cfr_sections
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| section_id ▼ | title_number | title_name | chapter | subchapter | part_number | part_name | subpart | subpart_name | section_number | section_heading | agency | authority | source_citation | amendment_citations | full_text |
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| 17:17:1.0.1.1.24.0.7.1 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | §§ 31.1-31.2 [Reserved] | CFTC | ||||||||
| 17:17:1.0.1.1.24.0.7.10 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.11 Disclosure. | CFTC | [49 FR 5532, Feb. 13, 1984; 49 FR 25427, June 21, 1984, as amended at 50 FR 29, Jan. 2, 1985; 50 FR 36415, Sept. 6, 1985; 54 FR 41080, Oct. 5, 1989; 54 FR 46503, Nov. 3, 1989] | (a) Except as provided in paragraph (i) of this section, prior to the opening of a leverage customer account, a leverage transaction merchant soliciting an order for any leverage contract shall furnish to the prospective leverage customer a dated Disclosure Document and receive from such prospective leverage customer a signed and dated copy of the risk disclosure statement contained in such document which acknowledges that the customer received and understood the Disclosure Document. The Disclosure Document shall contain then current information with respect to the leverage contract being offered by the person soliciting the order therefor, and shall contain: (1) The following bold-faced risk disclosure statement in at least ten-point type on the first page of the Disclosure Document: BECAUSE OF THE UNPREDICTABLE NATURE OF THE PRICES OF PRECIOUS AND OTHER METALS, LEVERAGE CONTRACTS INVOLVE A HIGH DEGREE OF RISK AND ARE NOT SUITABLE FOR MANY MEMBERS OF THE PUBLIC. THE LEVERAGE CUSTOMER SHOULD BE AWARE THAT THE VALUE OF A LEVERAGE CONTRACT ORIGINALLY PURCHASED BY A CUSTOMER (“LONG LEVERAGE CONTRACT”) MUST EXCEED THE BREAK-EVEN PRICE BEFORE IT IS POSSIBLE TO REALIZE A PROFIT ON THE CONTRACT. SIMILARLY, THE VALUE OF A LEVERAGE CONTRACT ORIGINALLY SOLD BY A LEVERAGE CUSTOMER (“SHORT LEVERAGE CONTRACT”) MUST BE LESS THAN THE BREAK-EVEN PRICE BEFORE IT IS POSSIBLE TO REALIZE A PROFIT ON THE CONTRACT. A FILLED IN VERSION OF THE CUSTOMER CONFIRMATION STATEMENT REFLECTING A SINGLE TRANSACTION IN A REPRESENTATIVE LEVERAGE COMMODITY FOR A LONG LEVERAGE TRANSACTION AND A SHORT LEVERAGE TRANSACTION WHICH INCLUDES A FORMULA FOR CALCULATING AN ESTIMATE OF THE LEVERAGE CONTRACT'S BREAK-EVEN VALUE IS ATTACHED TO THIS DOCUMENT. THIS IS IN THE SAME FORMAT AS THE CONFIRMATION STATEMENT YOU WILL RECEIVE TO CONFIRM YOUR ACTUAL TRANSACTION. BE CERTAIN THAT YOU UNDERSTAND THE INFORMATION PROVIDED BY THIS STATEMENT BEFORE YOU ENTER INTO A LEVERAGE TRANSACTION. YOU SHOULD ALSO UNDERSTAND THAT THE CHARGES FOR SIMILAR LEVERAGE CONTRACTS… | ||||||
| 17:17:1.0.1.1.24.0.7.11 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.12 Segregation. | CFTC | [49 FR 5535, Feb. 13, 1984, as amended at 50 FR 31, Jan. 2, 1985, 50 FR 34616, Sept. 6, 1985; 50 FR 40964, Oct. 8, 1985; 54 FR 41081, Oct. 5, 1989; 54 FR 46503, Nov. 3, 1989] | (a) Any person that accepts leverage customer funds from a leverage customer to enter into or maintain a leverage contract shall treat and deal with such leverage customer funds as belonging to that leverage customer. Such leverage customer funds: (1) Shall be separately accounted for and segregated as belonging to the leverage customer, (2) shall be kept in the United States, (3) shall not be commingled with the funds of any other person, and (4) shall not be used to secure or extend the credit of any leverage customer or person other than the one for whom the leverage customer funds are held: Provided, however, That the leverage customer funds treated as belonging to a leverage customer may for convenience be commingled with other leverage customer funds and deposited in the same account or accounts with a futures commission merchant or with a bank or trust company located in the United States under conditions set forth in paragraph (b) of this section. Any leverage customer funds when so deposited with a futures commission merchant, bank or trust company, shall be deposited under an account name which clearly indicates that the account contains leverage customer funds that are segregated as required by this section. Each person so depositing any leverage customer funds shall obtain and retain in its files for the period provided in § 1.31 of this chapter an acknowledgment from the futures commission merchant, bank or trust company wherein the leverage customer funds have been deposited that the futures commission merchant, bank or trust company has been informed that the leverage customer funds deposited with it are being treated by the depositing person as belonging to leverage customers and are being held in accordance with the provisions of this section. The futures commission merchant, bank or trust company shall allow inspection of such segregated accounts, including all documents pertaining thereto, at any reasonable time by any representative of the Commission or designated self-regulatory organizatio… | ||||||
