(kk) Strike price. This term means the price, per unit, at which a person may purchase or sell the contract of sale of a commodity for future delivery or the physical which is the subject of a commodity option: Provided, That for purposes of §1.17, the term "strike price" means the total price at which a person may purchase or sell the contract of sale of a commodity for future delivery or the physical which is the subject of a commodity option (i.e., price per unit times the number of units).

(11) Physical. This term means any good, article, service, right or interest upon which a commodity option may be traded in accordance with the Act and these regulations.

(mm) Introducing broker. This term

means:

(1) Any person who, for compensation or profit, whether direct or indirect, is engaged in soliciting or in accepting orders (other than in a clerical capacity) for the purchase or sale of any commodity for future delivery on or subject to the rules of any contract market who does not accept any money, securities, or property (or extend credit in lieu thereof) to margin, guarantee, or secure any trades or contracts that result or may result therefrom; and

(2) Includes any person required to register as an introducing broker by virtue of part 33 of this chapter: Provided, That the term "introducing broker" shall not include:

(i) Any futures commission merchant, floor broker, or associated person, acting in its capacity as such, regardless of whether that futures commission merchant, floor broker, or associated person is registered or exempt from registration in such capacity;

(ii) Any commodity trading advisor, which, acting in its capacity as a commodity trading advisor, is not compensated on a per-trade basis or which solely manages discretionary accounts pursuant to a power of attorney, regardless of whether that commodity trading advisor is registered or exempt from registration in such capacity; and (iii) Any commodity pool operator which, acting in its capacity as a commodity pool operator, solely operates commodity pools, regardless of whether that commodity pool operator is

registered or exempt from registration in such capacity.

(nn) Guarantee agreement. This term means an agreement of guaranty in the form set forth in part B of Form 1-FR, executed by a registered futures commission merchant and by an introducing broker or applicant for registration as an introducing broker on behalf of an introducing broker or applicant for registration as an introducing broker in satisfaction of the alternative adjusted net capital requirement set forth in §1.17(a)(2)(ii).

(00) Leverage transaction merchant. Means and includes any individual, association, partnership, corporation, trust or other person that is engaged in the business of offering to enter into, entering into or confirming the execution of leverage contracts, or soliciting or accepting orders for leverage contracts, and who accepts leverage customer funds (or extends credit in lieu thereof) in connection therewith.

(pp) Leverage customer funds. Means all money, securities and property received, directly or indirectly by a leverage transaction merchant from, for, or on behalf of leverage customers to margin, guarantee or secure leverage contracts and all money, securities and property accruing to such customers as the result of such contracts, or the customers' leverage equity. In the case of a long leverage transaction, profit or loss accruing to a leverage customer is the difference between the leverage transaction merchant's current price for the leverage contract and the ask price of the leverage contract when entered into. In the case of a short leverage transaction, profit or loss accruing to a leverage customer is the difference between the bid price of the leverage contract when entered into and the leverage transaction merchant's current ask price for the leverage contract.

bid

(qq) Leverage contract. Shall have the same meaning as that set forth in §31.4(w) of this chapter.

(rr) Foreign futures or foreign options secured amount. This term means all money, securities and property held by or held for or on behalf of a futures commission merchant from, for, or on behalf of foreign futures or foreign op

17 CFR Ch. I (4–1-95 Edition)
stered or exempt from registration
ch capacity.

) Guarantee agreement. This term
san agreement of guaranty in the
et forth in part B of Form 1-FR,
ed by a registered futures com-
merchant and by an introduc-
xer or applicant for registration
troducing broker on behalf of
ducing broker or applicant for
on as an introducing broker
ction of the alternative ad-
t capital requirement set
17(a)(2)(ii).

rage transaction merchant.
includes any individual, as-
corporation,
partnership,

r person that is engaged in of offering to enter into, or confirming the execue contracts, or soliciting rders for leverage cono accepts leverage cusextends credit in lieu ction therewith. ustomer funds. Means ties and property re- indirectly by a lemerchant from, for, erage customers to or secure leverage ney, securities and such customers as tracts, or the cusy. In the case of ction, profit or age customer is the leverage bid current tract and the ontract when of a short leloss acor mer is the rice of the tered into mer

ion

he lever

Commodity Futures Trading Commission

tions customers as defined in §30.1 of this chapter:

(1) In the case of foreign futures customers, money, securities and property required by a futures commission merchant to margin, guarantee, or secure open foreign futures contracts plus or minus any unrealized gain or loss on such contracts; and

(2) In the case of foreign options customers in connection with open foreign options transactions money, securities and property representing premiums paid or received, plus any other funds required to guarantee or secure open transactions plus or minus any unrealized gain or loss on such transactions.

(ss) Foreign board of trade. This term means any board of trade, exchange or market located outside the United States, its territories or possessions, whether incorporated or unincorporated, where foreign futures or foreign options transactions are entered into.

[41 FR 3194, Jan. 21, 1976]

EDITORIAL NOTE: For Federal Register citations affecting §1.3, see the List of CFR Sections Affected in the Finding Aids sections of this volume.

MINIMUM FINANCIAL AND RELATED
REPORTING REQUIREMENTS

§1.10 Financial reports of futures commission merchants and introducing brokers.

