The CFTC proposed revisions to Regulation 3.10 yesterday which would remove the clearing requirement from the registration exemption for foreign entities.

Regulation 3.10(c) allows foreign entities touching “commodity interest” transactions to not register with the CFTC as CPOs, CTAs, FCMs and IBs so long as they meet certain conditions. For example, with respect to such transactions, the foreign entity must act only on behalf of persons located outside the U.S. The foreign entity would still be subject to all the substantive rules relating to the transactions, but not those rules which relate only to CFTC registrants.

The CFTC proposed doing away with the requirement that foreign entities clear their commodity interest transactions through a registered FCM. Although prior no-action relief from CFTC Staff allowed foreign entities to rely on the exemption without clearing through FCMs, a change by the Commission in the regulation itself would provide more certainty and permanence to foreign entities intending to rely on the exemption.