| 17:17:1.0.1.1.24.0.7.12 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.13 Financial reports of leverage transaction merchants. | CFTC | [49 FR 5536, Feb. 13, 1984, as amended at 54 FR 41081, Oct. 5, 1989; 62 FR 10445, Mar. 7, 1997; 67 FR 62352, Oct. 7, 2002; 69 FR 41426, July 9, 2004; 78 FR 22419, Apr. 16, 2013; 89 FR 71811, Sept. 4, 2024] | (a) Each leverage transaction merchant who files an application for registration with the National Futures Association under § 3.17 of this chapter shall submit concurrently with the filing of such application either: (1) A Form 2-FR certified by an independent public accountant as of a date not more than 45 days prior to the date on which such report is filed; or (2) A Form 2-FR as of a date not more than 45 days prior to the date on which such report is filed and an Form 2-FR certified by an independent public accountant as of a date not more than 1 year prior to the date on which such report is filed. Each such person must include with such financial report a statement describing the source of his current assets and representing that his capital has been contributed for the purpose of operating his business and will continue to be used for such purpose. (b)(1) Each leverage transaction merchant must file, in accordance with the requirements of paragraph (e) of this section, a Form 2-FR for each fiscal quarter of each fiscal year. The Form 2-FR filed as of the close of the leverage transaction merchant's fiscal year must be certified by an independent public accountant. Each Form 2-FR must be filed no later than 45 days after the date for which the report is made: Provided, however, That any Form 2-FR which must be certified by an independent public accountant must be filed no later than 90 days after the close of the leverage transaction merchant's fiscal year. (2) The provisions of paragraph (b)(1) of this section may be met by any person registered as a leverage transaction merchant who is a member of a designated self-regulatory organization and conforms to minimum financial standards and related reporting requirements set by such designated self-regulatory organization in its bylaws, rules, regulations, or resolutions and approved after April 13, 1984, by the Commission pursuant to section 19 of the Act and § 31.28 of this part: Provided, however, That each such registrant shall promptly file with … | ||||||
| 17:17:1.0.1.1.24.0.7.13 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.14 Recordkeeping. | CFTC | [50 FR 32, Jan. 2, 1985; 50 FR 2283, Jan. 16, 1985, as amended at 67 FR 62352, Oct. 7, 2002; 78 FR 22419, Apr. 16, 2013; 89 FR 71811, Sept. 4, 2024] | (a) All books, records and other documents required to be kept by this part shall be kept in accordance with the provisions of § 1.31 of this chapter. In addition, information concerning leverage transactions shall be made available upon request of the Executive Director, the Director of the Market Participants Division, the Director of the Division of Market Oversight or the Director of the Division of Enforcement, or other designees, at a time and place and in such form and manner as may be specified in the request. (b) Each leverage transaction merchant shall: (1) Keep full, complete, and systematic records, together with all pertinent data and memoranda, of all transactions relating to leverage contracts, commodity futures, commodity options and cash commodities and furnish true and correct information and reports as to the contents or the meaning thereof when and as requested by any authorized representative of the Commission, designated self-regulatory organization, if any, or the U.S. Department of Justice. Included among such records shall be: All leverage contract orders; signature cards; journals; ledgers; canceled checks; bank statements; loan agreements; invoices; copies of confirmations; copies of statements of purchase, sale, repurchase, resale, liquidation, rescission and delivery; copies of month-end statements; monthly trial balances, and a monthly listing as described in paragraph (d) of this section; reports, letters and copies of disclosure statements signed by leverage customers as described in § 31.11; promotional material, circulars, memoranda, publications, writings, and all other literature or written advice distributed to leverage customers or prospective leverage customers; and all other records, data and memoranda which have been prepared in the course of the business of the leverage transaction merchant concerning leverage contracts, commodity futures, commodity options, and cash commodities; (2) Keep a record in permanent form which shall show for each leverage customer's account … | ||||||
| 17:17:1.0.1.1.24.0.7.14 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.15 Reporting to leverage customers. | CFTC | [49 FR 5539, Feb. 13, 1984, as amended at 50 FR 33, Jan. 2, 1985; 50 FR 2283, Jan. 16, 1985] | Each leverage transaction merchant shall furnish in writing directly to each leverage customer: (a) Promptly upon the repurchase, resale, liquidation, rescission or delivery of a leverage contract, a statement showing the financial result of the transactions involved, including the gain or loss on the leverage contract as well as the commission and other charges; (b) As of the close of the last business day of each calendar month or as of any regular monthly date selected a statement which clearly shows: (1) All leverage contracts which were terminated for or by the leverage customer during the monthly reporting period by leverage commodity and contract, the number of contracts involved, the transaction identification number for each leverage contract, whether the terminating transaction involved repurchase, resale, liquidation, rescission, or delivery, the date the contract was initially entered into, the value of the contract when initiated, the date the contract was terminated, the value of the contract when terminated, and the realized profit or loss on the contract; (2) The open leverage contract positions carried for the leverage customer by leverage commodity and contract, whether the position is a long or short leverage contract, the dates on which such contracts were executed and their maturity dates, the number of contracts, the total value of the contracts when initiated, and the unrealized profit or loss on each such contract marked to the market on the basis of the leverage transaction merchant's bid price for a long leverage contract and ask price for a short leverage contract. (3) The net ledger balance carried in the leverage customer's account as of the monthly closing date and a complete accounting of any leverage customer funds held for the leverage customer; (4) A detailed accounting of all financial charges and credits to the previous ledger balance during the monthly reporting period, including all leverage customer funds received from or disbursed to the leverage customer, and all com… | ||||||
