[Federal Register Volume 76, Number 136 (Friday, July 15, 2011)]
[Rules and Regulations]
[Pages 41676-41685]
[FR Doc No: 2011-18009]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 240

[Release No. 34-64874; File No. S7-30-11]
RIN 3235-AL19

Retail Foreign Exchange Transactions

AGENCY: Securities and Exchange Commission.

ACTION: Interim final temporary rule; request for comments.

-----------------------------------------------------------------------

SUMMARY: Under section 742(c) of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (``Dodd-Frank Act''), certain foreign exchange
transactions with persons who are not ``eligible contract
participants'' (commonly referred to as ``retail forex transactions,''
and as further defined below) with a registered broker or dealer
(``broker-dealer'') will be prohibited as of July 16, 2011, in the
absence of the Commission adopting a rule to allow such transactions
under terms and conditions prescribed by the Commission. The Commission
is adopting interim final temporary Rule 15b12-1T to allow a registered
broker-dealer to engage in a retail forex business until July 16, 2012,
provided that the broker-dealer complies with the Securities Exchange
Act of 1934 (``Exchange Act''), the rules and regulations thereunder,
and the rules of the self-regulatory organization(s) of which the
broker-dealer is a member (``SRO rules''), insofar as they are
applicable to retail forex transactions.

DATES: Effective Date: Rule 15b12-1T is effective on July 15, 2011 and
will remain in effect until July 16, 2012.
    Comment Date: Comments on the interim final temporary rule should
be received on or before September 13, 2011.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/interim-final-temp.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number S7-30-11 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Elizabeth Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549.

All submissions should refer to File Number S7-30-11. This file number
should be included on the subject line if e-mail is used. To help the
Commission to process and review your comments more efficiently, please
use only one method. The Commission will post all comments on its Web
site: (http://www.sec.gov/rules/interim-final-temp.shtml). Comments are
also available for Web site viewing and printing in the Commission's
Public Reference Room, 100 F Street, NE., Washington, DC 20549 on
official business days between the hours of 10 a.m. and 3 p.m. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Jo Anne Swindler, Assistant Director;
Richard Vorosmarti, Special Counsel; or Angie Le, Special Counsel, at
(202) 551-5777, Division of Trading and Markets, Securities and
Exchange Commission, 100 F Street, NE., Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is adopting new Rule 15b12-1T
under the Exchange Act as an interim final temporary rule. The rule
will expire and no longer be effective on July 16, 2012. The Commission
is soliciting comments on all aspects of this interim final temporary
rule. The Commission will carefully consider any comments received and
intends to take further action if it determines that further action is
necessary or appropriate, either prior to or following the expiration
of the rule. In making this determination, the Commission may consider
a number of alternative approaches with respect to retail forex
transactions, including proposing new rules for public comment; issuing
a final rule amending the interim final temporary rule; issuing a final
rule adopting the interim final temporary rule as final; or allowing
the interim final temporary rule to expire without further action,
which would allow the statutory prohibition to take effect.

I. Background

    On July 21, 2010, President Obama signed into law the Dodd-Frank
Act.\1\ As amended by the Dodd-Frank Act,\2\ the Commodity Exchange Act
(``CEA'') provides that a person for which there is a Federal
regulatory agency,\3\ including a broker-dealer registered under
section 15(b) (except pursuant to paragraph (11) thereof) or 15C of the
Exchange Act,\4\ shall not enter into, or offer to enter into, a
transaction described in section 2(c)(2)(B)(i)(I) of the CEA with a
person who is not an ``eligible contract participant'' \5\ except

pursuant to a rule or regulation of a Federal regulatory agency
allowing the transaction under such terms and conditions as the Federal
regulatory agency shall prescribe \6\ (``retail forex rule'').\7\
Transactions described in CEA section 2(c)(2)(B)(i)(I) include ``an
agreement, contract, or transaction in foreign currency that * * * is a
contract of sale of a commodity for future delivery (or an option on
such a contract) or an option (other than an option executed or traded
on a national securities exchange registered pursuant to section 6(a)
of the Securities Exchange Act of 1934 (15 U.S.C. 78f(a)).'' \8\ A
Federal regulatory agency's retail forex rule must treat all
agreements, contracts, and transactions in foreign currency described
in CEA section 2(c)(2)(B)(i)(I) and all agreements, contracts, and
transactions in foreign currency that are functionally or economically
similar to agreements, contracts, or transactions described in CEA
section 2(c)(2)(B)(i)(I), similarly.\9\ Any retail forex rule also must
prescribe appropriate requirements with respect to disclosure,
recordkeeping, capital and margin, reporting, business conduct, and
documentation, and may include such other standards or requirements as
the Federal regulatory agency determines to be necessary.\10\
---------------------------------------------------------------------------

