By John Filar Atwood, Associate Managing Editor, SEC Today.
The SEC is adopting interim final temporary Rule 15b12-1T to permit a registered broker-dealer to engage in retail foreign exchange transactions with persons who are not eligible contract participants (“retail forex transactions”) until July 16, 2012, provided that the broker-dealer complies with all applicable 1934 Act rules and regulations and SRO rules (Release No. 34-64874, July 13, 2011). Under Dodd-Frank Section 742(c), certain retail forex transactions would have been prohibited as of July 16 in the absence of the interim rule. The rule is effective July 15, 2011 and will remain in effect for one year.
The Dodd-Frank Act amends the Commodity Exchange Act as of July 16, 2011 to provide that a person for which there is a federal regulatory agency cannot enter into, or offer to enter into, a retail forex transaction except pursuant to a rule or regulation that allows the transaction issued by the federal agency. Consequently, broker-dealers for which the SEC is the regulator may not engage in off-exchange retail forex futures and options transactions with a customer except pursuant to a retail forex rule issued by the Commission. The prohibition does not apply to forex transactions with a customer who qualifies as an eligible contract participant, or to transactions that are spot forex contracts or forward forex contracts irrespective of whether the customer is an eligible contract participant. The prohibition does apply to “rolling spot” transactions in foreign currency by broker-dealers.