The Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight granted a temporary exemption from introducing broker registration to an unnamed non-US, non-UK-based global financial firm, to enable its London branch temporarily to handle non-solicited order flow from US institutional customers for execution on US designated contract markets to be introduced on a fully disclosed basis to the London branch’s US futures commission merchant affiliate.
Previously, such introductions were made by a so-called Part 30.10 subsidiary of the non-US-based global financial firm that was overseen in all material aspects by the UK Financial Conduct Authority. However, in light of Brexit, the financial firm dissolved the Part 30.10 firm. Although the London branch is overseen by the FCA for some aspects, the FCA cannot sponsor it for Part 30.10 relief because it is a branch office of a non-UK-based financial firm that is also regulated by a non-UK regulator.
Because the non-US-based financial firm is itself in the process of applying for Part 30.10 relief, DSIO consented to allow the firm’s London branch to effectively act as an introducing broker through no later than May 4, 2020, subject to a number of conditions, including that it will not solicit or handle the customer funds of any US person for trading on a DCM.
Under CFTC Rule 30.10, a non-US firm subject to comparable regulations as a US FCM may be authorized to carry accounts for US persons to trade non-US futures and options without registering as an FCM. (Click here to access CFTC Rule 30.10.) Under another CFTC rule, a non-US firm that is qualified as a Rule 30.10 person may also introduce institutional accounts to a registered FCM on a fully disclosed basis for trading on US DCMs, if it is substantially affiliated with a US FCM, and certain other requirements are satisfied. (Click here to access CFTC Rule 3.10(c)(4).)