    \1\ Public Law 111-203, 124 Stat. 1376.
    \2\ Public Law 111-203, Sec.  742(c)(2) (to be codified at 7
U.S.C. 2(c)(2)(E)).
    \3\ 7 U.S.C. 2(c)(2)(E)(i), as amended by Sec.  742(c) of the
Dodd-Frank Act, defines a ``Federal regulatory agency'' to mean the
Commodity Futures Trading Commission (``CFTC''), the Securities and
Exchange Commission, an appropriate Federal banking agency, the
National Credit Union Association, and the Farm Credit
Administration.
    \4\ 7 U.S.C. 2(c)(2)(B)(i)(II).
    \5\ ``Eligible contract participant'' (``ECP'') is defined in
CEA section 1a(18), as re-designated and amended by section 721 of
the Dodd-Frank Act. See Public Law 111-203, Sec.  721 (amending CEA
section 1a). The CEA's definition of ECP generally is comprised of
regulated persons; entities that meet a specified total asset test
(e.g., a corporation, partnership, proprietorship, organization,
trust, or other entity with total assets exceeding $10 million) or
an alternative monetary test coupled with a non-monetary component
(e.g., an entity with a net worth in excess of $1 million and
engaging in business-related hedging; or certain employee benefit
plans, the investment decisions of which are made by one of four
enumerated types of regulated entities); and certain governmental
entities and individuals that meet defined thresholds. The
Commission and the CFTC recently have proposed rules under the CEA
that further define ``eligible contract participant'' with respect
to transactions with major swap participants, swap dealers, major
security-based swap participants, security-based swap dealers, and
commodity pools. See Exchange Act Release No. 63452 (Dec. 7, 2010),
75 FR 80174 (Dec. 21, 2010). Because transactions that are the
subject of this release are commonly referred to as ``retail forex
transactions,'' this release uses the term ``retail customer'' to
describe persons who are not ECPs.
    \6\ 7 U.S.C. 2(c)(2)(E)(ii)(I).
    \7\ As used in this release, ``retail forex rule'' refers to any
rule proposed or adopted by a Federal regulatory agency pursuant to
section 742(c)(2) of the Dodd-Frank Act.
    \8\ 7 U.S.C. 2(c)(2)(B)(i)(I).
    \9\ 7 U.S.C. 2(c)(2)(E)(iii)(II).
    \10\ 7 U.S.C. 2(c)(2)(E)(iii)(I).
---------------------------------------------------------------------------

    This amendment to the CEA takes effect on July 16, 2011, which is
360 days from the date of enactment of the Dodd-Frank Act.\11\ After
that date, for purposes of CEA section 2(c)(2)(B), broker-dealers for
which the Commission is the ``Federal regulatory agency'' may not
engage in off-exchange retail forex futures and options with a customer
except pursuant to a retail forex rule issued by the Commission.\12\
This prohibition will not apply to (1) forex transactions with a
customer who qualifies as an ECP, or (2) transactions that are spot
forex contracts or forward forex contracts irrespective of whether the
customer is an ECP.\13\ However, consistent with other Federal
regulatory agencies' retail forex rules, Rule 15b12-1T applies to
``rolling spot'' transactions in foreign currency by broker-
dealers.\14\ The discussion of the definition of ``retail forex
transaction'' below addresses the distinctions between rolling spot
forex transactions and spot and forward forex contracts.
---------------------------------------------------------------------------

