The U.S. Commodity Futures Trading Commission (CFTC) last week issued an order to Hong Kong Securities and Futures Commission (HKSFC) permitting HKSFC licensed corporations authorized to solicit and accept orders and funds directly from U.S. customers for trading on any exchange subject to the HKSFC’s oversight without having to register with the CFTC as futures commission merchants (FCMs). This exemption follows similar exemptions granted to other foreign exchanges or foreign regulators pursuant to Commission Regulation 30.10.
This is a very interesting move, as one of the facets of the Dodd-Frank Act which was signed by President Obama in 2010 and sworn into US law was that US domestic customers must only use US domestic firms, and vice versa. Indeed, it is likely to be well received that overseas participants under the Hong Kong regulatory jurisdiction can now execute orders on US venues without having to register as an FCM in their own right.
The order has been submitted to the Federal Register to be published and the relief is effective as to each foreign firm upon the filing of certain representations with the National Futures Association. For more information on HKSFC’s Regulation 30.10 exemption, as well as a list of other Regulation 30.10 exemptions granted by the CFTC, please refer to the List of Foreign Part 30 Exemptions on the International section at www.cftc.gov.
Orders issued by the Commission pursuant to Regulation 30.10 allow firms located in certain foreign jurisdictions to deal directly with U.S. customers on non-U.S. markets without having to comply with certain requirements set forth in the Commodity Exchange Act and CFTC regulations, including the requirement to register with the Commission as a FCM. These foreign firms are permitted to do so because they are subject to comparable customer protection standards in their home jurisdiction. The criteria for the CFTC’s review of foreign standards are set forth in an Interpretative Statement contained in Appendix A to Part 30 of the CFTC’s regulations.
For the official release from the CFTC, click here.