Self-Regulatory Organizations; National Futures Association; Notice of Filing of Proposed Rule Change to the Interpretive Notice to NFA Compliance Rules 2-4 and 2-36: Prohibition on the Use of Certain Electronic Funding Mechanisms, 38349-38353 [2014-15719]

Download as PDF Federal Register / Vol. 79, No. 129 / Monday, July 7, 2014 / Notices Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– C2–2014–012 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. mstockstill on DSK4VPTVN1PROD with NOTICES All submissions should refer to File Number SR–C2–2014–012. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–C2– 2014–012 and should be submitted on or before July 28, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.12 Jill M. Peterson, Assistant Secretary. [FR Doc. 2014–15720 Filed 7–3–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72498; File No. SR–NFA– 2014–04] Self-Regulatory Organizations; National Futures Association; Notice of Filing of Proposed Rule Change to the Interpretive Notice to NFA Compliance Rules 2–4 and 2–36: Prohibition on the Use of Certain Electronic Funding Mechanisms June 30, 2014. Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’),1 and Rule 19b–7 under the Exchange Act,2 notice is hereby given that on June 18, 2014, National Futures Association (‘‘NFA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change described in Items I and II below, which Items have been substantially prepared by the NFA. The Commission is publishing this notice to solicit comments on the proposed rule from interested persons. On June 18, 2014, NFA submitted the proposed rule change to the CFTC for approval. The CFTC has not yet approved the proposed rule change. I. Self-Regulatory Organization’s Description and Text of the Proposed Rule Change Under the proposed Interpretive Notice to NFA Compliance Rules 2–4 and 2–36: Prohibition on the Use of Certain Electronic Funding Mechanisms (‘‘Interpretive Notice’’), NFA Members (‘‘Members’’) are prohibited from allowing customers to fund futures or forex accounts with a credit card or other electronic funding methods tied to a credit card. The proposed Interpretive Notice does not prohibit Members from allowing customers to fund futures or forex accounts with electronic funding mechanisms that are tied to a customer’s bank account at a financial institution provided the funds deposited are drawn directly from the customer’s bank account. The Interpretive Notice requires, however, that the Member be able to distinguish, prior to accepting funds, between an electronic funding method that draws money from the customer’s account at a financial institution and a traditional credit card, and be able to reject the credit card transaction before accepting funds. The Interpretive Notice also requires Members offering this type of electronic funding mechanism to provide adequate 1 15 12 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 15:59 Jul 03, 2014 2 17 Jkt 232001 PO 00000 U.S.C. 78s(b)(7). CFR 240.19b–7. Frm 00074 Fmt 4703 risk disclosure in light of the customer’s financial circumstances. The text of the Interpretive Notice is available on NFA’s Web site at www.nfa.futures.org, the Commission’s Web site at www.sec.gov, NFA’s office, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for the Proposed Rule Change In its filing with the Commission, NFA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NFA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for the Proposed Rule Change 1. Purpose Section 15A(k) of the Exchange Act 3 makes NFA a national securities association for the limited purpose of regulating the activities of NFA Members who are registered as brokers or dealers under Section 15(b)(11) of the Exchange Act.4 The proposed Interpretive Notice applies to all NFA Members, including those that are registered as security futures brokers or dealers under Section 15(b)(11) of the Exchange Act. NFA adopted the Interpretive Notice to NFA Compliance Rules 2–4 and 2–36 prohibiting Members from allowing customers to fund futures or forex accounts with a credit card or other electronic payment methods tied to a credit card after an extensive study and analysis done at the direction of NFA’s Compliance and Risk Committee (‘‘CRC’’). The CRC’s study and analysis found significant customer protection concerns with credit card funding in the retail forex area, and therefore NFA’s Board of Directors, upon the recommendation of the CRC, determined the only appropriate action was to adopt this prohibition. The prohibition is entirely consistent with NFA’s longstanding position that it is a violation of NFA Compliance Rule 2–4, and inconsistent with just and equitable principles of trade, for Members to 3 15 4 15 Sfmt 4703 38349 E:\FR\FM\07JYN1.SGM U.S.C. 78o–3(k). U.S.C. 78o(b)(11). 07JYN1 mstockstill on DSK4VPTVN1PROD with NOTICES 38350 Federal Register / Vol. 79, No. 129 / Monday, July 7, 2014 / Notices encourage customers to borrow money to invest.5 Many Forex Dealer Members (‘‘FDMs’’) offer their retail forex customers the ability to fund their accounts directly using a credit card or via an online payment facilitator (e.g., PayPal) that is commonly tied to a credit card (Payment Facilitator(s)—Credit). The CRC had several concerns with this practice, including that retail customers may be using credit cards to open accounts with funds that are borrowed and, therefore, not risk capital. The CRC’s concern had significant merit since a 2012 review of several FDM Web sites showed that those FDMs promoted credit funding as the ‘‘quickest,’’ ‘‘easiest,’’ and ‘‘fastest’’ method of investing. Given its concern, the CRC began considering whether it would be appropriate for NFA to prohibit its Members from allowing customers to fund their accounts (both forex and futures) via a credit card or a Payment Facilitator—Credit. As part of its consideration, the CRC directed NFA staff to conduct a detailed analysis of FDM account funding practices, customer income levels, and customer account funding origins. The analysis covered approximately 15,500 accounts held at seven FDMs—all of which were registered as retail foreign exchange dealers (‘‘RFED’’)—during 2012. The results of this analysis revealed: • Credit card funding restrictions varied among the FDMs. Several permitted the use of a credit card up to $10,000 per transaction. One firm based its restriction on a customer’s income level and a permitted customer with a net income between $0–$19,000 to fund an account with as much as $1,000 through a credit card; • The average life of a retail forex trading account at an RFED was 4 months regardless of the amount of the initial deposit; • For the 4th quarter 2013, 72% of the accounts analyzed were unprofitable; • 78% of all accounts were initially funded via credit card/debit card/online payment facilitator; • Almost 50% of all account holders reported a net income of $50,000 or less; and • Deposits made by credit card/debit card/online payment facilitator were markedly lower than deposits made by wires or checks. For example, for customers with a net income less than $50,000, the average deposit via credit card/debit card/online payment 5 See In the Matter of First Investors Group of Pal Beaches, Inc., et.al., NFA Case No. 95–BCC–011 (November 12, 1999). VerDate Mar<15>2010 15:59 Jul 03, 2014 Jkt 232001 facilitator was approximately $1,050 whereas for checks or wires it was approximately $6,650. This difference was also prevalent at other net income levels, including above $100,000 where the average deposit via credit card/debit card/online payment facilitator was approximately $2,450 whereas for checks or wires it was approximately $28,000. Given the prevalence of credit card usage by customers to initially fund retail forex accounts and the fact that such a large percentage of those customers had a relatively low