| 17:17:1.0.1.1.24.0.7.15 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.16 Monthly reporting requirements. | CFTC | [54 FR 41082, Oct. 5, 1989] | (a) Monthly activity. Each leverage transaction merchant shall file written monthly reports with the National Futures Association in the format specified by the National Futures Association, by the tenth business day of the month following the month covered by the report and shall include the following information separately for each leverage commodity and each long and short leverage contract: (1) The total number of leverage contracts that are open as of the close of business on the last business day of the month for: (i) All customer accounts, and (ii) Separately for commercial leverage accounts. (2) The total number of leverage contracts entered into by leverage customers during the month for: (i) All customer accounts, and (ii) Separately for commercial leverage accounts. (3) The total number of leverage contracts which were repurchased or resold by the leverage transaction merchant during the month. (4) The total number of leverage contracts which were liquidated by the leverage transaction merchant during the month ( i.e., as a result of overdue or unanswered margin calls). (5) The total number of deliveries on leverage contracts during the month. (6) The total number of leverage contracts which were rescinded during the month. (b) Prices. The monthly report shall also show the following information separately for each leverage commodity and each long and short leverage contract: the leverage transaction merchant's last bid price offered and last ask price offered as of the close of business on each business day. | ||||||
| 17:17:1.0.1.1.24.0.7.16 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.17 Records of leverage transactions. | CFTC | [49 FR 5540, Feb. 13, 1984, as amended at 50 FR 34, Jan. 2, 1985] | (a) Each leverage transaction merchant receiving a leverage customer's order shall immediately upon receipt thereof prepare a written record of such order, including the account identification and order number, and shall record thereon, by time-stamp or other timing device, the date and time, to the nearest minute, such order is received. (b) Each leverage transaction merchant executing the order of a leverage customer shall record on a written record of such order, including the account identification and order number, by time-stamp or other timing device, the date and time, to the nearest minute, such order is executed. (c) For the purposes of this section, the term “order” shall include, but not be limited to, any order for the purchase, sale, repurchase, resale, rescission, settlement by delivery, or liquidation of a leverage contract. (d) Each leverage transaction merchant shall establish and maintain a record of the bid and ask prices of each leverage contract on each leverage commodity that the leverage transaction merchant offers to sell or sells, or offers to purchase or purchases. The record shall include the times these prices were in effect to the nearest ten seconds. | ||||||
| 17:17:1.0.1.1.24.0.7.17 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.18 Margin calls. | CFTC | [49 FR 5540, Feb. 13, 1984, as amended at 50 FR 34, Jan. 2, 1985; 50 FR 36416, Sept. 6, 1985] | (a) No leverage transaction merchant shall liquidate a leverage contract because of a margin deficiency without effecting personal contact with the leverage customer. If a leverage transaction merchant is unable to effect personal contact with a leverage customer, a telegram sent to the leverage customer at the address furnished by the customer to the leverage transaction merchant shall be sufficient contact. (b) A leverage transaction merchant shall allow a leverage customer a reasonable time after contact is effected in which to respond to a margin call. Twenty-four hours, excluding Saturdays, Sundays, and holidays, will be a reasonable time: Provided, however, That in the event the leverage customer's leverage account equity falls below 50 percent of aggregate minimum margin with respect to the leverage contracts therein, the leverage transaction merchant may liquidate sufficient contracts to restore minimum margin without prior notice: Provided, further, That the leverage customer must be notified of such liquidation within no more than 24 hours thereafter and must be permitted to re-establish his contract for a period of 5 business days at the then prevailing bid price in the case of a long leverage contract and at the then prevailing ask price in the case of a short leverage contract, without commissions, fees or other mark-ups or charges. If a termination charge was assessed by the leverage transaction merchant upon liquidation of a contract in accordance with the first proviso of this paragraph, such a charge must be rescinded upon re-establishment of the contract in accordance with the second proviso of this paragraph. (c) A record of all margin calls, including all contacts with leverage customers and attempts to contact leverage customers with respect to such calls, shall be kept by the leverage transaction merchant in accordance with the provisions of § 31.14. (d) Leverage contracts liquidated by a leverage transaction merchant because of a margin deficiency must be liquidated in declining orde… | ||||||
