or options on those obligations may be offered or sold to U.S. customers.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.

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