income level ($50,000 or less), the CRC reviewed whether the FDMs provide specific risk disclosures regarding the implications of funding via a credit card or a Payment Facilitator—Credit and learned that none of the FDMs warned customers that they should not use a credit card or Payment Facilitator— Credit to borrow money to invest in retail forex. The CRC found the data very disturbing from a customer protection perspective because it reveals that lower income individuals predominantly use credit cards or Payment Facilitators— Credit to fund their accounts and the vast majority of these individuals lose their funds trading forex. Although the CRC recognized that it is possible that all lower income individuals pay off their credit card balances each month and are not borrowing funds to invest beyond the payment due date, the CRC concluded that this possibility is simply implausible given the low income levels. NFA Compliance Rule 2–4 requires Members and their Associates to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their commodity futures business. Similarly, NFA Compliance Rule 2–36(c) requires Members and their Associates to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their forex business. The CRC concluded that permitting customers to utilize funding mechanisms that by their very nature allow retail customers to borrow funds to invest in markets where the risk of loss can be substantial and a total loss may occur simply is not consistent with a Member’s obligation to observe high standards of commercial honor and just and equitable principles of trade. Given NFA’s analysis of the FDMs’ customers’ usage of credit cards and Payment Facilitators—Credit, and the fact that credit cards and Payment Facilitators— Credit readily allow individuals to borrow funds to purchase goods and services, the CRC concluded that PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 without adequate mechanisms in place to ensure that customers are not borrowing funds to invest in the highly volatile futures and forex markets, Members should not be permitted to allow their customers to invest via electronic funding mechanisms. The Interpretive Notice does not ban forms of electronic funding mechanisms that are tied to a customer’s bank account at a financial institution, such as a debit card or a PayPal account tied to a bank account. The CRC found that these funding mechanism are acceptable and appear consistent with a Member’s obligation to observe high standards of commercial honor and just and equitable principles of trade because when a customer uses an electronic funding mechanism directly tied to an account at a financial institution, the customer has funds on hand that are immediately transferred from the customer’s bank account to the Member, which significantly reduces the likelihood that funds are being borrowed to invest. However, in order for a Member to allow customers to use electronic funding mechanisms, the Member must be able to distinguish between those electronic funding mechanisms tied to a credit card and those tied to a bank account and reject the ones tied to a credit card.6 Under the Interpretive Notice, if a Member offers customers the ability to use an electronic funding mechanism, then the Member must utilize a processing system or some other electronic mechanism that can ensure the funding device is a debit card or some other payment facilitator that is tied directly to the customer’s bank account at a financial institution. Moreover, any Member offering this type of funding mechanism, must also ensure that adequate risk disclosure is provided to customers in light of the customers’ financial circumstances. 2. Statutory Basis NFA believes that the proposed rule change is authorized by, and consistent with, Section 15A(k)(2)(B) of the 6 One FDM indicated that it currently uses a third-party provider to process credit and debit card transactions when they are initiated by the customer. Accordingly, the third-party provider uses a programming code, which allows its frontend processer to identify whether a card is a credit or debit card based on the digits listed on the card. This front-end processing system has the ability to identify the card as a debit card even if the customer elected to process the card as a credit transaction. In other words, the system programming can distinguish between a debit card issued by a bank with monies drawn from a checking or savings account, or a traditional credit card. The third party provider is able to automatically reject transactions that are credit card transactions. E:\FR\FM\07JYN1.SGM 07JYN1 Federal Register / Vol. 79, No. 129 / Monday, July 7, 2014 / Notices Exchange Act.7 That section sets out requirements for rules of a futures association, registered under Section 17 of the Commodity Exchange Act, that are a registered national securities association for the limited purpose of regulating the activities of members who are registered as brokers or dealers in security futures products pursuant to Section 15(b)(11) of the Exchange Act. Under Section 15A(k)(2)(B), the rules of such a limited purpose national securities association must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest in connection with security futures products in a manner reasonably comparable to the rules of a registered national securities association registered pursuant to Section 15A(a) that are applicable to securities futures products. NFA believes the proposed rule change meets these requirements because NFA determined that permitting customers to use credit cards to fund futures and forex accounts was inconsistent with just and equitable principles of trade and the proposed Interpretive Notice prohibits Members from permitting customers to use credit cards to fund accounts. mstockstill on DSK4VPTVN1PROD with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition NFA recognizes that the proposed rule change may impose a minor burden on competition with respect to foreign customers that might be able to use credit cards to fund accounts with foreign intermediaries that are not Members of NFA. NFA concluded, however, that any burden was outweighed by the need to adopt appropriate customer protection measures. NFA also concluded that the burden was minimized by the fact that the Interpretive Notice permits Members to offer customers the ability to use an electronic funding mechanism that draws funds directly from the customer’s account at a financial institution, provided the Member is able to distinguish between those electronic funding mechanisms drawing funds directly from the customer’s account at a financial institution and those tied to a credit card and reject those transactions tied to a credit card. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The CRC requested feedback on the concept of prohibiting Members from 7 15 U.S.C. 78o–3(k)(2)(B). VerDate Mar<15>2010 15:59 Jul 03, 2014 Jkt 232001 allowing customers to fund their forex or futures accounts with a credit card or Payment Facilitator—Credit from NFA’s Futures Commission Merchant (‘‘FCM’’), Introducing Broker (‘‘IB’’), Commodity Pool Operator (‘‘CPO’’) and Commodity Trading Advisor (‘‘CTA’’) Advisory Committees. Each of these Committees fully supported a ban of this practice for both futures and forex accounts. Given the importance of this issue, the CRC did not obtain the views of NFA’s FDM Advisory Committee— which had recently lost most of its representatives due to FDM withdrawals and consolidations—but rather obtained the FDMs’ views by issuing a Notice to all FDMs requesting their comments. The CRC also met with affected members of the FDM community to further discuss their comments. Specifically, NFA received comments from five of NFA’s 17 FDMs (one of which was filed by a law firm on behalf of the FDM), the Financial Services Roundtable (‘‘FSR’’) and a retail forex customer. All but one FDM strongly opposed a ban against FDMs accepting credit cards from customers to fund forex trading accounts. Despite the fact that credit card funding was not ‘‘an insignificant portion’’ of its business, this FDM did not object to the proposed ban but requested a 60-day implementation period in order to make operational changes to reject credit card transactions while permitting debit card transactions and to educate clients about the ban. The CRC carefully considered all of the comments received. Below is a summary of the material comments and the CRC’s response. • Forex customers must react to market changes during non-banking hours and credit cards are the only funding method to do so, while checks or wire transfers often take too long to be credited to prevent a margin closeout. • Credit cards are more economical since FDMs do not charge a fee to use them while banks charge fees for wire transfers and use of Automated Clearing House (‘‘ACH’’). • Credit card funding is one of the fastest, most convenient, and lowest cost funding vehicles. • Many FDMs represented to NFA that customers need to use credit cards in order to quickly add funds in order to avoid forced liquidation of their positions. The CRC recognized that credit cards may provide an efficient and, in some instances, economical method for depositing funds into a trading account. The CRC believed, however, that this benefit is vastly outweighed by the risk PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 38351 associated with a customer borrowing funds to invest in futures or forex. Moreover, the CRC believed that the efficient and economical benefits of credit card funding can be retained by permitting Members to offer customers the ability to use an electronic funding mechanism that draws funds directly from the customer’s account at a financial institution, provided the Member is able to distinguish between those electronic funding mechanisms drawing funds directly from the customer’s account at a financial institution and those tied to a credit card and reject those transactions tied to a credit card. Additionally, NFA’s analysis revealed that very few forex positions overall are auto-liquidated, customers generally add funds to their account using the same method as their initial funding method, and positions in accounts funded through a credit card are not less likely to be auto-liquidated. In fact, NFA’s analysis showed that those accounts funded through a credit card actually had positions auto-liquidated more frequently than those accounts funded through traditional methods, although the percentage of autoliquidations remained relatively low. • Funds deposited by traditional methods may ultimately be drawn from credit sources. The CRC acknowledged that the prohibition could be circumvented because accounts funded with deposits using traditional methods may ultimately be drawn from credit sources. The CRC, however, concluded that banning the direct use of credit cards would lessen the likelihood of this occurrence because a customer can make an instantaneous decision to use a credit card, whereas other forms of credit generally take longer to obtain and provide the customer with more time to consider the consequences of borrowing funds to invest. Moreover, the CRC felt that credit cards are funding mechanism that lend themselves to borrowing funds and permitting this type of funding mechanism is directly contrary to NFA’s longstanding position that it is a violation of NFA Compliance Rule 2–4, and inconsistent with just and equitable principles of trade, for Members and Associates to encourage customers to borrow money to invest. • The ban is overly broad since alternative payment facilitators (e.g., PayPal, MoneyBookers and Google Checkout) may be funded through a bank account or other debit sources. The CRC addressed this comment by providing that the ban did not apply to electronic payment methods that are E:\FR\FM\07JYN1.SGM 07JYN1 mstockstill on DSK4VPTVN1PROD with NOTICES 38352 Federal Register / Vol. 79, No. 129 / Monday, July 7, 2014 / Notices tied to a bank account at a financial institution provided that the Member is able to distinguish between electronic payment mechanisms that are tied to a bank account and traditional credit card transactions and reject the credit card transactions before accepting funds. • FDMs have other procedures in place to ensure that customers only use risk capital even if the source is a credit card. • NFA has other rules that ensure that customers do not invest funds in excess of risk capital (Rule 2–36 ‘‘know your customer,’’ risk disclosure requirements, and guidance requiring FCMs to prominently disclose that customers should only fund with risk capital). The CRC acknowledged that NFA had other rules in place to guard against customers investing in excess of risk capital and that FDMs should have other procedures in place to ensure customers only use risk capital even if the source was a credit card. The CRC concluded, however, that based on the analysis conducted and the fact that credit cards by their nature permit easy access to borrowed funds any disclosure alone is an insufficient customer protection measure to address the issue. • Banks that issue credit cards consider a customer’s credit worthiness in determining the customer’s credit limit, which is a built in risk safeguard. The CRC did not believe this provided a credible rationale to permit credit card funding. Retail customers should not be borrowing funds to invest in futures or forex. Regardless of the credit limit determined by a bank, a customer should not be using borrowed funds to invest in the volatile futures or forex markets where the risk of loss may be substantial. • Certain foreign jurisdictions permit credit card funding. • Credit cards are permitted in numerous industries in which ‘‘customer funds are put at risk with far fewer safeguards than retail forex trading,’’ including the New York State Lottery, which provides customers the option of signing up for subscriptions to certain lottery games using credit cards, and the Nassau County New York OTB permits individuals to make deposits via credit card to their permanent wagering account. The CRC was not persuaded by the comment that many foreign jurisdictions permit customers to use credit cards to fund forex accounts. The CRC felt that the customer protection concerns raised by this practice were far too disturbing and the fact that foreign jurisdictions may permit this practice did not outweigh these concerns. The CRC also found entirely unpersuasive VerDate Mar<15>2010 15:59 Jul 03, 2014 Jkt 232001 the fact that other industries, particularly off-track betting parlors or lottery related agencies, permitted customers to use credit cards. • The FDMs opposing a ban on funding via a credit card recommended that NFA address this issue short of imposing a prohibition. For example, these FDMs believe that NFA should do one or more of the following—prohibit heavy promotion of credit card funding, require account withdrawals to go back to the original funding credit card, establish a monthly deposit cap for credit card funding, enhance disclosures regarding risk capital usage, issue prominent warnings regarding credit card usage to underscore the risks of using this funding means if a customer does not have sufficient bank funds to cover the deposit, and recommending that customers pay off credit card balances monthly by the due date. The CRC considered other alternatives and concluded that given the customer protection concerns raised, and the fact that credit cards are any easy source of borrowed funds, the only way to address the issues was to prohibit Members from allowing customers to use credit cards or other electronic methods unless the Member could distinguish between electronic payments that are tied to a bank account and traditional credit card transactions and reject the credit card transactions. • The FSR’s letter claimed banning credit cards and the use of credit cards through payment facilitators (e.g. Paypal) is a significant regulatory action that has far reaching implications. The FSR urged NFA to consider viable alternatives and seek comments from those outside the forex industry. The CRC determined that one of NFA’s primary responsibilities is the protection of customers in the futures and forex industries and that the prohibition was necessary to achieve this objective. The CRC also observed that NFA’s mandate is not to promote the business interests of credit card companies. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change is not effective because the CFTC has not approved the proposed rule change. Section 19(b)(7)(C) of the Act provides, inter alia that ‘‘[a]ny proposed rule change of a self-regulatory organization that has taken effect pursuant to [Section 19(b)(7)(B) of the Act] may be enforced by such selfregulatory organization to the extent such rule is not inconsistent with the provisions of the title, the rules and PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 regulations thereunder, and applicable Federal law. At any time within 60 days of the date of effectiveness of the proposed rule change, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be refiled in accordance with the provisions of Section 19(b)(1) of the Exchange Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NFA–2014–04 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NFA–2014–04. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of NFA. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File E:\FR\FM\07JYN1.SGM 07JYN1 Federal Register / Vol. 79, No. 129 / Monday, July 7, 2014 / Notices Number SR–NFA–2014–04 and should be submitted on or before July 28, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Jill M. Peterson, Assistant Secretary. [FR Doc. 2014–15719 Filed 7–3–14; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF STATE [Public Notice: 8786] 60-Day Notice of Proposed Information Collection: Individual, Corporate or Foundation, and Government Donor Letter Applications Notice of request for public comment. ACTION: The Department of State is seeking Office of Management and Budget (OMB) approval for the information collection described below. In accordance with the Paperwork Reduction Act of 1995, we are requesting comments on this collection from all interested individuals and organizations. The purpose of this notice is to allow 60 days for public comment preceding submission of the collection to OMB. DATES: The Department will accept comments from the public up to September 5, 2014. ADDRESSES: You may submit comments by any of the following methods: • Web: Persons with access to the Internet may use the Federal Docket Management System (FDMS) to comment on this notice by going to www.Regulations.gov. You can search for the document by entering ‘‘Public Notice 8786’’ in the Search bar. If necessary, use the Narrow by Agency filter option on the Results page. • Email: HarveyRJ2@state.gov. • Mail: M/EDCS, U.S. Department of State, 2201 C Street NW., HST, Room 7427B, Washington, DC 20520. • Fax: (202) 647–8194. You must include the DS form number (if applicable), information collection title, and the OMB control number in any correspondence. FOR FURTHER INFORMATION CONTACT: Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to Ronda Harvey, who may be reached on (202) 647–6009 or at HarveyRJ2@ state.gov. mstockstill on DSK4VPTVN1PROD with NOTICES SUMMARY: 8 17 CFR 200.30–3(a)(73). VerDate Mar<15>2010 15:59 Jul 03, 2014 Jkt 232001 SUPPLEMENTARY INFORMATION: • Title of Information Collection: Individual, Corporate or Foundation and Government Donor Letter Application. • OMB Control Number: None. • Type of Request: Collection in use without an OMB control number. • Originating Office: Office of Emergencies in the Diplomatic and Consular Service (EDCS). • Form Numbers: Donor Form— Individual (DS–4273), Donor Form— Corporate or Foundation (DS–4272), Donor Form—Government (DS–4271). • Respondents: Individuals, Corporations, or Foundations that make donations to the Department. • Estimated Number of Respondents: 3665. • Estimated Number of Responses: 3665. • Average Time per Response: 8 minutes per form. • Total Estimated Burden Time: 489 hours. • Frequency: On occasion. • Obligation to Respond: Mandatory. We are soliciting public comments to permit the Department to: • Evaluate whether the proposed information collection is necessary for the proper functions of the Department. • Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used. • Enhance the quality, utility, and clarity of the information to be collected. • Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology. Please note that comments submitted in response to this Notice are public record. Before including any detailed personal information, you should be aware that your comments as submitted, including your personal information, will be available for public review. Abstract of Proposed Collection The Office of Emergencies in the Diplomatic and Consular Service (EDCS) manages the solicitation and acceptance of gifts to the U.S. Department of State. The information requested via donor letters is a necessary first step to accepting donations. The information is sought pursuant to 22 U.S.C. 2697, 5 U.S.C. 7324 and 22 CFR, Part 3) and will be used by EDCS’s Gift Fund Coordinator to demonstrate the donor’s intention to donate either an in-kind or monetary gift to the Department. This information PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 38353 is mandatory and must be completed before the gift is received by the Department. Methodology The information collection forms will be available electronically via the State Department’s Internet Web site (www.state.gov). Donors can also complete hard-copies of the form and mail them to EDCS if internet access is not available. Dated: June 30, 2014. Frances Z. Gidez, Director, Gift & K Fund, Department of State. [FR Doc. 2014–15823 Filed 7–3–14; 8:45 am] BILLING CODE 4710–10–P DEPARTMENT OF STATE [Public Notice: 8788] 30-Day Notice of Proposed Information Collection: Non-Foreign Service Personnel and Their Family Members Notice of request for public comment and submission to OMB of proposed collection of information. ACTION: The Department of State has submitted the information collection described below to the Office of Management and Budget (OMB) for approval. In accordance with the Paperwork Reduction Act of 1995 we are requesting comments on this collection from all interested individuals and organizations. The purpose of this Notice is to allow 30 days for public comment. DATES: Submit comments directly to the Office of Management and Budget (OMB) up to August 6, 2014. ADDRESSES: Direct comments to the Department of State Desk Officer in the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB). You may submit comments by the following methods: • Email: oira_submission@ omb.eop.gov. You must include the DS form number, information collection title, and the OMB control number in the subject line of your message. • Fax: 202–395–5806. Attention: Desk Officer for Department of State. FOR FURTHER INFORMATION CONTACT: Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to Susan B. Summers—Chief, Medical Clearances at Department of State, Office of Medical Clearances, SA–15 Room 400, 1800 North Kent St., Rosslyn, VA 22209, who may be SUMMARY: E:\FR\FM\07JYN1.SGM 07JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 129 (Monday, July 7, 2014)]
[Notices]
[Pages 38349-38353]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-15719]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72498; File No. SR-NFA-2014-04]