    \11\ See Public Law 111-203, Sec.  754.
    \12\ See 7 U.S.C. 2(c)(2)(B)(i)(II) and 7 U.S.C.
2(c)(2)(E)(ii)(I). On September 10, 2010, the CFTC adopted a retail
forex rule for persons subject to its jurisdiction. See Regulation
of Off-Exchange Retail Foreign Exchange Transactions and
Intermediaries, 75 FR 55410 (Sept. 10, 2010) (``Final CFTC Retail
Forex Rule''). The CFTC had proposed its rules regarding retail
forex transactions prior to the enactment of the Dodd-Frank Act. See
Regulation of Off-Exchange Retail Foreign Exchange Transactions and
Intermediaries, 75 FR 3282 (Jan. 20, 2010) (``Proposed CFTC Retail
Forex Rule''). The Federal Deposit Insurance Corporation (``FDIC'')
and the Office of the Comptroller of the Currency (``OCC'')
subsequently proposed similar rules. See Retail Foreign Exchange
Transactions, 76 FR 28358 (May 17, 2011); Retail Foreign Exchange
Transactions, 76 FR 22633 (Apr. 22, 2011) (``Proposed OCC Retail
Forex Rule''). On July 6, 2011, the FDIC adopted final retail forex
rules. See Retail Foreign Exchange Transactions, 76 FR 40779 (July
12, 2011) (``Final FDIC Retail Forex Rule'').
    \13\ See 7 U.S.C. 2(c)(2)(C)(i)(I) and 7 U.S.C.
2(c)(2)(C)(i)(II); see also Final FDIC Retail Forex Rule, supra note
12; Proposed OCC Retail Forex Rule, supra note 12.
    \14\ See Final FDIC Retail Forex Rule, supra note 12 (explaining
that its retail forex rule applies to rolling spot forex
transactions); Proposed OCC Retail Forex Rule, supra note 12
(stating that rolling spot forex transactions should be regulated as
retail forex transactions); Final CFTC Retail Forex Rule, supra note
12 (stating that the CFTC has the authority to fully regulate
``look-alike,'' leveraged forex contacts, also called off-exchange
Zelener contracts; as discussed below, Zelener contracts are also
called rolling spot transactions); Proposed CFTC Retail Forex Rule,
supra note 12 (``The [CFTC Reauthorization Act of 2008] amends the
[CEA] to require that certain intermediaries for forex futures and
options and for look-alike contracts (i.e., those at issue in
Zelener) register in such capacity as the Commission shall
determine. * * * '').
---------------------------------------------------------------------------

    Prior to June 2011, the Commission had not been made aware of
industry concerns with respect to the operation of section 742 of the
Dodd-Frank Act in the absence of Commission rulemaking. In mid-June
2011, however, market participants for the first time brought to the
attention of Commission staff the possibility that section 742 of the
Dodd-Frank Act may have serious adverse consequences for certain
securities markets in the absence of rulemaking by the Commission
before the impending effective date of the provision (i.e., July 16,
2011).\15\ Although this correspondence from market participants
brought this issue to the attention of Commission staff, the Commission
understands that this is in fact a wider concern shared by several
other market participants. One potential consequence concerns the
ability of broker-dealers to facilitate the settlement of foreign
securities transactions for retail customers. For example, a broker-
dealer may purchase a foreign currency or exchange a foreign currency
for U.S. dollars on behalf of a retail customer in connection with the
customer's purchase or sale of a security listed on a foreign exchange
and denominated in the foreign currency. In particular, a
representative of certain market participants informed the staff that
section 742 could operate to preclude broker-dealers from continuing to
engage in certain foreign exchange transactions that are inherent in
certain of their customers' securities transactions, and that serve to
minimize their customers' risk exposure to changes in foreign currency
rates.\16\
---------------------------------------------------------------------------

    \15\ See Memorandum from P. Georgia Bullitt, Morgan Lewis, on
Pershing LLC--Proposed Relief regarding transactions in Retail
Foreign Exchange to James Brigagliano et al. (June 17, 2011)
(available at http://www.sec.gov/comments/other/other-initiatives/otherinitiatives-56.pdf) (``Morgan Lewis Memo'').
    \16\ See id.
---------------------------------------------------------------------------

    The Commission further understands that there may be other
situations in which broker-dealers engage in foreign exchange
transactions in connection with facilitating the ordinary execution,
clearance, or settlement of customers' securities transactions and that
may warrant rulemaking by the Commission in order to avoid market
disruption due to the potential application of section 742 of the Dodd-
Frank Act. At the same time, the Commission notes that media coverage
over the past few years has highlighted potentially abusive practices
by some intermediaries in connection with retail forex
transactions.\17\ The Commission also notes that other regulators have
expressed concerns with regard to the retail forex practices of the
entities that they regulate.\18\
---------------------------------------------------------------------------

    \17\ See Gregory Zuckerman, Carrick Mollenkamp & Lingling Wei,
Suspicion of Forex Gouging Spreads, The Wall Street Journal (Feb.
10, 2011) at A1 (describing allegations of overcharging of customers
by custody banks in currency trades).
    \18\ See, e.g., Press Release, CFTC, CFTC Releases Final Rules
Regarding Retail Forex Transactions (Aug. 30, 2010) (available at
http://www.cftc.gov/PressRoom/PressReleases/pr5883-10.html?dbk)
(noting that retail forex is the largest area of retail fraud that
the CFTC oversees); see also the Financial Industry Regulatory
Authority's (``FINRA'') Regulatory Notice 08-66, (Retail Foreign
Currency Exchange) (November 2008) (``FINRA Forex Notice'')
(describing the retail forex market as opaque, volatile, and risky).
---------------------------------------------------------------------------

