CFTC exemption to deal directly with U.S. customers
These frequently asked questions (“FAQs”) are prepared by the Licensing Department to provide guidance to market practitioners regarding the exemption from registration granted by the CFTC under the relevant CFTC Order.
Licensed corporations must read the CFTC Order carefully to understand the scope of the exemption and be satisfied that they are able to comply fully with the terms stipulated in the CFTC Order before sending in the applications. They are also strongly encouraged to read the related press release and circular issued by the SFC.
The information set out below is not meant to be exhaustive. These FAQs may be updated and revised from time to time. These FAQs are only for general reference. Compliance with all the requirements in these FAQs does not necessarily mean that an exemption will be granted. The SFC reserves the rights to exercise all powers conferred under the law.
Who will be eligible for the CFTC exemption?
To be eligible for the exemption, the licensed corporation must:
(a) be licensed for Type 2 regulated activity (dealing in futures contracts); (b) trade on behalf of customers in Hong Kong and intends to trade on behalf of customers in the U.S.; (c) be located outside the U.S.; (d) appoint an agent for service of process in the U.S.; and (e) provide the necessary representations and undertakings to the SFC and the U.S. National Futures Association (“NFA”).
Can a registered institution apply for the CFTC exemption?
No. The CFTC exemption is not applicable to registered institutions.
What are the application procedures? To whom should the application be submitted?
The application is to be made via the SFC to the NFA, which is delegated by the CFTC with the relevant responsibilities. A licensed corporation interested in obtaining the exemption under the CFTC Order should submit an application package to the NFA via the SFC, containing:
(a) An application letter addressed to the NFA; and
(b) An agency agreement signed by both the licensed corporation and its
appointed agent for service of process in the U.S..
The licensed corporation is also required to provide a written representation to the SFC. The application package together with the written representations should be sent to Licensing Department, Intermediaries Division of the SFC.
What is the application fee for the CFTC exemption?
No fee is required for applying for the CFTC exemption.
How and when will a licensed corporation be notified of the result after submitting the application?
Once the NFA has made a determination in relation to the application, the licensed corporation will be informed of the result via the SFC.
If a licensed corporation granted with the CFTC exemption no longer carries out activities in the U.S., what should it do in respect of the exemption?
Licensed corporations granted an exemption under the CFTC Order are required to make timely notifications to the SFC and NFA should there be any material change to any of the representations made in or in support of the application for exemption.
Examples of notifiable changes include (but are not limited to):
(a) termination of their activities in the U.S.; and (b) changes in the status of their confirmation that they and their licensed individuals who engage in activities subject to the CFTC Order would not be statutorily disqualified from registration under the U.S. Commodity Exchange Act.
Upon notification by a licensed corporation any change in its status that would affect its continued eligibility for the exemption granted, such exemption may be suspended immediately.
Last update: 11 Jul 2019