Self-Regulatory Organizations; National Futures Association; 
Notice of Filing of Proposed Rule Change to the Interpretive Notice to 
NFA Compliance Rules 2-4 and 2-36: Prohibition on the Use of Certain 
Electronic Funding Mechanisms

June 30, 2014.
    Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 
(``Exchange Act''),\1\ and Rule 19b-7 under the Exchange Act,\2\ notice 
is hereby given that on June 18, 2014, National Futures Association 
(``NFA'') filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change described in Items I and II 
below, which Items have been substantially prepared by the NFA. The 
Commission is publishing this notice to solicit comments on the 
proposed rule from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(7).
    \2\ 17 CFR 240.19b-7.
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    On June 18, 2014, NFA submitted the proposed rule change to the 
CFTC for approval. The CFTC has not yet approved the proposed rule 
change.

I. Self-Regulatory Organization's Description and Text of the Proposed 
Rule Change

    Under the proposed Interpretive Notice to NFA Compliance Rules 2-4 
and 2-36: Prohibition on the Use of Certain Electronic Funding 
Mechanisms (``Interpretive Notice''), NFA Members (``Members'') are 
prohibited from allowing customers to fund futures or forex accounts 
with a credit card or other electronic funding methods tied to a credit 
card. The proposed Interpretive Notice does not prohibit Members from 
allowing customers to fund futures or forex accounts with electronic 
funding mechanisms that are tied to a customer's bank account at a 
financial institution provided the funds deposited are drawn directly 
from the customer's bank account. The Interpretive Notice requires, 
however, that the Member be able to distinguish, prior to accepting 
funds, between an electronic funding method that draws money from the 
customer's account at a financial institution and a traditional credit 
card, and be able to reject the credit card transaction before 
accepting funds. The Interpretive Notice also requires Members offering 
this type of electronic funding mechanism to provide adequate risk 
disclosure in light of the customer's financial circumstances.
    The text of the Interpretive Notice is available on NFA's Web site 
at www.nfa.futures.org, the Commission's Web site at www.sec.gov, NFA's 
office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for the Proposed Rule Change

    In its filing with the Commission, NFA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NFA has prepared summaries, set forth in sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for the Proposed Rule Change

1. Purpose
    Section 15A(k) of the Exchange Act \3\ makes NFA a national 
securities association for the limited purpose of regulating the 
activities of NFA Members who are registered as brokers or dealers 
under Section 15(b)(11) of the Exchange Act.\4\ The proposed 
Interpretive Notice applies to all NFA Members, including those that 
are registered as security futures brokers or dealers under Section 
15(b)(11) of the Exchange Act.
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    \3\ 15 U.S.C. 78o-3(k).
    \4\ 15 U.S.C. 78o(b)(11).
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    NFA adopted the Interpretive Notice to NFA Compliance Rules 2-4 and 
2-36 prohibiting Members from allowing customers to fund futures or 
forex accounts with a credit card or other electronic payment methods 
tied to a credit card after an extensive study and analysis done at the 
direction of NFA's Compliance and Risk Committee (``CRC''). The CRC's 
study and analysis found significant customer protection concerns with 
credit card funding in the retail forex area, and therefore NFA's Board 
of Directors, upon the recommendation of the CRC, determined the only 
appropriate action was to adopt this prohibition. The prohibition is 
entirely consistent with NFA's longstanding position that it is a 
violation of NFA Compliance Rule 2-4, and inconsistent with just and 
equitable principles of trade, for Members to

