by Email
June 1, 2012
Mr. David Stawick, Secretary
Commodity Futures Trading Commission
Three LaFayette Centre
1155 21st Street, NW
Washington, DC 20581
Re: CFTC Rule 1.71 - Conflict of Interest Policies and Procedures by Futures Commission Merchants and Introducing Brokers: Scheduled to be Effective June 4, 2012
Mr. Stawick:I write in behalf of the National Introducing Brokers Association (NIBA). Founded in 1991, the NIBA represents Introducing Brokers, Commodity Trading Advisors and Associated Persons who are primarily engaged in the retail sector of the futures and options business. NIBA, a not-for-profit association, also has the support of 11 major Futures Commission Merchants and all the U.S. domestic exchanges.
I write in behalf of our Introducing Broker (IB) membership, both Guaranteed IBs (GIBs) and Independent (IIBs), with regard to Rule 1.71 concerning conflicts of interest policies and procedures as they relate to research, advice and recommendations to the public. NIBA urges the Commission to delay the effective date of Rule 1.71 for a minimum of 120 days from the now scheduled date of June 4, 2012.
While some IBs may be not be subject to Rule 1.71 due to the de minimis exemption built in, many more will be subject to its regulation. IBs who transact business in the agricultural markets will be particularly affected. For most of those offices, compliance with Rule 1.71 involves an actual, and in some cases, total restructuring of their businesses. IBs - and the FCMs who clear and guarantee them, are put to an expensive, time-consuming and in many cases, nearly impossible task by the implementation of Rule 1.71.
The NIBA stands ready to provide the Commission with additional information regarding the potential effects of Rule 1.71 on the IB community and to continue the conversation begun in our Opinion Letter filed with the Commission January 11, 2011. That letter described the workings of virtually every full-service IB office in which advice/ research functions and trading and supervision functions exist side-by-side. Indeed, at many IBs, these functions are performed by the same person or by all the Associated Persons in the office.
The NIBA also pointed out in our January 11, 2011 letter, that rather than protecting the public, implementation of Rule 1.71 will quite likely have the opposite effect because it could prevent market participants from receiving timely information about the markets necessary to make good risk management and trading decisions.
The NIBA urges the Commission to consider our comments together with those of other industry participants and delay the effective date of Rule 1.71. for a minimum of 120-days. Please contact me at the above number or by email at melinda@futuresrep.com to discuss this matter further.
Respectfully submitted,
/Melinda Schramm/
Melinda Schramm, Chairman
National Introducing Brokers Association
cc:
Futures Industry Association
National Futures Association
FCM Members of the NIBA
Frank Fisanich, CFTC