    In order to provide the Commission with the opportunity to receive
comments regarding practices in this area and to consider prescribing
additional rules to address investor protection concerns (e.g., abusive
sales practices, volatility and riskiness of the

forex market) \19\ as they affect the regulatory treatment of retail
forex transactions by broker-dealers--while also preserving potentially
beneficial market practices identified to the Commission only weeks
before the July 16, 2011 effective date for section 742 of the Dodd-
Frank Act--the Commission today is adopting interim final temporary
Rule 15b12-1T under the Exchange Act to enable broker-dealers to engage
in a retail forex business under the existing regulatory regime for one
year. By receiving comments regarding practices in this area, the
Commission will be better positioned to determine, for example, the
scope of retail forex business conducted by broker-dealers that may be
beneficial and poses limited risk to customers and any aspects of the
business that may pose substantial undue risks to customers. The
Commission will carefully consider comments on what additional
rulemaking may be necessary, if any.
---------------------------------------------------------------------------

    \19\ In one of its notices to members, FINRA identified several
investor protection concerns, including, among other things, the
following: ``[t]he retail customer typically does not having pricing
information and cannot determine whether the price quoted by the
dealer is fair''; ``the dealer acts as counterparty and establishes
the price, which means that the dealer has a conflict of interest in
the transaction''; ``[p]rice comparisons are also complicated by
different compensation structures''; and ``[t]he currency market is
extremely volatile and retail forex customers are exposed to
substantial currency risk.'' See FINRA Forex Notice, supra note 18.
---------------------------------------------------------------------------

II. Discussion

    The Commission is adopting interim final temporary Rule 15b12-1T to
maintain the ability of broker-dealers to engage in a retail forex
business during a one-year period under the existing regulatory
framework that now applies to broker-dealers providing these services.
The Commission solicits comment on each aspect of the rule and the
nature and circumstances surrounding retail forex business conducted by
broker-dealers. The Commission intends to carefully consider comments
received to determine what further regulatory action, if any, would be
appropriate. In making this determination, the Commission may consider
a number of alternatives with respect to retail forex transactions,
including proposing new rules for public comment; issuing a final rule
amending the interim final temporary rule; issuing a final rule
adopting the interim final temporary rule as final; or allowing the
interim final temporary rule to expire without further action, which
would allow the statutory prohibition to take effect.

A. Rule 15b12-1T(a): Definitions

    Rule 15b12-1T(a) sets forth the definitions of terms specific to
the interim final temporary rule. Many of the terms (i.e., broker,
dealer, person, registered broker or dealer, and self-regulatory
organization) have the same meanings as in the Exchange Act. The term
``Act,'' as used in the rule, refers to the Exchange Act.\20\ The
Commission chose these terms and definitions because their meanings are
readily understood in the industry.
---------------------------------------------------------------------------

    \20\ Exchange Act Rule 15b12-1T(a)(1).
---------------------------------------------------------------------------

    The term ``retail forex business'' is defined as ``engaging in one
or more retail forex transactions with the intent to derive income from
those transactions, either directly or indirectly.'' \21\ This
definition mirrors the definition contained in the FDIC's final retail
forex rules and the OCC's proposed rules.\22\ This term is intended to
include retail forex transactions that may not generate income to the
broker-dealer or a retail forex business that is ultimately not
profitable. The Commission chose this definition because it focuses on
the intent to engage in a series of forex transactions with a business
purpose, whether or not the transactions result in income or profits.
---------------------------------------------------------------------------

    \21\ Exchange Act Rule 15b12-1T(a)(2).
    \22\ See Final FDIC Retail Forex Rule, supra note 12; Proposed
OCC Retail Forex Rule, supra note 12 (each defining ``retail forex
business'').
---------------------------------------------------------------------------

    The term ``retail forex transaction'' is defined as ``any account,
agreement, contract or transaction in foreign currency that is offered
or entered into by a broker or dealer with a person that is not an
eligible contract participant as defined in section 1a(18) of the
Commodity Exchange Act (7 U.S.C. 1a(18)) and that is: (i) A contract of
sale of a commodity for future delivery or an option on such a
contract; (ii) an option, other than an option executed or traded on a
national securities exchange registered pursuant to section 6(a) of the
Act (15 U.S.C. 78(f)(a)); or (iii) offered, or entered into, on a
leveraged or margined basis, or financed by a broker or dealer or any
person acting in concert with the broker or dealer on a similar basis,
other than: (A) a security that is not a security futures product as
defined in section 1a(47) of the Commodity Exchange Act (7 U.S.C.
1a(47)); or (B) a contract of sale that: (1) Results in actual delivery
within two days; or (2) creates an enforceable, obligation to deliver
between a seller and buyer that have the ability to deliver and accept
delivery, respectively, in connection with their line of business.''
\23\ This definition is based on the CEA, incorporates the terms
described in CEA sections 2(c)(2)(B) and 2(c)(2)(C),\24\ and is
substantially the same as the definition in the FDIC's final section
349.2 \25\ and the OCC's proposed section 48.2.\26\ This definition has
at least two important features.
---------------------------------------------------------------------------