(a) Application for registration. (1) Except as otherwise provided, a futures commission merchant or an applicant for registration as a futures commission merchant, in order to satisfy any requirement in this part that it file a Form 1-FR, must file a Form 1-FRFCM, and any reference in this part to Form 1-FR with respect to a futures or commission merchant applicant therefor shall be deemed to be a reference to Form 1-FR-FCM. Except as otherwise provided, an introducing broker or an applicant for registration as an introducing broker, in order to satisfy any requirement in this part that it file a Form 1-FR, must file a Form 1-FR-IB, and any reference in this part to Form 1-FR with respect to

an

introducing broker or applicant therefor shall be deemed to be a reference to Form 1-FR-IB.

$1.10

(2)(i) Except as provided in paragraphs (a)(3) and (h) of this section, each person who files an application for registration as a futures commission merchant and who is not so registered at the time of such filing, must, concurrently with the filing of such application file either:

(A) A Form 1-FR certified by an independent public accountant in accordance with §1.16 as of a date not more than 45 days prior to the date on which such report is filed, or

(B) A Form 1-FR as of a date not more than 45 days prior to the date on which such report is filed and a Form 1-FR certified by an independent public accountant in accordance with §1.16 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.

(ii) Except as provided in paragraphs (a)(3) and (h) of this section, each person who files an application for registration as an introducing broker and who is not so registered at the time of such filing, must, concurrently with the filing of such application file either:

(A) A Form 1-FR certified by an independent public accountant in accordance with §1.16 as of a date not more than 45 days prior to the date on which such report is filed, or

(B) A Form 1-FR as of a date not more than 45 days prior to the date on which such report is filed and a Form 1-FR certified by an independent public accountant in accordance with §1.16 as of a date not more than 1 year prior to the date on which such report is filed,

or

(C) A guarantee agreement. Each person filing in accordance with paragraphs (a)(2)(ii) (A) or (B) of this section 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.

(3)(1) The provisions of paragraph (a)(2) of this section do not apply to any person succeeding to and continuing the business of another futures commission merchant. Each such person who files an application for registration as a futures commission merchant and who is not so registered in that capacity at the time of such filing must file a form 1-FR as of the first monthend following the date on which his registration is approved. Such report must be filed with the National Futures Association, the Commission and the designated self-regulatory organization, if any, not more than 45 days after the date for which the report is made.

(ii) The provisions of paragraph (a)(2) of this section do not apply to any person succeeding to and continuing the business of another introducing broker.

(A) Each such person who succeeds to and continues the business of an introducing broker which was not operating pursuant to a guarantee agreement, or which was operating pursuant to a guarantee agreement and was also a securities broker or dealer, at the time of succession, who files an application for registration as an introducing broker, and who is not so registered in that capacity at the time of such filing, must file with the National Futures Association either a guarantee agreement with his application for registration or a Form 1-FR as of the first monthend following the date on which his registration is approved. Such Form 1-FR must be filed not more than 45 days after the date for which the report is made.

(B) Each such person who succeeds to and continues the business of an introducing broker which was operating pursuant to a guarantee agreement and which was not also a securities broker or dealer at the time of succession, who files an application for registration as an introducing broker, and who is not so registered in that capacity at the time of such filing, must file with the National Futures Association either a guarantee agreement or a Form 1-FRIB with his application for registration. If such person files a Form 1-FRIB with his application for registration, such person must also file a Form 1-FR-IB, certified by an independent

public accountant, as of a date no later than the end of the month registration is granted. The Form 1-FR-IB certified by an independent public accountant must be filed with the National Futures Association not more than 45 days after the date for which the report is made.

(b) Filing of financial reports. (1)(i) Except as provided in paragraphs (b)(3) and (h) of this section, each person registered as a futures commission merchant must file a Form 1-FR-FCM for each fiscal quarter of each fiscal year unless the futures commission merchant elects, pursuant to paragraph (e)(2) of this section, to file a Form 1FR-FCM for each calendar quarter of each calendar year. Each Form 1-FRFCM must be filed no later than 45 days after the date for which the report is made: Provided, however, That any Form 1-FR-FCM which must be certified by an independent public accountant pursuant to paragraph (b)(2) of this section must be filed no later than 90 days after the close of each futures commission merchant's fiscal year.

(ii) Except as provided in paragraphs (b)(3) and (h) of this section, and except for an introducing broker operating pursuant to a guarantee agreement which is not also a securities broker or dealer, each person registered as an introducing broker must file a Form 1FR-IB semiannually as of the middle and the close of each fiscal year unless the introducing broker elects pursuant to paragraph (e)(2) of this section to file a Form 1-FR-IB semiannually as of the middle and the close of each calendar year. Each Form 1-FR-IB must be filed no later than 45 days after the date for which the report is made: Provided, however, That any Form 1-FR-IB which must be certified by an independent public accountant pursuant to paragraph (b)(2) of this section must be filed no later than 90 days after the close of each introducing broker's fiscal year.

(2)(i) The Form 1-FR-FCM filed pursuant to paragraph (b)(1)(i) of this section, as of the close of the futures commission merchant's fiscal year, must be certified by an independent public accountant in accordance with §1.16 of this part. A futures commission mer