[[Page 38350]]

encourage customers to borrow money to invest.\5\
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    \5\ See In the Matter of First Investors Group of Pal Beaches, 
Inc., et.al., NFA Case No. 95-BCC-011 (November 12, 1999).
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    Many Forex Dealer Members (``FDMs'') offer their retail forex 
customers the ability to fund their accounts directly using a credit 
card or via an online payment facilitator (e.g., PayPal) that is 
commonly tied to a credit card (Payment Facilitator(s)--Credit). The 
CRC had several concerns with this practice, including that retail 
customers may be using credit cards to open accounts with funds that 
are borrowed and, therefore, not risk capital. The CRC's concern had 
significant merit since a 2012 review of several FDM Web sites showed 
that those FDMs promoted credit funding as the ``quickest,'' 
``easiest,'' and ``fastest'' method of investing.
    Given its concern, the CRC began considering whether it would be 
appropriate for NFA to prohibit its Members from allowing customers to 
fund their accounts (both forex and futures) via a credit card or a 
Payment Facilitator--Credit. As part of its consideration, the CRC 
directed NFA staff to conduct a detailed analysis of FDM account 
funding practices, customer income levels, and customer account funding 
origins. The analysis covered approximately 15,500 accounts held at 
seven FDMs--all of which were registered as retail foreign exchange 
dealers (``RFED'')--during 2012. The results of this analysis revealed:
     Credit card funding restrictions varied among the FDMs. 
Several permitted the use of a credit card up to $10,000 per 
transaction. One firm based its restriction on a customer's income 
level and a permitted customer with a net income between $0-$19,000 to 
fund an account with as much as $1,000 through a credit card;
     The average life of a retail forex trading account at an 
RFED was 4 months regardless of the amount of the initial deposit;
     For the 4th quarter 2013, 72% of the accounts analyzed 
were unprofitable;
     78% of all accounts were initially funded via credit card/
debit card/online payment facilitator;
     Almost 50% of all account holders reported a net income of 
$50,000 or less; and
     Deposits made by credit card/debit card/online payment 
facilitator were markedly lower than deposits made by wires or checks. 
For example, for customers with a net income less than $50,000, the 
average deposit via credit card/debit card/online payment facilitator 
was approximately $1,050 whereas for checks or wires it was 
approximately $6,650. This difference was also prevalent at other net 
income levels, including above $100,000 where the average deposit via 
credit card/debit card/online payment facilitator was approximately 
$2,450 whereas for checks or wires it was approximately $28,000.
    Given the prevalence of credit card usage by customers to initially 
fund retail forex accounts and the fact that such a large percentage of 
those customers had a relatively low income level ($50,000 or less), 
the CRC reviewed whether the FDMs provide specific risk disclosures 
regarding the implications of funding via a credit card or a Payment 
Facilitator--Credit and learned that none of the FDMs warned customers 
that they should not use a credit card or Payment Facilitator--Credit 
to borrow money to invest in retail forex.
    The CRC found the data very disturbing from a customer protection 
perspective because it reveals that lower income individuals 
predominantly use credit cards or Payment Facilitators--Credit to fund 
their accounts and the vast majority of these individuals lose their 
funds trading forex. Although the CRC recognized that it is possible 
that all lower income individuals pay off their credit card balances 
each month and are not borrowing funds to invest beyond the payment due 
date, the CRC concluded that this possibility is simply implausible 
given the low income levels.
    NFA Compliance Rule 2-4 requires Members and their Associates to 
observe high standards of commercial honor and just and equitable 
principles of trade in the conduct of their commodity futures business. 
Similarly, NFA Compliance Rule 2-36(c) requires Members and their 
Associates to observe high standards of commercial honor and just and 
equitable principles of trade in the conduct of their forex business. 
The CRC concluded that permitting customers to utilize funding 
mechanisms that by their very nature allow retail customers to borrow 
funds to invest in markets where the risk of loss can be substantial 
and a total loss may occur simply is not consistent with a Member's 
obligation to observe high standards of commercial honor and just and 
equitable principles of trade. Given NFA's analysis of the FDMs' 
customers' usage of credit cards and Payment Facilitators--Credit, and 
the fact that credit cards and Payment Facilitators--Credit readily 
allow individuals to borrow funds to purchase goods and services, the 
CRC concluded that without adequate mechanisms in place to ensure that 
customers are not borrowing funds to invest in the highly volatile 
futures and forex markets, Members should not be permitted to allow 
their customers to invest via electronic funding mechanisms.
    The Interpretive Notice does not ban forms of electronic funding 
mechanisms that are tied to a customer's bank account at a financial 
institution, such as a debit card or a PayPal account tied to a bank 
account. The CRC found that these funding mechanism are acceptable and 
appear consistent with a Member's obligation to observe high standards 
of commercial honor and just and equitable principles of trade because 
when a customer uses an electronic funding mechanism directly tied to 
an account at a financial institution, the customer has funds on hand 
that are immediately transferred from the customer's bank account to 
the Member, which significantly reduces the likelihood that funds are 
being borrowed to invest. However, in order for a Member to allow 
customers to use electronic funding mechanisms, the Member must be able 
to distinguish between those electronic funding mechanisms tied to a 
credit card and those tied to a bank account and reject the ones tied 
to a credit card.\6\
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    \6\ One FDM indicated that it currently uses a third-party 
provider to process credit and debit card transactions when they are 
initiated by the customer. Accordingly, the third-party provider 
uses a programming code, which allows its front-end processer to 
identify whether a card is a credit or debit card based on the 
digits listed on the card. This front-end processing system has the 
ability to identify the card as a debit card even if the customer 
elected to process the card as a credit transaction. In other words, 
the system programming can distinguish between a debit card issued 
by a bank with monies drawn from a checking or savings account, or a 
traditional credit card. The third party provider is able to 
automatically reject transactions that are credit card transactions.
---------------------------------------------------------------------------

