All Letters

12-01 ; Regulations 4.34 and 4.35; Interpretation
The Division of Swap Dealer and Intermediary Oversight issued an interpretation regarding the time period for which past performance is required to be disclosed by persons required to register as CTAs because they engage in off-exchange retail foreign currency transactions (“retail forex”). Such persons (“Forex CTAs”) are required to disclose performance information for the period beginning October 18, 2010, the date upon which the Commission’s regulations governing retail forex became effective. A Forex CTA that chooses to present past performance information for any period of time prior to October 18, 2010 must do so in accordance with the time period as specified in Regulation 4.35(a)(5), must include all accounts directed by the Forex CTA, must present the information in the format specified in Regulation 4.35, and must have and maintain adequate books and records to substantiate the information.

12-02 ; Part 20: Large Trader Reporting for Physical Commodity Swaps; No-Action
The Division of Market Oversight issued a letter to market participants providing temporary no-action relief for less than fully compliant reporting of positions based on ownership under the CFTC’s large trader reporting system for physical commodity swaps and swaptions. This temporary relief is intended to provide sufficient time for the industry to transition to fully compliant reporting for positions based on ownership by July 27, 2012. As a condition of this relief, market participants must submit, by July 30, 2012, fully compliant reports dating back to July 2, 2012.

12-03 ; Part 4: Registration and Compliance Obligations for CPOs and CTAs; No-Action
The Division of Swap Dealer and Intermediary Oversight (“the Division”) of the Commodity Futures Trading Commission (“CFTC”) today issued a notice of the availability of time-limited no action relief for commodity pool operators (“CPOs”) and commodity trading advisors (“CTAs”) who would have been exempt or excluded from registration but for the recent amendments to Regulations 4.13 and 4.5. The Division has determined not to recommend that the Commission take an enforcement action against CPOs or CTAs for failure to register as such until December 31, 2012, subject to certain requirements, including the filing of a notice with the Division. Once filed, this no-action relief is effective immediately.

12-04 ; Part 20: Large Trader Reporting for Physical Commodity Swaps; No-Action
The Division of Market Oversight issued a letter to market participants providing temporary no-action relief for reporting by non-clearing member swap dealers under the CFTC’s large trader reporting system for physical commodity swaps and swaptions. This temporary relief is intended to provide sufficient time for non-clearing member swap dealers to transition to fully compliant reporting by 60 days after the Commission’s deadline for entities to apply to register as swap dealers. In addition, the letter provides a further six months of no-action relief to non-clearing member swap dealers that satisfy the conditions of Section 20.10(e) of the Commission’s regulations.

12-05 ; Part 151: Position Limits for Futures and Swaps; No-Action
The Division of Market Oversight issued a letter to market participants providing temporary no-action relief in order to give effect to the Commission’s commitment to “coordinate the disposition” of a May 30, 2012 notice of proposed rulemaking regarding aggregation (“Aggregation Notice”) with the implementation of position limits under part 151 (“Position Limits Rule”), as well as “to provide an orderly transition to the compliance dates” for the Position Limits Rule. The no-action relief provides two alternative methods for compliance: (1) as if the Position Limits Rule were amended to include the provisions proposed in the Aggregation Notice; and (2) in conformity with the dis-aggregation criteria specified in the no-action relief. This temporary relief is intended to provide sufficient time for persons to transition to fully compliant aggregation by 60 days after the earlier of the date the Commission publishes a rule finalizing changes to the Commission’s aggregation policy or the date the Commission issues an order declining to take further action on the Aggregation Notice. The relief is time limited to no later than December 31, 2012.

12-06 ; Regulation 32.3 Trade Options; No-Action
The staff of the Division of Market Oversight issued a no-action letter providing that, for a limited time, market participants can rely on the trade option exemption in CFTC regulation 32.3 without complying with specified provisions thereof. The no action letter is effective until the earlier of December 31, 2012, or the effective date of any final action taken by the Commission in response to comments on the Trade Option Exemption Interim Final Rules (77 FR 25320). To rely on the no-action relief, market participants must comply with: (1) the conditions for qualifying as a “trade option” (§ 32.3(a)); (2) speculative position limits (§ 32.3(c)(2)); and (3) prohibitions on fraud, manipulation and other abusive trade practices (§ 32.3(d)).

12-07 ; Rule 140.98; Interpretation
The Division of Market Oversight issued an interpretation addressing whether, under Part 151 of the Commission’s regulations, an electric company may treat as bona fide hedging transactions certain derivative transactions that reduce the price risk associated with its unfilled anticipated requirements for natural gas, even though it has entered into some long-term, firm purchases of natural gas at an unfixed price. The interpretation notes that unfilled anticipated requirements may be recognized as the basis of a bona fide hedging position or transaction under Commission Regulation 151.5(a)(2)(ii)(C) when a commercial enterprise has entered into long-term, unfixed-price supply or requirements contracts as the price risk of such “unfilled” anticipated requirements is not offset by an unfixed price forward contract as the price risk remains with the commercial, even though the commercial enterprise has contractually assured a supply of the commodity. Instead, the price risk continues until the forward contract’s price is fixed; once the price is fixed on the supply contract, the commercial enterprise no longer has price risk and the derivative position, to the extent the position is above an applicable speculative position limit, must be liquidated in an orderly manner in accordance with sound commercial practices.

12-08 ; Regulation 39.13(g)(8)(ii); Interpretation
The Division of Clearing and Risk issued a letter interpreting Regulation 39.13(g)(8)(ii) (customer margin rule) to clarify that registered derivatives clearing organizations, in establishing customer initial margin requirements, may preserve historical practices by which customer initial margin requirements are based on the type of customer account and reflect the application of prudential standards that result in FCMs collecting customer initial margin at levels commensurate with the risk presented by each type of customer account.

12-09 ; 1.73(a)(2)(i), 1.73(a)(2)(iv), 1.73(a)(2)(v); No-Action
Commodity Futures Trading Commission’s (CFTC) Division of Clearing and Risk (DCR) today announced an extension of time for compliance in order to provide additional time for market participants to coordinate on the communication of limits for give-ups and bunched orders for futures and swaps. This extension of time is intended to provide sufficient time to transition to fully compliant pre-trade screening no later than June 1, 2013. Additionally, DCR also announced the issuance of an extension of time for compliance from pre-trade screening requirements for those transactions executed on DCMs that do not have a system permitting FCMs to set pre-execution limits, until the earlier of the date on which the DCM implements such a system, or June 1, 2013.