    \23\ Exchange Act Rule 15b12-1T(a)(3).
    \24\ 7 U.S.C. 2(c)(2)(B) and 7 U.S.C. 2(c)(2)(C).
    \25\ See Final FDIC Retail Forex Rule, supra note 12 (defining
``retail forex transaction'').
    \26\ See Proposed OCC Retail Forex Rule, supra note 12 (defining
``retail forex transaction'').
---------------------------------------------------------------------------

    First, certain transactions in foreign currency are excluded from
the definition of the term ``retail forex transaction.'' For example,
the CEA expressly excludes ``a contract of sale [in foreign currency]
that * * * results in actual delivery within 2 days.'' \27\ As defined
by court decisions as well as the retail forex rules of other Federal
regulatory agencies, this term refers to a ``spot'' forex transaction,
in which one currency is purchased for another, the transaction is
settled within two days, and actual delivery occurs as soon as
practicable.\28\ Similarly, based upon the language in the CEA,\29\ a
``retail forex transaction'' does not include a contract of sale that
creates an enforceable obligation to deliver between a buyer and seller
that have the ability to deliver and accept delivery, respectively, in
connection with their line of business.\30\ This statutory language
refers to a retail forex forward contract with a commercial entity that
creates an enforceable obligation to make or take delivery, provided
the commercial counterparty has the ability to make delivery and accept
delivery in connection with its line of business.\31\ In

addition, consistent with the approach of other Federal regulatory
agencies' retail forex rules, the definition does not include forex
transactions executed or traded on an exchange or designated contract
market.\32\
---------------------------------------------------------------------------

    \27\ See 7 U.S.C. 2(c)(2)(C)(i)(II).
    \28\ See generally CFTC v. Int'l Fin. Servs. (New York), Inc.,
323 F. Supp. 2d 482, 495 (S.D.N.Y. 2004) (distinguishing between
foreign exchange futures contracts and spot contracts in foreign
exchange, and noting that spot transactions--unlike futures
contracts--ordinarily call for settlement within two days); see also
Bank Brussels Lambert v. Intermetals Corp., 779 F. Supp. 741, 748
(S.D.N.Y. 1991) (noting that the spot market is essentially the
current market rather than the market for future delivery); Final
FDIC Retail Forex Rule, supra note 12 (explaining that its retail
forex rule does not apply to spot forex contracts); Proposed OCC
Retail Forex Rule, supra note 12 (explaining that its retail forex
rule does not apply to spot forex contracts); Final CFTC Retail
Forex Rule, supra note 12 (defining ``retail forex transaction'' as
any account, agreement, contract or transaction described in section
2(c)(2)(B) or 2(c)(2)(C) of the CEA; as discussed above, by its
terms, CEA section 2(c)(2)(C)(i)(II) excludes what are referred to
as spot forex transactions).
    \29\ See 7 U.S.C. 2(c)(2)(C)(i)(II).
    \30\ Exchange Act Rule 15b12-1T(a)(3)(iii)(B)(2).
    \31\ See generally CFTC v. Int'l Fin. Servs. (New York), Inc.,
323 F. Supp. 2d at 495 (distinguishing between forward contracts in
foreign exchange and foreign exchange futures contracts); see also
William L. Stein, The Exchange-Trading Requirement of the Commodity
Exchange Act, 41 Vand. L. Rev. 473, 491 (1988). In contrast to
forward contracts, futures contracts generally include several or
all of the following characteristics: (i) Standardized nonnegotiable
terms (other than price and quantity); (ii) parties are required to
deposit initial margin to secure their obligations under the
contract; (iii) parties are obligated and entitled to pay or receive
variation margin in the amount of gain or loss on the position
periodically over the period the contract is outstanding; (iv)
purchasers and sellers are permitted to close out their positions by
selling or purchasing offsetting contracts; and (v) settlement may
be provided for by either (a) cash payment through a clearing entity
that acts as the counterparty to both sides of the contract without
delivery of the underlying commodity; or (b) physical delivery of
the underlying commodity. See Edward F. Greene et al., U.S.
Regulation of International Securities and Derivatives Markets Sec.
14.08[2] (8th ed. 2006). See also Final FDIC Retail Forex Rule,
supra note 12; Proposed OCC Retail Forex Rule, supra note 12 (each
explaining that their retail forex rule would not apply to forex
forward contracts).
    \32\ See Final CFTC Retail Forex Rule, supra note 12; Final FDIC
Retail Forex Rule, supra note 12; Proposed OCC Retail Forex Rule,
supra note 12.
---------------------------------------------------------------------------