    Under the Interpretive Notice, if a Member offers customers the 
ability to use an electronic funding mechanism, then the Member must 
utilize a processing system or some other electronic mechanism that can 
ensure the funding device is a debit card or some other payment 
facilitator that is tied directly to the customer's bank account at a 
financial institution. Moreover, any Member offering this type of 
funding mechanism, must also ensure that adequate risk disclosure is 
provided to customers in light of the customers' financial 
circumstances.
2. Statutory Basis
    NFA believes that the proposed rule change is authorized by, and 
consistent with, Section 15A(k)(2)(B) of the

[[Page 38351]]

Exchange Act.\7\ That section sets out requirements for rules of a 
futures association, registered under Section 17 of the Commodity 
Exchange Act, that are a registered national securities association for 
the limited purpose of regulating the activities of members who are 
registered as brokers or dealers in security futures products pursuant 
to Section 15(b)(11) of the Exchange Act. Under Section 15A(k)(2)(B), 
the rules of such a limited purpose national securities association 
must be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, and, in 
general, to protect investors and the public interest in connection 
with security futures products in a manner reasonably comparable to the 
rules of a registered national securities association registered 
pursuant to Section 15A(a) that are applicable to securities futures 
products. NFA believes the proposed rule change meets these 
requirements because NFA determined that permitting customers to use 
credit cards to fund futures and forex accounts was inconsistent with 
just and equitable principles of trade and the proposed Interpretive 
Notice prohibits Members from permitting customers to use credit cards 
to fund accounts.
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    \7\ 15 U.S.C. 78o-3(k)(2)(B).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NFA recognizes that the proposed rule change may impose a minor 
burden on competition with respect to foreign customers that might be 
able to use credit cards to fund accounts with foreign intermediaries 
that are not Members of NFA. NFA concluded, however, that any burden 
was outweighed by the need to adopt appropriate customer protection 
measures. NFA also concluded that the burden was minimized by the fact 
that the Interpretive Notice permits Members to offer customers the 
ability to use an electronic funding mechanism that draws funds 
directly from the customer's account at a financial institution, 
provided the Member is able to distinguish between those electronic 
funding mechanisms drawing funds directly from the customer's account 
at a financial institution and those tied to a credit card and reject 
those transactions tied to a credit card.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The CRC requested feedback on the concept of prohibiting Members 
from allowing customers to fund their forex or futures accounts with a 
credit card or Payment Facilitator--Credit from NFA's Futures 
Commission Merchant (``FCM''), Introducing Broker (``IB''), Commodity 
Pool Operator (``CPO'') and Commodity Trading Advisor (``CTA'') 
Advisory Committees. Each of these Committees fully supported a ban of 
this practice for both futures and forex accounts. Given the importance 
of this issue, the CRC did not obtain the views of NFA's FDM Advisory 
Committee--which had recently lost most of its representatives due to 
FDM withdrawals and consolidations--but rather obtained the FDMs' views 
by issuing a Notice to all FDMs requesting their comments. The CRC also 
met with affected members of the FDM community to further discuss their 
comments.
    Specifically, NFA received comments from five of NFA's 17 FDMs (one 
of which was filed by a law firm on behalf of the FDM), the Financial 
Services Roundtable (``FSR'') and a retail forex customer. All but one 
FDM strongly opposed a ban against FDMs accepting credit cards from 
customers to fund forex trading accounts. Despite the fact that credit 
card funding was not ``an insignificant portion'' of its business, this 
FDM did not object to the proposed ban but requested a 60-day 
implementation period in order to make operational changes to reject 
credit card transactions while permitting debit card transactions and 
to educate clients about the ban.
    The CRC carefully considered all of the comments received. Below is 
a summary of the material comments and the CRC's response.
     Forex customers must react to market changes during non-
banking hours and credit cards are the only funding method to do so, 
while checks or wire transfers often take too long to be credited to 
prevent a margin close-out.
     Credit cards are more economical since FDMs do not charge 
a fee to use them while banks charge fees for wire transfers and use of 
Automated Clearing House (``ACH'').
     Credit card funding is one of the fastest, most 
convenient, and lowest cost funding vehicles.
     Many FDMs represented to NFA that customers need to use 
credit cards in order to quickly add funds in order to avoid forced 
liquidation of their positions.
    The CRC recognized that credit cards may provide an efficient and, 
in some instances, economical method for depositing funds into a 
trading account. The CRC believed, however, that this benefit is vastly 
outweighed by the risk associated with a customer borrowing funds to 
invest in futures or forex. Moreover, the CRC believed that the 
efficient and economical benefits of credit card funding can be 
retained by permitting Members to offer customers the ability to use an 
electronic funding mechanism that draws funds directly from the 
customer's account at a financial institution, provided the Member is 
able to distinguish between those electronic funding mechanisms drawing 
funds directly from the customer's account at a financial institution 
and those tied to a credit card and reject those transactions tied to a 
credit card.
    Additionally, NFA's analysis revealed that very few forex positions 
overall are auto-liquidated, customers generally add funds to their 
account using the same method as their initial funding method, and 
positions in accounts funded through a credit card are not less likely 
to be auto-liquidated. In fact, NFA's analysis showed that those 
accounts funded through a credit card actually had positions auto-
liquidated more frequently than those accounts funded through 
traditional methods, although the percentage of auto-liquidations 
remained relatively low.
     Funds deposited by traditional methods may ultimately be 
drawn from credit sources.
    The CRC acknowledged that the prohibition could be circumvented 
because accounts funded with deposits using traditional methods may 
ultimately be drawn from credit sources. The CRC, however, concluded 
that banning the direct use of credit cards would lessen the likelihood 
of this occurrence because a customer can make an instantaneous 
decision to use a credit card, whereas other forms of credit generally 
take longer to obtain and provide the customer with more time to 
consider the consequences of borrowing funds to invest. Moreover, the 
CRC felt that credit cards are funding mechanism that lend themselves 
to borrowing funds and permitting this type of funding mechanism is 
directly contrary to NFA's longstanding position that it is a violation 
of NFA Compliance Rule 2-4, and inconsistent with just and equitable 
principles of trade, for Members and Associates to encourage customers 
to borrow money to invest.
     The ban is overly broad since alternative payment 
facilitators (e.g., PayPal, MoneyBookers and Google Checkout) may be 
funded through a bank account or other debit sources.
    The CRC addressed this comment by providing that the ban did not 
apply to electronic payment methods that are

