Current through Register Vol. 48, No. 38, September 20, 2024
a) A futures
commission merchant registered with the CFTC is not a dealer solely because the
futures commission merchant effects transactions in government securities that
are defined in subsection (b) as incidental to that person's futures-related
business.
b) Transactions that
Qualify as Incidental under Subsection (a)
1)
The futures commission merchant:
A) maintains
in a regulated account as set forth in
17
CFR 1.20 (May 31, 2011) all funds and
securities associated with the government securities transactions (except funds
and securities associated with transactions under subsection (b)(2)(A)(i));
and
B) does not advertise that it
is in the business of effecting transactions in government securities otherwise
than in connection with futures or options on futures trading or the investment
of margin or excess funds related to trading or the trading of any other
instrument subject to CFTC jurisdiction.
2) The following transactions in government
securities are incidental to the futures-related business of a futures
commission merchant:
A) Transactions as agent
for a customer:
i) to effect delivery
pursuant to a futures contract; or
ii) for risk reduction or arbitrage of
existing or contemporaneously created positions in futures or options on
futures;
B) Transactions
as agent for a customer for investment of margin and excess funds related to
futures or options on futures trading or the trading of other instruments
subject to CFTC jurisdiction, provided further that:
i) the transactions involve Treasury
securities with a maturity of less than 93 days at the time of the
transaction;
ii) the transactions
generate no monetary profit for the futures commission merchant in excess of
the costs of executing the transactions; or
iii) the transactions are unsolicited, and
commissions and other income generated on transactions pursuant to this
subsection (b)(2)(B)(iii) (including transactional fees paid by the futures
commission merchant and charged to its customer) do not exceed 2% of the
futures commission merchant's total commission revenues;
C) Exchange of futures for physicals
transactions as agent for or as principal with a customer; and
D) Any transaction or transactions that the
SEC exempts, either unconditionally or on specified terms and conditions, as
incidental to the futures-related business of a specified futures commission
merchant, a specified category of futures commission merchants, or futures
commission merchants generally.
c) A person registered with the CFTC, a
contract market designated by the CFTC under section 5 of the Federal 1936 Act,
as defined in Section
130.200,
the a contract market's affiliated clearing organization, or any floor trader
on the a contract market (hereinafter referred to collectively as a
"CFTC-regulated person") is not a dealer solely because the person effects
transactions for its own account in government securities that are defined in
subsection (d) as incidental to that person's futures-related
business.
d) Provided that a
CFTC-regulated person does not advertise or otherwise hold itself out as a
dealer except as permitted by 17 CFR 240.3a43-1 (May 31, 2011), the following
transactions in government securities for its own account are incidental to the
futures-related business of a CFTC-regulated person:
1) Transactions to effect delivery of a
government security pursuant to a futures contract;
2) Exchange of futures for transactions with:
A) a dealer that has registered with the SEC
or filed notice pursuant to section 15C(a) of the Federal 1934 Act, as defined
in Section
130.200
of this Part; or
B) a
CFTC-regulated person.
3) Transactions (including repurchase
agreements and reverse repurchase agreements) involving segregated customer
funds and securities or funds and securities held by a clearing organization
with:
A) a dealer that has registered with the
SEC or filed notice pursuant to section 15C(a) of the Federal 1934 Act, as
defined in Section
130.200
of this Part; or
B) a
bank.
4) Transactions
for risk reduction or arbitrage of existing or contemporaneously created
positions in futures or options on futures with:
A) a dealer that has registered with the SEC
or filed notice pursuant to section 15C(a) of the Federal 1934 Act, as defined
in Section
130.200
of this Part; or
B) a
CFTC-regulated person.
5) Repurchase and reverse repurchase
agreement transactions between a futures commission merchant acting in a
proprietary capacity and another CFTC-regulated person action in a proprietary
capacity and contemporaneous offsetting transactions between such a futures
commission merchant with:
A) a dealer that
has registered with the SEC or filed notice pursuant to section 15C(a) of the
Federal 1934 Act, as defined in Section
130.200
of this Part;
B) a bank;
or
C) a CFTC-regulated
person.
6) Any
transaction or transactions that the SEC exempts, either unconditionally or on
specified terms and conditions, as incidental to the futures related business
of a specified CFTC-regulated person, a specified category of CFTC-regulated
persons, or CFTC-regulated persons generally.