| 17:17:1.0.1.1.24.0.7.18 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.19 Unlawful representations. | CFTC | [49 FR 5540, Feb. 13, 1984, as amended at 50 FR 34, Jan. 2, 1985] | It shall be unlawful for any person: (a) Required to be registered with the Commission in accordance with §§ 3.17 and 3.18 of this chapter expressly or impliedly to represent that the commission, by registering that person or by registering the leverage commodity which underlies contracts offered for sale or purchase, or sold or purchased by that person, or otherwise, has directly or indirectly approved that person, the person's method of operation, or any leverage commodity or leverage contract solicited or accepted by that person; (b) To represent in writing that it is registered with the Commission or that it is offering any leverage commodity registered with the Commission without also stating in writing in connection with that representation that the Commission, by registering that person or the leverage commodity which underlies contracts offered for sale or purchase or sold or purchased by that person, has not directly or indirectly approved the person, the person's method of operation, or any leverage commodity or contract solicited or accepted by that person; or (c) In or in connection with an offer to enter into, the entry into, the confirmation of the execution of, or the maintenance of any leverage contract, expressly or impliedly to represent that compliance with the provisions of the Act and these regulations constitutes a guarantee of the fulfillment of the leverage contract. | ||||||
| 17:17:1.0.1.1.24.0.7.19 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.20 Prohibition of guarantees against loss. | CFTC | [49 FR 5540, Feb. 13, 1984] | (a) No leverage transaction merchant shall in any way represent that it will, with respect to any leverage contract in any account carried by the leverage transaction merchant for or on behalf of any person: (1) Guarantee such person against loss; (2) Limit the loss of such person; or (3) Not call for or attempt to collect initial, minimum or maintenance leverage margin established for customers. (b) No person shall in any way represent that a leverage transaction merchant will engage in any of the acts or practices described in paragraphs (a)(1), (a)(2) or (a)(3) of this section. (c) This section shall not be construed to prevent a leverage transaction merchant from assuming or sharing in the losses resulting from an error or mishandling of an order. (d) This section shall not affect any guarantee entered into prior to the effective date of this section, but this section shall apply to any extension, modification or renewal thereof entered into after such date. | ||||||
| 17:17:1.0.1.1.24.0.7.2 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.3 Fraud in connection with certain transactions in silver or gold bullion or bulk coins, or other commodities. | CFTC | [43 FR 58554, Dec. 15, 1978. Redesignated at 49 FR 5526, Feb. 13, 1984] | It shall be unlawful for any person, by use of the mails or any means or instrumentality of interstate commerce, directly or indirectly: (a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made in the light of the circumstances under which they were made, not misleading, or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in, or in connection with (1) an offer to make or the making of, any transaction for the purchase, sale or delivery of silver bullion, gold bullion, bulk silver coins, bulk gold coins, or any other commodity pursuant to a standardized contract commonly known to the trade as a margin account, margin contract, leverage account, or leverage contract, or pursuant to any contract, account, arrangement, scheme, or device that serves the same function or functions as such a standardized contract, or is marketed or managed in substantially the same manner as such a standardized contract, or (2) the maintenance or carrying of any such contract. The provisions of this section shall not apply to any transaction expressly prohibited by section 19(a) of the Act. | ||||||
| 17:17:1.0.1.1.24.0.7.20 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.21 Leverage contracts entered into prior to April 13, 1984; subsequent transactions. | CFTC | [54 FR 41082, Oct. 5, 1989] | Nothing contained in these regulations shall be construed to affect any lawful activities that occurred prior to April 13, 1984. All leverage contracts offered or entered into on or after April 13, 1984 shall be subject to the terms and conditions of these regulations. | ||||||
| 17:17:1.0.1.1.24.0.7.21 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.22 Prohibited trading in leverage contracts. | CFTC | [54 FR 41082, Oct. 5, 1989] | No futures commission merchant or introducing broker shall offer to enter into, enter into, confirm the execution of, or solicit or accept orders for any leverage contract. | ||||||
| 17:17:1.0.1.1.24.0.7.22 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.23 Limited right to rescind first leverage contract. | CFTC | [49 FR 5540, Feb. 13, 1984, as amended at 50 FR 34, Jan. 2, 1985] | (a) A leverage customer who is entering a leverage contract or contracts for the first time with a particular leverage transaction merchant may rescind such contract or contracts during a period of not less than three business days from and including the day on which the leverage customer receives the Confirmation Statement pursuant to the following provisions: (1) Such customer may be assessed actual price losses accruing to the customer's position from the time at which the customer entered into a leverage contract to the time that the leverage contract was rescinded. Such losses do not extend to any other charges or fees, such as account initiation, carrying, margin or account termination; (2) In the case of a leverage customer whose initial leverage transaction was a purchase of a leverage contract from a leverage transaction merchant (long leverage contract), actual losses accruing to the position may be calculated only by subtracting the ask price of the leverage contract offered by the leverage transaction merchant at the time when the leverage contract was rescinded from the ask price at which the leverage contract was purchased by the leverage customer and which appears on the Confirmation Statement. In the case of a leverage customer whose initial leverage transaction was a sale of a leverage contract to a leverage transaction merchant (short leverage contract), actual losses are calculated by subtracting the bid price at which the leverage contract was sold by the leverage customer and which appears on the Confirmation Statement from the bid price of the leverage contract offered by the leverage transaction merchant at the time when the leverage contract was rescinded. (3) Such customer may rescind the contract by telegram sent to the leverage transaction merchant at the address provided on the confirmation statement, or by telephone to a telephone number provided by the leverage transaction merchant on the Confirmation Statement with immediate written affirmation of rescission by telegram, certifie… | ||||||