    Second, a ``rolling spot'' forex transaction (also known as a
Zelener contract),\33\ including without limitation such a transaction
traded on the Internet, through a mobile phone, or on an electronic
platform, falls within the definition of ``retail forex transaction,''
\34\ and thus is not excluded from the definition as a ``spot''
transaction. This interpretation is consistent with the approach of
other Federal regulatory agencies acting pursuant to section 742 of the
Dodd-Frank Act to treat all agreements, contracts, and transactions in
foreign currency described in CEA section 2(c)(2)(B)(i)(I) and all
agreements, contracts, and transactions in foreign currency that are
functionally or economically similar to agreements, contracts, or
transactions described in CEA section 2(c)(2)(B)(i)(I), similarly.\35\
Like a spot forex transaction, a rolling spot forex transaction with a
retail customer may initially require delivery of currency within two
days. In practice, however, contracts with a retail customer for a
rolling spot forex transaction may be indefinitely renewed every other
day, and no currency is actually delivered until one party
affirmatively closes out the position.\36\ The Commission preliminarily
believes that a contract with a retail customer for a rolling spot
forex transaction is economically more similar to a retail forex
future, as described in CEA section 2(c)(2)(B)(i)(I), than a spot forex
contract.
---------------------------------------------------------------------------

    \33\ See CFTC v. Zelener, 373 F.3d 861 (7th Cir. 2004); see also
CFTC v. Erskine, 512 F.3d 309 (6th Cir. 2008) (discussing Zelener
contracts).
    \34\ CEA section 2(c)(2)(E)(ii) refers to agreements, contracts,
or transactions described in CEA section 2(c)(2)(B)(i)(I) (which is
incorporated into subparts (i) and (ii) of the Commission's
definition of ``retail forex transaction''). In addition, CEA
section 2(c)(2)(E)(iii)(II) requires the Commission to treat
similarly all agreements, contracts, and transactions in foreign
currency described in CEA section 2(c)(2)(B)(i)(I) and all
agreements, contracts, and transactions that are functionally or
economically similar to agreements, contracts, or transactions
described in CEA section 2(c)(2)(B)(i)(I). The Commission
preliminarily believes that agreements, contracts, and transactions
described in CEA section 2(c)(2)(C)(i) (including rolling spot forex
transactions) are functionally or economically similar to
agreements, contracts, or transactions described in CEA section
2(c)(2)(B)(i)(I). Therefore, the Commission is defining ``retail
forex transaction'' to encompass the types of agreements, contracts,
and transactions described in CEA section 2(c)(2)(C)(i), such as
rolling spot forex transactions, and is reflected in subpart (iii)
of the Commission's definition. See also Final FDIC Retail Forex
Rule, supra note 12; Proposed OCC Retail Forex Rule, supra note 12
(both concluding that rolling spot forex transactions are more like
futures than spot contracts). Some courts have held these contracts
to be spot contracts in form. See, e.g., CFTC v. Erskine, 512 F.3d
309, 326 (6th Cir. 2008); CFTC v. Zelener, 373 F.3d 861, 869 (7th
Cir. 2004).
    \35\ 7 U.S.C. 2(c)(2)(E)(iii)(II); see also Final FDIC Retail
Forex Rule, supra note 12; Proposed OCC Retail Forex Rule, supra
note 12.
    \36\ For example, in Zelener, the retail forex dealer retained
the right, at the date of delivery of the currency, to deliver the
currency, roll the transaction over, or offset all or a portion of
the transaction with another open position held by its customer. See
CFTC v. Zelener, 373 F.3d 861, 868 (7th Cir. 2004).
---------------------------------------------------------------------------