[[Page 38352]]

tied to a bank account at a financial institution provided that the 
Member is able to distinguish between electronic payment mechanisms 
that are tied to a bank account and traditional credit card 
transactions and reject the credit card transactions before accepting 
funds.
     FDMs have other procedures in place to ensure that 
customers only use risk capital even if the source is a credit card.
     NFA has other rules that ensure that customers do not 
invest funds in excess of risk capital (Rule 2-36 ``know your 
customer,'' risk disclosure requirements, and guidance requiring FCMs 
to prominently disclose that customers should only fund with risk 
capital).
    The CRC acknowledged that NFA had other rules in place to guard 
against customers investing in excess of risk capital and that FDMs 
should have other procedures in place to ensure customers only use risk 
capital even if the source was a credit card. The CRC concluded, 
however, that based on the analysis conducted and the fact that credit 
cards by their nature permit easy access to borrowed funds any 
disclosure alone is an insufficient customer protection measure to 
address the issue.
     Banks that issue credit cards consider a customer's credit 
worthiness in determining the customer's credit limit, which is a built 
in risk safeguard.
    The CRC did not believe this provided a credible rationale to 
permit credit card funding. Retail customers should not be borrowing 
funds to invest in futures or forex. Regardless of the credit limit 
determined by a bank, a customer should not be using borrowed funds to 
invest in the volatile futures or forex markets where the risk of loss 
may be substantial.
     Certain foreign jurisdictions permit credit card funding.
     Credit cards are permitted in numerous industries in which 
``customer funds are put at risk with far fewer safeguards than retail 
forex trading,'' including the New York State Lottery, which provides 
customers the option of signing up for subscriptions to certain lottery 
games using credit cards, and the Nassau County New York OTB permits 
individuals to make deposits via credit card to their permanent 
wagering account.
    The CRC was not persuaded by the comment that many foreign 
jurisdictions permit customers to use credit cards to fund forex 
accounts. The CRC felt that the customer protection concerns raised by 
this practice were far too disturbing and the fact that foreign 
jurisdictions may permit this practice did not outweigh these concerns. 
The CRC also found entirely unpersuasive the fact that other 
industries, particularly off-track betting parlors or lottery related 
agencies, permitted customers to use credit cards.
     The FDMs opposing a ban on funding via a credit card 
recommended that NFA address this issue short of imposing a 
prohibition. For example, these FDMs believe that NFA should do one or 
more of the following--prohibit heavy promotion of credit card funding, 
require account withdrawals to go back to the original funding credit 
card, establish a monthly deposit cap for credit card funding, enhance 
disclosures regarding risk capital usage, issue prominent warnings 
regarding credit card usage to underscore the risks of using this 
funding means if a customer does not have sufficient bank funds to 
cover the deposit, and recommending that customers pay off credit card 
balances monthly by the due date.
    The CRC considered other alternatives and concluded that given the 
customer protection concerns raised, and the fact that credit cards are 
any easy source of borrowed funds, the only way to address the issues 
was to prohibit Members from allowing customers to use credit cards or 
other electronic methods unless the Member could distinguish between 
electronic payments that are tied to a bank account and traditional 
credit card transactions and reject the credit card transactions.
     The FSR's letter claimed banning credit cards and the use 
of credit cards through payment facilitators (e.g. Paypal) is a 
significant regulatory action that has far reaching implications. The 
FSR urged NFA to consider viable alternatives and seek comments from 
those outside the forex industry.
    The CRC determined that one of NFA's primary responsibilities is 
the protection of customers in the futures and forex industries and 
that the prohibition was necessary to achieve this objective. The CRC 
also observed that NFA's mandate is not to promote the business 
interests of credit card companies.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The proposed rule change is not effective because the CFTC has not 
approved the proposed rule change.
    Section 19(b)(7)(C) of the Act provides, inter alia that ``[a]ny 
proposed rule change of a self-regulatory organization that has taken 
effect pursuant to [Section 19(b)(7)(B) of the Act] may be enforced by 
such self-regulatory organization to the extent such rule is not 
inconsistent with the provisions of the title, the rules and 
regulations thereunder, and applicable Federal law. At any time within 
60 days of the date of effectiveness of the proposed rule change, the 
Commission, after consultation with the CFTC, may summarily abrogate 
the proposed rule change and require that the proposed rule change be 
refiled in accordance with the provisions of Section 19(b)(1) of the 
Exchange Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Exchange Act. Comments may be submitted 
by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NFA-2014-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, Station Place, 100 F Street NE., Washington, 
DC 20549-1090.

All submissions should refer to File Number SR-NFA-2014-04. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of NFA. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make publicly available. All 
submissions should refer to File

[[Page 38353]]

Number SR-NFA-2014-04 and should be submitted on or before July 28, 
2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(73).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2014-15719 Filed 7-3-14; 8:45 am]
BILLING CODE 8011-01-P

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