Interpretative Letters

12-01 ; Regulations 4.34 and 4.35; Interpretation
The Division of Swap Dealer and Intermediary Oversight issued an interpretation regarding the time period for which past performance is required to be disclosed by persons required to register as CTAs because they engage in off-exchange retail foreign currency transactions (“retail forex”). Such persons (“Forex CTAs”) are required to disclose performance information for the period beginning October 18, 2010, the date upon which the Commission’s regulations governing retail forex became effective. A Forex CTA that chooses to present past performance information for any period of time prior to October 18, 2010 must do so in accordance with the time period as specified in Regulation 4.35(a)(5), must include all accounts directed by the Forex CTA, must present the information in the format specified in Regulation 4.35, and must have and maintain adequate books and records to substantiate the information.

12-07 ; Rule 140.98; Interpretation
The Division of Market Oversight issued an interpretation addressing whether, under Part 151 of the Commission’s regulations, an electric company may treat as bona fide hedging transactions certain derivative transactions that reduce the price risk associated with its unfilled anticipated requirements for natural gas, even though it has entered into some long-term, firm purchases of natural gas at an unfixed price. The interpretation notes that unfilled anticipated requirements may be recognized as the basis of a bona fide hedging position or transaction under Commission Regulation 151.5(a)(2)(ii)(C) when a commercial enterprise has entered into long-term, unfixed-price supply or requirements contracts as the price risk of such “unfilled” anticipated requirements is not offset by an unfixed price forward contract as the price risk remains with the commercial, even though the commercial enterprise has contractually assured a supply of the commodity. Instead, the price risk continues until the forward contract’s price is fixed; once the price is fixed on the supply contract, the commercial enterprise no longer has price risk and the derivative position, to the extent the position is above an applicable speculative position limit, must be liquidated in an orderly manner in accordance with sound commercial practices.

12-08 ; Regulation 39.13(g)(8)(ii); Interpretation
The Division of Clearing and Risk issued a letter interpreting Regulation 39.13(g)(8)(ii) (customer margin rule) to clarify that registered derivatives clearing organizations, in establishing customer initial margin requirements, may preserve historical practices by which customer initial margin requirements are based on the type of customer account and reflect the application of prudential standards that result in FCMs collecting customer initial margin at levels commensurate with the risk presented by each type of customer account.

12-13 ; Section 1a(10) and Commission Regulation 4.10(d); Interpretation
The Division of Swap Dealer and Intermediary Oversight determined that equity real estate investment trusts that satisfy certain criteria are outside the definition of commodity pool as that term is defined in Section 1a(10) of the Commodity Exchange Act and Commission Regulation 4.10(d). The requirements include deriving its income primarily from the ownership and operation of real estate and use derivatives for the limited purpose of mitigating their exposure to changes in interest rates or fluctuations in currency; complying with applicable provisions of the Internal Revenue Code; and identifying itself as an equity REIT on applicable Internal Revenue Service forms. The relief is self executing.

12-14 ; Section 1a(10) of the CEA and Commission Regulation 4.10(d); Interpretation
The Division of Swap Dealer and Intermediary Oversight issued an interpretative letter excluding certain securitization vehicles from the definition of commodity pool, subject to certain conditions.

12-17 ; 1a(18)(A); 2(e); 13(a); 17 C.F.R. § 23.430; No-Action; Interpretations
Interpretations and no-action positions related to ECP status.

12-19 ; Commission Regulations 4.5 and 1.3(z); Interpretation
The Division of Swap Dealer and Intermediary Oversight issued an interpretative letter that clarifies, in light of the recent vacatur of the position limits rule, the scope of the bona fide hedging exemption from the trading thresholds as applied to the operators of registered investment companies pursuant to Regulation 4.5.