B. Rule 15b12-1T(b): Broker-Dealers Engaged in a Retail Forex Business

    Rule 15b12-1T(b) allows any registered broker or dealer to engage
in a retail forex business provided that such broker or dealer complies
with the Exchange Act, the rules and regulations thereunder, and the
SRO rules, including, but not limited to, the disclosure, recordkeeping
(or documentation), capital and margin, reporting, and business conduct
requirements, insofar as they are applicable to retail forex
transactions. In order for broker-dealers to engage in retail forex
transactions after July 16, 2011, the Commission must adopt rules
prescribing appropriate requirements with respect to disclosure,
recordkeeping, capital and margin, reporting, business conduct,
documentation,\37\ and such other standards or requirements that the
Commission determines to be necessary.\38\ Because broker-dealers
engaging in a retail forex business are already subject to numerous
regulatory requirements with respect to this business under the
Exchange Act, the rules and regulations thereunder, and SRO rules, the
Commission does not intend to create any new obligations under this
interim final temporary rule for broker-dealers that are engaged in a
retail forex business. The Commission provides below illustrative
examples of obligations, including certain SRO requirements, applicable
to broker-dealers' retail forex transactions.\39\
---------------------------------------------------------------------------

    \37\ The Commission considers the documentation requirements as
a subset of recordkeeping requirements. To avoid confusion, the
Commission will refer to these requirements collectively as
recordkeeping requirements.
    \38\ See Public Law 111-203, Sec.  742(c)(2) (amending CEA
section 2(c)(2)).
    \39\ In this connection, the Commission notes that in the FINRA
Forex Notice, FINRA described specific FINRA rules that apply to
retail forex activities of broker-dealers, which are referenced
below. See FINRA Forex Notice, supra note 18.
---------------------------------------------------------------------------

Disclosure Requirements
    Broker-dealers that engage in a retail forex business must comply
with the disclosure requirements in NASD Rule 2210.\40\ NASD Rule 2210
requires all communications with the public by members of FINRA--
including forex-related communications--to be based on principles of
fair dealing and good faith, to be fair and balanced, and to provide a
sound basis for evaluating the facts regarding the market generally and
a customer's specific transaction.\41\ NASD Rule 2210 further prohibits
broker-dealers from making ``any false, exaggerated, unwarranted or
misleading statement or claim in any communication with the public.''
As stated in the FINRA Forex Notice, a broker-dealer's communications
with the public ``must adequately disclose the risks associated with
forex trading, including the risks of highly leveraged trading,'' and a
broker-dealer ``must also make sure that [its] communications with the
public are not misleading regarding, among other things: [t]he
likelihood of profits or the risks of forex trading, including
leveraged trading; [t]he firm's role in or compensation from the trade;
[t]he firm's or the customer's access to the interbank currency market;
or [t]he performance or accuracy of electronic trading platforms or
software sold or licensed by or through the firm to customers in
connection with forex trading, including falsely advertising claims
regarding slippage rates.'' \42\
---------------------------------------------------------------------------

    \40\ See id.
    \41\ See id.
    \42\ Id.
---------------------------------------------------------------------------

    Further, FINRA stated in its regulatory notice to members that
FINRA Rule 2010 (formerly NASD Rule 2110), which requires broker-
dealers, in the conduct of their business, to observe high standards of
commercial honor and just and equitable principles of trade, applies to
all of a broker-dealer's

business, including its retail forex business.\43\ FINRA stated, for
example, that to comply with FINRA Rule 2010, a member firm must
adequately disclose to its retail customers that the firm is acting as
a counterparty to a transaction, the risks associated with forex
trading, and the risks and terms of leveraged trading.\44\
---------------------------------------------------------------------------

    \43\ Id.
    \44\ Id.
---------------------------------------------------------------------------

Recordkeeping Requirements
    Exchange Act Rules 17a-3 and 17a-4 require a broker-dealer to make,
keep current, and preserve records regarding its business. For example,
Exchange Act Rules 17a-3(a)(2) and 17a-3(a)(11) require a broker-dealer
to make and keep current a general ledger, which provides details
relating to all assets, liabilities, and nominal accounts.
    A broker-dealer is also required to preserve, for a period of not
less than three years, originals of all communications received and
copies of all communications (and any approvals thereof) sent by the
broker-dealer relating to its business as such, including all
communications that are subject to SRO rules regarding communications
with the public.\45\ As discussed above, communications with the public
regarding retail forex are subject to NASD Rule 2210.\46\ In addition,
Exchange Act Rule 17a-4(b)(7) requires a broker-dealer to preserve, for
a period of not less than three years, all written agreements (or
copies thereof) entered into by the broker-dealer relating to its
business as such, including agreements with respect to any account.
Accordingly, broker-dealers must preserve, for a period of not less
than three years, originals of all communications received and copies
of all communications (and any approvals thereof) sent by the broker-
dealer and any written agreements with respect to retail forex
transactions.
---------------------------------------------------------------------------

    \45\ Exchange Act Rule 17a-4(b)(4). See Exchange Act Release No.
44992 (Oct. 26, 2001), 66 FR 55818 (Nov. 23, 2001).
    \46\ See supra note 40 and accompanying text regarding NASD Rule
2210 (communications with the public).
---------------------------------------------------------------------------

