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Interpretative Letters
Date
Interpretative Letters
02/27/2012
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.
;
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.
08/16/2012
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.
;
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.
09/14/2012
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.
;
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.
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