CFTC Permits Direct Interaction between Korea Exchange Members and U.S. Customers
Commentary by Bob Zwirb
The CFTC granted an exemption to certain member firms of the Korea Exchange ("KRX") from CFTC registration as futures commission merchants. The exemption allows the firms to: (i) solicit, accept orders and accept funds directly from U.S. customers trading on KRX, and (ii) engage in marketing conduct within the United States for a period not to exceed thirty days.
Specifically, the order exempts such firms from compliance with certain regulations which govern the sale of foreign futures and foreign options to U.S. customers pursuant to CFTC Rule 30. The order exempts these firms from:
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registration with the CFTC,
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providing customers with a CFTC Rule 1.55 risk disclosure statement, and
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the separate account requirement of CFTC Rule 30.7.
The Order does not provide an exemption from other provisions of the CEA, nor does it extend to trading on U.S. exchanges or to transactions involving swaps. The exemption will become effective on the date of its publication in the Federal Register.
Commentary
The process for providing exemptive relief to foreign intermediaries can take a long time; in this case, it took seven years. KRX petitioned the CFTC in January 2009. It amended its petition with additional information in May 2013.