The Division of Clearing and Intermediary Oversight (DCIO) of the Commodity Futures Trading Commission has granted no-action relief to a U.S.-based bank, permitting its foreign branches to introduce commodity futures and options customers located outside of the United States to an affiliated futures commission merchant (FCM) without such branches being required to register as introducing brokers (IBs) with the CFTC. Under Section 4d(1) of the Commodity Exchange Act (CEA), persons acting as IBs (which includes persons soliciting or accepting orders for the purchase or sale of commodity futures and options contracts) are required to register as such with the CFTC. In this case, the foreign branches would be compensated by the FCM for their introduction of non-U.S. customers to the FCM, and would therefore be considered to act as IBs and, absent relief, required to register.
The no-action relief is conditioned upon, among other things, the bank identifying all of its foreign branches engaged in introduction activities to National Futures Association, and the bank and the FCM agreeing to be jointly and severally liable for any violations of the CEA or CFTC regulations by the foreign branches. The DCIO staff issued a no-action letter based on similar facts in 2000 (Interpretative Letter No. 00-44).
A copy of the no-action letter is available here.