CFTC Staff Says Trading Firm Is Not a "U.S. Person" Under the Rules

In a joint interpretive letter, the CFTC's Market Participants Division and Division of Market Oversight concluded that a proprietary trading firm qualifies as a non-U.S. person for the purposes of trading non-U.S. futures on a non-U.S. exchange. 

According to the interpretive letter, a Bahamian digital asset proprietary trading firm requested an interpretation from the CFTC on whether it could be considered a non-U.S. person despite plans to expand its operations into the U.S. Staff recounted that the firm is organized and headquartered in the Bahamas, where its senior officers direct and control operations, and it conducts trading in digital asset spot and derivatives markets. Staff determined that the Bahamian firm - which is indirectly owned by U.S. residents who also manage a related U.S. firm - operates independently of the U.S. firm's trading functions. The Bahamian firm requested the guidance because it seeks to hire U.S.-based personnel through a Bahamian affiliate, license technology from the related U.S. firm and host trading infrastructure in the U.S.

Based on the firm's place of organization and principal place of business, the CFTC staff concluded that the firm:

• is not a "person located in the United States" for purposes of trading non-U.S. futures on a non-U.S. exchange under CFTC Rule 30.1(c) ("Definitions");
• is not a "participant located in the United States" for purposes of entering into trades on a foreign market under CFTC Rule 48.2(c) ("Definitions");
• is a "foreign located person" for purposes of receiving services from a CPO or CTA Commission regulation 3.10(c)(1)(ii) ("Registration of futures commission merchants, retail foreign exchange dealers, introducing brokers, commodity trading advisors, commodity pool operators, swap dealers, major swap participants and leverage transaction merchants"); and
• is not a U.S. person for the purpose of entering into swaps with non-U.S. swap-dealers.