| 17:17:1.0.1.1.24.0.7.23 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.24 [Reserved] | CFTC | ||||||||
| 17:17:1.0.1.1.24.0.7.24 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.25 Bid and ask prices; carrying charges. | CFTC | [50 FR 36416, Sept. 6, 1985, as amended at 54 FR 41082, Oct. 5, 1989] | (a) A leverage transaction merchant must use the same bid price at any particular point in time to purchase a leverage contract from a leverage customer (initiation of a short transaction) and to repurchase a leverage contract from a leverage customer (close-out of a long transaction), and a leverage transaction merchant must use the same ask price at any particular point in time to sell a leverage contract to a leverage customer (initiation of a long transaction) and to resell a leverage contract to a leverage customer (close-out of a short transaction), with respect to contracts involving the same leverage commodity. (b) A leverage transaction merchant must apply a carrying charge rate on a short leverage contract that is within one percent per annum of the carrying charge rate that it applies to a long leverage contract. In the case of a short leverage contract, the leverage customer must be credited with carrying charges computed on the total initial value of the contract, using the bid price when the contract was executed, plus any margin deposits made by the leverage customer in connection with the contract, and the same carrying charge rate must be applied to the total initial value of the contract and to the margin deposits. In the case of a long leverage contract, the leverage customer must be assessed carrying charges only on the unpaid balance of the contract, which is the total initial value of the contract, using the ask price when the contract was executed, minus any margin deposits made in connection with the contract: Provided, however, That in the case of a long leverage contract, interest on unpaid carrying charges may be assessed at the same rate as the interest rate component of the carrying charges and, if such an assessment were made and if the leverage transaction merchant offers short leverage contracts, payment of interest on carrying charges that have been credited to the leverage customer's account and not withdrawn must be made at the same rate as the interest rate component of the … | ||||||
| 17:17:1.0.1.1.24.0.7.25 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.26 Quarterly reporting requirement. | CFTC | [50 FR 36416, Sept. 6, 1985; 50 FR 37519, Sept. 16, 1985, as amended at 54 FR 41083, Oct. 5, 1989] | Each leverage transaction merchant must file, in accordance with the instructions of, and in the format specified by, the National Furtures Association a quarterly report with the National Futures Association by the fifteenth business day of the month following the quarter covered by the report. The report must list all leverage contracts which were either repurchased, resold, liquidated or settled by delivery by or to the leverage transaction merchant during the quarter and, with respect to each leverage contract, must include the following information: (a) The leverage commodity and contract involved; (b) Whether a long or short leverage contract was involved; (c) The date the leverage contract was entered into; (d) The maturity date of the leverage contract at initiation; (e) The price at which the leverage contract was entered into; (f) Whether the leverage contract was repurchased, resold, liquidated or settled by delivery; (g) The date the leverage contract was repurchased, resold, liquidated or settled by delivery; (h) The price at which the leverage contract was repurchased, resold or liquidated; (i) The leverage customer account identification number; (j) Whether the leverage customer had a commercial or noncommercial leverage account; (k) Whether the leverage customer was the owner or holder of a proprietary leverage account as defined in § 31.4(e); and (l) The profit or loss incurred by the leverage customer on the contract. In the case of a long leverage contract, profit or loss shall be determined by subtracting, from the total value of the contract based on the leverage transaction merchant's bid price at the time of repurchase or liquidation, the total value of the contract based on the ask price at which the contract was entered into, minus any amounts paid or owed by the leverage customer to the leverage transaction merchant, including initial, carrying and termination charges, plus any amounts paid or credited by the leverage transaction merchant to the leverage customer, in connecti… | ||||||
| 17:17:1.0.1.1.24.0.7.26 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.27 Registered futures association membership. | CFTC | [54 FR 41083, Oct. 5, 1989] | Each person registered or required to register as a leverage transaction merchant must become and remain a member of at least one futures association which is registered under section 17 of the Act and which provides for the membership therein of such leverage transaction merchant, unless no such futures association is so registered. | ||||||
