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CFTC Provides Relief to Certain Foreign Affiliates of FCMs in Response to COVID-19

On March 31, the Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission (CFTC) issued Staff Letter No. 20-12 (Letter), announcing temporary no-action relief (Relief) that allows certain non-US entities, that are exempt from registration with the CFTC as introducing brokers pursuant to CFTC Regulation 30.5 (Foreign Brokers), and which are affiliates of futures commission merchants (FCMs) registered with the CFTC, to handle US order flow under certain conditions. The Relief is in response to the COVID-19 pandemic, causing compliance with certain CFTC requirements to be difficult or impossible due to the displacement of personnel from normal business sites as a result of preventative measures implemented in response to the pandemic.

The Relief allows Foreign Brokers of covered FCMs to accept orders from US persons for execution on US contract markets in the event the affiliated FCM’s US personnel are unable to handle the order flow of US customers due to their absence from normal business sites. Such Relief is subject to certain conditions, including, but not limited to, the Foreign Broker being (1) an affiliate of a CFTC-registered FCM, and (2) appropriately licensed or registered in a jurisdiction in which the CFTC has issued an exemptive order under CFTC Regulation 30.10. In addition, each FCM with which the Foreign Broker is affiliated must file with the National Futures Association an acknowledgment that it will be jointly and severally liable for any violations of the Commodity Exchange Act, or the CFTC’s rules, by the Foreign Broker in connection with the activities in which it engages in reliance on the Letter.

The Relief expires on September 30.

The press release announcing the Relief and Staff Letter No. 20-12 are available here.

©2020 Katten Muchin Rosenman LLP

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About this Author

Kevin M. Foley, Finance Lawyer, Katten Llaw Firm
Partner

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.

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312-902-5372
Stanley V. Polit, Katten Muchin, Financial Services lawyer, Corporate Regulatory Matters Attorney
Associate

Stanley Polit concentrates his practice in transactional, corporate and regulatory aspects of financial services matters. Stan is able to provide legal services to a wide variety of clients including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, commodity trading advisers, financial institutions and general corporate clients.

Prior to joining Katten, Stan served as a council member for a national crisis management firm, where he specialized in crisis communication and merged media strategies. He has lectured extensively and conducted trainings related to these topics at numerous national and international conferences, including the National Communication Association's National Convention, the International Crisis and Risk Communication Conference and the Disaster Recovery Journal's World Business Continuity Conference.

312.902.5420