Customer Margin Rules Relating to Security Futures; Applicability of CFTC and SEC Customer Protection, Recordkeeping, Reporting, and Bankruptcy Rules and the Securities Investor Protection Act of 1970 to Accounts Holding Security Futures Products

Summary:

The Commodity Futures Trading Commission (“CFTC”) and Securities and Exchange Commission (“SEC”) (collectively, the “Commissions”) are extending the comment periods for the customer margin rules relating to security futures contained in proposed Release No. 34-44853 (September 26, 2001), 66 FR 50719 (October 4, 2001) and the rule relating to the applicability of CFTC and SEC customer protection, recordkeeping, reporting, and bankruptcy rules and the Securities Investor Protection Act of 1970 to accounts holding security futures products proposed in Release No. 34-44854 (September 26, 2001), 66 FR 50785 (October 4, 2001). The original comment periods for these proposals are scheduled to end on November 5, 2001. The new deadline for submitting public comments on both of the above releases is December 5, 2001.

Dates:

Public comments are due on or before December 5, 2001.

Addresses:

Comments should be sent to both agencies at the addresses listed below.

CFTC: Comments should be sent to the Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581, Attention: Office of the Secretariat. Comments may be sent by facsimile transmission to (202) 418-5521, or by e-mail to secretary@cftc.gov. Reference should be made to “Customer Margin for Security Futures” or “Proposed Rule 41.42—Treatment of Customer Funds.” All comment letters will be posted, as submitted, on the CFTC's Internet web site (http://www.cftc.gov).

SEC: Persons wishing to submit written comments should send three copies to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. Comments also may be submitted electronically at the following e-mail address:rule-comments@sec.gov. All comment letters should refer to File No. S7-16-01 (relating to customer margin for security futures) or S7-17-01 (relating to treatment of customer funds); this file number should be included on the subject line if e-mail is used. Comment letters received will be available for public inspection and copying in the SEC's Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549-0102. Electronically submitted comment letters will be posted on the SEC's Internet web site (http://www.sec.gov). The SEC does not edit personal identifying information, such as names or e-mail addresses, from electronic submissions. Submit only the information you wish to make publicly available.

For further information contact:

CFTC: Regarding Customer Margin Rules Relating to Security Futures, Phyllis P. Dietz, Special Counsel, Division of Trading and Markets, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581. Telephone: (202) 418-5000. E-mail: (PDietz@cftc.gov).

Regarding Applicability of CFTC and SEC Customer Protection, Recordkeeping, Reporting, and Bankruptcy Rules and the Securities Investor Protection Act of 1970 to Accounts Holding Security Futures Products, Helene D. Schroeder, Special Counsel, Division of Trading and Markets, Commodity Futures Trading Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581. Telephone: (202) 418-5430. E-mail: (hschroeder@cftc.gov).

SEC: Regarding Customer Margin Rules Relating to Security Futures, Jennifer Colihan, Special Counsel, at (202) 942-0735, Division of Market Regulation, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-1001.

Regarding Applicability of CFTC and SEC Customer Protection, Recordkeeping, Reporting, and Bankruptcy Rules and the Securities Investor Protection Act of 1970 to Accounts Holding Security Futures Products Bonnie L. Gauch, Attorney, at (202) 942-0765, Office of Risk Management and Control; and with respect to Exchange Act Rule 10b-10, Catherine McGuire, Chief Counsel, or Theodore R. Lazo, Special Counsel, at (202) 942-0073, Division of Market Regulation, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-1001.

Supplementary information:

On October 4, 2001, the Commissions published for comment proposed rules governing customer margin for security futures. The proposed rules would apply to margin arrangements between brokers, dealers, and members of national securities exchanges and their customers with respect to security futures, subject to certain exclusions. Also on October 4, 2001, the Commissions published for comment proposed rules relating to the applicability of the Commissions' customer protection, recordkeeping, reporting, and bankruptcy rules and the Securities Investor Protection Act of 1970 to accounts holding security futures products. These proposing releases established a deadline of November 5, 2001 for submitting public comment.

The Commissions have received a request from the Securities Industry Association (“SIA”) and Futures Industry Association (“FIA”) to extend the deadline on each release by an additional 30 days so that their members have an adequate opportunity to review these proposals and provide thoughtful comment. [1] The SIA and FIA explained that, in light of the tragic events of September 11, the securities and futures industries need more time to provide meaningful comments. They stated their belief that such extensions would not have any adverse consequences, recognizing that such extensions could delay commencement of trading of security futures on other than a principal-to-principal basis between eligible contract participants beyond December 21, 2001. [2] In letters to the leadership of the Senate Committee on Banking, Housing and Urban Affairs and the House Committees on Financial Services and Agriculture, the SIA andFIA further pointed out that “the tragic events of September 11, 2001 have severely strained the systems, personnel and related operational resources of the firms, exchanges and clearing organizations that provide the infrastructure for the U.S. capital markets.” [3]

The Commissions are extending the comment periods for the proposed rules until December 5, 2001, even if, as noted by Chairmen Oxley and Combest, granting such extension would mean that security futures would not commence trading on other than a principal-to-principal basis between eligible contract participants until after December 21, 2001, because they believe that an additional 30-day comment period is appropriate for the reasons described above and will facilitate more meaningful comments from the public.

By the Commodity Futures Trading Commission.

Dated: October 25, 2001. Jean A. Webb,

Secretary.

By the Securities and Exchange Commission.

Dated: October 29, 2000. Jonathan G. Katz,

Secretary.

Footnotes

1. See letter to Jean A. Webb, Secretary, CFTC, and Jonathan G. Katz, Secretary, SEC, from the SIA and FIA, dated October 16, 2001 (“SIA/FIA Extension Request”).

2. Section 6(g)(5) of the Securities Exchange Act of 1934 (“Exchange Act”) permits security futures products to commence trading on the later of December 21, 2001 or such date that a futures association registered under Section 17 of the Commodity Exchange Act has met the requirements set forth in Section 15A(k)(2) of the Exchange Act. 15 U.S.C. 78f(g)(5).

3. See letters to The Honorable Paul S. Sarbanes, Chairman, Senate Committee on Banking, Housing and Urban Affairs, The Honorable Michael G. Oxley, Chairman, House Committee on Financial Services, and The Honorable Larry Combest, Chairman, House Committee on Agriculture, from the SIA and FIA, dated October 10, 2001 (attached to the SIA/FIA Extension Request). The Commissions also note that the House Committees on Financial Services and Agriculture support an extension of the public comment period by joint letter to Chairmen Newsome and Pitt. See letter to The Honorable James E. Newsome, Chairman, CFTC, and The Honorable Harvey Pitt, Chairman, SEC, from The Honorable Michael G. Oxley, Chairman, House Committee on Financial Services, and The Honorable Larry Combest, Chairman, House Committee on Agriculture, dated October 15, 2001.

References

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