| 17:17:1.0.1.1.24.0.7.27 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.28 Self-regulatory organization adoption and surveillance of minimum financial, cover, segregation and sales practice requirements. | CFTC | [54 FR 41083, Oct. 5, 1989, as amended at 89 FR 71811, Sept. 4, 2024] | (a) Each self-regulatory organization must adopt, and submit for Commission approval, rules prescribing minimum financial, cover, segregation and sales practice, and related reporting requirements for all its members who are registered leverage transaction merchants. Each self-regulatory organization shall submit for Commission approval any modification or other amendments to such rules. Such requirements must be the same as, or more stringent than, those contained in this part 31 and the definition of adjusted net capital must be the same as that prescribed in § 31.9(b)(4) of this part. (b) Each self-regulatory organization which has members who are registered leverage transaction merchants shall have in effect and enforce rules submitted to the Commission pursuant to paragraph (a) of this section and approved by the Commission. (c) Any two or more self-regulatory organizations may file with the Commission a plan for delegating to a designated self-regulatory organization, for any registered leverage transaction merchant which is a member of more than one such self-regulatory organization, the responsibility of: (1) Monitoring and auditing for compliance with the minimum financial, cover, segregation and sales practice, and related reporting requirements adopted by such self-regulatory organizations in accordance with paragraph (a) of this section; and (2) Receiving the reports necessitated by such minimum financial, cover, segregation and sales practice, and related reporting requirements. (d) Any plan filed under this section may contain provisions for the allocation of expenses reasonably incurred by the designated self-regulatory organization among the self-regulatory organizations participating in such a plan. (e) A plan's designated self-regulatory organization must report to that plan's other self-regulatory organizations any violation of such other self-regulatory organizations' rules and regulations for which the responsibility to monitor, audit or examine has been delegated to such designated sel… | ||||||
| 17:17:1.0.1.1.24.0.7.28 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.29 Arbitration or other dispute settlement procedures. | CFTC | [54 FR 41084, Oct. 5, 1989; 54 FR 46503, Nov. 3, 1989] | Each self-regulatory organization which has members who are registered as leverage transaction merchants must be able to demonstrate its capability to promulgate rules and to conduct proceedings which provide a fair, equitable and expeditious procedure, through arbitration or otherwise, for the voluntary settlement of a leverage customer's claim or grievance brought against any member leverage transaction merchant or any employee of a member leverage transaction merchant. Such rules shall be consistent with the rules set forth in part 180 of this chapter governing contract market arbitration and dispute settlement procedures. | ||||||
| 17:17:1.0.1.1.24.0.7.3 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.4 Definitions. | CFTC | [49 FR 5527, Feb. 13, 1984, as amended at 49 FR 25428, June 21, 1984; 50 FR 26, Jan. 2, 1985; 50 FR 36414, Sept. 6, 1985; 54 FR 41078, Oct. 5, 1989] | For the purposes of this part: (a)-(b) [Reserved] (c) Promotional material includes: (1) Any text of a standard oral presentation, or any communication for publication in any newspaper, magazine or similar medium or for broadcast over television, radio, or other electronic medium which is disseminated or directed to a leverage customer or prospective leverage customer; (2) Any standardized form of report, letter, circular, memorandum, or publication which is disseminated or directed to a leverage customer or prospective leverage customer; or (3) Any other written literature or advice disseminated or directed to a leverage customer or prospective leverage customer for the purpose of soliciting the entry into a leverage contract; (d) Leverage customer means any person who, directly or indirectly, enters into, purchases, sells, or otherwise acquires for value any interest in a leverage contract with, from or to a leverage transaction merchant: Provided, however, That an owner or holder of a proprietary leverage account as defined in paragraph (e) of this section shall not be deemed to be a customer within the meaning of §§ 31.11(a)-(j) and (l), 31.12 and 31.26, and such an owner or holder of such a proprietary leverage account shall otherwise be deemed to be a leverage customer within the meaning of all other sections of these rules. (e) Proprietary leverage account means a leverage account carried on the books and records of an individual, a partnership, corporation or other type association (1) for one of the following persons, or (2) of which ten percent or more is owned by one of the following persons, or an aggregate of ten percent or more of which is owned by more than one of the following persons: (i) Such individual himself, or such partnership, corporation or association itself; (ii) In the case of a partnership, a general partner in such partnership; (iii) In the case of a limited partnership, a limited or special partner in such partnership whose duties include: (A) The management of th… | ||||||
| 17:17:1.0.1.1.24.0.7.4 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.5 Unlawful conduct. | CFTC | [49 FR 5528, Feb. 13, 1984, as amended at 54 FR 41078, Oct. 5, 1989; 59 FR 5703, Feb. 8, 1994] | (a) On and after April 13, 1984, it shall be unlawful for any person: (1) To offer to enter into, enter into or confirm the execution of a leverage contract to or with a leverage customer, or to solicit or accept a leverage customer's order for a leverage contract, or to accept any leverage customer funds from a leverage customer to enter into or maintain a leverage contract, unless the leverage commodity which is the subject of the leverage contract has been registered with the Commission in accordance with § 31.6; (2) Except as provided in paragraph (a)(3) of this section, to offer to enter into, enter into or confirm the execution of a leverage contract to or with a leverage customer, or to solicit or accept a leverage customer's order for a leverage contract, or to accept any leverage customer funds from a leverage customer to enter into or maintain a leverage contract, unless that person is registered with the Commission in accordance with § 3.17 of this chapter and that registration has not expired, been suspended (and the period of suspension has not expired) or been revoked; or (3) Except as provided in paragraph (a)(2) of this section, if such person is a natural person, to offer to enter into, enter into or confirm the execution of a leverage contract to or with a leverage customer, or to solicit or accept a leverage customer's order (other than in a clerical capacity) for a leverage contract, or to supervise any person or persons so engaged, unless that person is registered with the Commission in accordance with § 3.18 of this chapter and that registration has not expired, been suspended (and the period of suspension has not expired) or been revoked. (b) On and after April 13, 1984, it shall be unlawful for any leverage transaction merchant to permit any natural person to become or remain associated with it as a partner, officer or employee (or in any similar status or position involving similar functions) in any capacity which involves the offering to enter into, the entry into, or the confirmatio… | ||||||
| 17:17:1.0.1.1.24.0.7.5 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.6 Registration of leverage commodities. | CFTC | [49 FR 5529, Feb. 13, 1984, as amended at 50 FR 27, Jan. 2, 1985; 50 FR 2283, Jan. 16, 1985; 54 FR 41079, Oct. 5, 1989; 67 FR 62352, Oct. 7, 2002] | (a) Registration of leverage commodities. Each leverage commodity upon which a leverage contract is offered for sale or purchase or is sold or purchased by a particular leverage transaction merchant must be separately registered with the Commission. Registration will be granted only when the following conditions are, and continue to be, met: (1) The person requesting registration of a leverage commodity is a registered leverage transaction merchant; (2) The commodity to be registered is a leverage commodity as defined in § 31.4(g); (3) There exists a widely accepted and broadly disseminated commercial or retail cash price series for the commodity; (4) The commodity can be readily purchased or sold in normal commercial or retail channels by leverage customers making or taking delivery on a leverage contract; (5) The terms and conditions of the leverage contracts based on the leverage commodity are consistent with the Act and the regulations thereunder, and are not contrary to the public interest; and (6) The terms and conditions of the leverage contracts based on the leverage commodity do not include substantial characteristics of other interests, such as options, certificates of deposit, or other regulated instruments. (b) Application for registration. Applications to register leverage commodities should be filed with the Commission at its Washington, DC headquarters. Attn: Secretariat. Three copies of each such submission should be filed. The Commission may return any application which does not comply with the form and content requirements of this section. Each applicant must: (1) Provide evidence that the person applying for registration of the leverage commodity is registered or has applied to the National Futures Association for registration as a leverage transaction merchant; (2) Provide an explanation of the distinguishing characteristics of the leverage commodity for which registration is sought, including a complete description of the cash market for the leverage commodity, and for the spot, … | ||||||
| 17:17:1.0.1.1.24.0.7.6 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.7 Maintenance of minimum financial, cover and segregation requirements by leverage transaction merchants. | CFTC | [49 FR 5530, Feb. 13, 1984, as amended at 50 FR 28, Jan. 2, 1985; 54 FR 41079, Oct. 5, 1989] | (a) Each person registered as a leverage transaction merchant or who files an application for registration as a leverage transaction merchant, who knows or should have known that its adjusted net capital at any time is less than the minimum required by § 31.9, or that its cover at any time is less than the minimum required by § 31.8, or that the amount of leverage customer funds in segregation is less than is required by § 31.12 or by the capital, cover or segregation rules of any designated self-regulatory organization to which such person is subject, if any, must: (1) Give telegraphic notice as set forth in § 1.12(g) of this chapter that such applicant's or registrant's adjusted net capital is less than is required by § 31.9, or its cover is less than is required by § 31.8, or the amount of leverage customer funds in segregation is less than is required by § 31.12 or by such other capital, cover or segregation rule, identifying the applicable capital, cover or segregation rule. This notice must be given within 24 hours after such applicant or registrant knows or should have known that its adjusted net capital or its cover or the amount of leverage customer funds in segregation is less than is required by any of the aforesaid rules to which such applicant or registrant is subject; and (2) Within 24 hours after giving such notice file a statement of financial condition, a statement of the computation of the minimum capital requirements pursuant to § 31.9 (computed in accordance with the applicable capital rule), a schedule of coverage requirements and coverage provided, and a schedule of segregation requirements and funds on deposit in segregation, all as of the date such applicant's or registrant's adjusted net capital or its cover or the amount of leverage customer funds in segregation became less than the minimum required. (b) Each person registered as a leverage transaction merchant, or who files an application for registration as a leverage transaction merchant, who knows or should have known that its adj… | ||||||
| 17:17:1.0.1.1.24.0.7.7 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.8 Cover of leverage contracts. | CFTC | [49 FR 5531, Feb. 13, 1984, as amended at 50 FR 28, Jan. 2, 1985; 54 FR 41079, Oct. 5, 1989] | (a)(1) Each leverage transaction merchant must at all times maintain cover of at least 90 percent of the amount of physical commodities subject to open long leverage contracts entered into with leverage customers, and must at all times also maintain cover of at least 90 percent of the amount of physical commodities subject to open short leverage contracts entered into with leverage customers. At least 25 percent of the amount of physical commodities subject to open long leverage contracts must be covered by the types of permissible cover set forth in paragraphs (a)(2) (i) and (ii) of this section. (2) Permissible cover for a long leverage contract is limited to: (i) Warehouse receipts for the leverage commodity subject to the leverage contract held in commercial banks located in the United States or in approved contract market depositories: Provided, That the balance of the principal and accrued interest on any loan against such warehouse receipts does not exceed 70 percent of the current market value of the commodity represented by each receipt. (ii) Warehouse receipts for gold bullion in the case of leverage contracts on bulk gold coins, bulk gold coins in the case of leverage contracts on gold bullion, silver bullion in the case of leverage contracts on bulk silver coins, bulk silver coins in the case of leverage contracts on silver bullion, one type of bulk gold coins for leverage contracts involving another type of bulk gold coins on an ounce-for-ounce basis if each type of bulk gold coins used as cover is the subject of a leverage contract offered by the leverage transaction merchant pursuant to registration under § 31.6 of this part, and one type of bulk silver coins for leverage contracts involving another type of bulk silver coins on an ounce-for-ounce basis if each type of bulk silver coins used as cover is the subject of a leverage contract offered by the leverage transaction merchant pursuant to registration under § 31.6 of this part, which are held in commercial banks located in the United State… | ||||||
| 17:17:1.0.1.1.24.0.7.8 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.9 Minimum financial requirements. | CFTC | [49 FR 5531, Feb. 13, 1984; 49 FR 25427, June 21, 1984, as amended at 50 FR 36414, Sept. 6, 1985; 54 FR 41079, Oct. 5, 1989] | (a) Each leverage transaction merchant must at all times maintain adjusted net capital equal to or in excess of $2,500,000, plus 20 percent of the market value of the amount of physical commodities subject to leverage contracts entered into by the leverage transaction merchant which are uncovered, plus 2 1/2 percent of the market value of the amount of physical commodities subject to short leverage contracts entered into by the leverage transaction merchant which are covered. (1) For purposes of determining compliance with the provisions of paragraph (a) of this section, each leverage transaction merchant must compute the market value of the physical commodities subject to leverage contracts which it has entered into by using the widely accepted and broadly disseminated commercial or retail cash price series submitted with the leverage transaction merchant's application for registration of the leverage commodity in accordance with § 31.6, and cannot include any mark-ups or discounts of the leverage transaction merchant. (2) The requirements of paragraph (a) of this section shall not be applicable if the applicant or registrant is a member of a designated self-regulatory organization and conforms to minimum financial standards and related reporting requirements set by such designated self-regulatory organization in its bylaws, rules, regulations or resolutions approved by the Commission pursuant to section 19 of the Act and § 31.28 of this part. (3) No person applying for registration as a leverage transaction merchant shall be so registered unless such person affirmatively demonstrates to the satisfaction of the Commission that it complies with the financial requirements of this section. Each leverage transaction merchant must be in compliance with this section at all times and must be able to demonstrate such compliance to the satisfaction of the Commission and/or the designated self-regulatory organization. (4) A leverage transaction merchant who is not in compliance with this section, or is unable to dem… | ||||||
| 17:17:1.0.1.1.24.0.7.9 | 17 | Commodity and Securities Exchanges | I | 31 | PART 31—LEVERAGE TRANSACTIONS | § 31.10 Repurchase and resale of leverage contracts by leverage transaction merchants. | CFTC | [50 FR 36414, Sept. 6, 1985] | (a) No leverage transaction merchant shall offer to sell or sell a long leverage contract involving a leverage commodity to any leverage customer at any time when such leverage transaction merchant is not offering to repurchase from any of its leverage customers any long leverage contract, and is not offering to resell to any of its leverage customers any short leverage contract, involving the same leverage commodity previously sold or purchased by the leverage transaction merchant to or from a leverage customer. (b) No leverage transaction merchant shall offer to purchase or purchase a short leverage contract involving a leverage commodity from any leverage customer at any time when such leverage transaction merchant is not offering to resell to any of its leverage customers any short leverage contract, and is not offering to repurchase from any of its leverage customers any long leverage contract, involving the same leverage commodity previously purchased or sold by the leverage transaction merchant from or to a leverage customer. |
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