    Another example of recordkeeping requirements applicable to retail
forex transactions derives from the Bank Secrecy Act (``BSA''), as
amended by the USA PATRIOT Act and implemented under rules promulgated
by the U.S. Treasury Department's Financial Crimes Enforcement Network
(``FinCEN''), which requires broker-dealers to make, keep, retain, and
report certain records that have a high degree of usefulness for the
purposes of criminal, tax, or regulatory matters.\47\ Exchange Act Rule
17a-8 requires broker-dealers to comply with the reporting,
recordkeeping, and record retention requirements of the BSA's
implementing regulations.\48\
---------------------------------------------------------------------------

    \47\ See 31 CFR Chapter X (formerly 31 CFR Part 103); see also
67 FR 44048 (July 1, 2002) (amendments to BSA regulations requiring
that a broker-dealer report suspicious transactions).
    \48\ See Exchange Act Release No. 18321 (Dec. 10, 1981); 46 FR
61454 (Dec. 17, 1981); see also FINRA Rule 3310 (formerly NASD Rule
3011) (requiring FINRA member firms to establish and implement
policies and procedures that can be reasonably expected to detect
and cause the reporting of suspicious transactions). As FINRA noted,
``FINRA member firms engaging in retail forex activities should
ensure their Anti-Money Laundering Program addresses the risks
associated with the business and includes procedures for monitoring,
detecting, and reporting suspicious transactions associated with
their retail forex activities.'' FINRA Forex Notice, supra note 18.
---------------------------------------------------------------------------

Net Capital and Margin Requirements
    Each broker-dealer must comply with Exchange Act Rule 15c3-1, which
prescribes minimum regulatory net capital requirements for broker-
dealers and is applicable to all business activities of the broker-
dealer, including forex. The Commission notes that, under Exchange Act
Rule 15c3-1, any uncollateralized current exposure by a broker-dealer
to retail forex transactions must be deducted when computing the firm's
net capital. The provisions of the net capital rule dealing with
contractual commitment charges under Rule 15c3-1(c)(2)(viii) also apply
to commitments with respect to foreign currency. Further, pursuant to
Exchange Act section 7, broker-dealer margin requirements are generally
set according to Regulation T \49\ and SRO margin rules.\50\
---------------------------------------------------------------------------

    \49\ 12 CFR Part 220.
    \50\ In 2009, FINRA solicited comment on proposed FINRA Rule
2380 to establish a leverage limitation for retail forex.
Specifically, proposed FINRA Rule 2380, as modified by Amendment No.
2, would prohibit any member firm from permitting a customer to: (1)
initiate any forex position with a leverage ratio of greater than 4
to 1; and (2) withdraw money from an open forex position that would
cause the leverage ratio for such position to be greater than 4 to
1. In addition, it would exempt from the proposed leverage
limitation any security as defined in Exchange Act section 3(a)(10).
See FINRA Regulatory Notice 09-06 (Retail Forex) (January 2009).
FINRA filed Amendment No. 1 to the proposed rule change on August
27, 2009. See Letter from Gary L. Goldsholle, Vice President and
Associate General Counsel, FINRA, to Elizabeth M. Murphy, Secretary,
Commission (Aug. 27, 2009). On November 12, 2009, FINRA filed
Amendment No. 2 to the proposed rule. Amendment No. 2 replaced and
superseded Amendment No. 1 in its entirety. The proposed rule
change, as modified by Amendment No. 2, was published for comment in
the Federal Register on December 8, 2009. Exchange Act Release No.
61090 (Dec. 1, 2009), 74 FR 64776 (Dec. 8, 2009).
---------------------------------------------------------------------------

Reporting Requirements
    A broker-dealer is required to file with the Commission periodic
financial and operational reports (i.e., FOCUS Reports), as prescribed
in Exchange Act Rule 17a-5, that include relevant information regarding
the broker-dealer, including information regarding its retail forex
business, if any. In addition, FINRA has advised its member firms that
a broker-dealer's expansion of its business to include retail forex
transactions constitutes a material change in business operations
pursuant to NASD Rule 1017(a), and broker-dealers must first apply for
and receive approval from FINRA to conduct this activity.\51\
Additionally, as discussed above, Exchange Act Rule 17a-8 requires
broker-dealers to report to FinCEN certain enumerated types of
transactions, including suspicious transactions in foreign currencies
and foreign currency futures and options.\52\
---------------------------------------------------------------------------

    \51\ See FINRA Forex Notice, supra note 18 (emphasizing that a
broker-dealer's expansion of business into retail forex constitutes
a material change in business operations under NASD rules).
    \52\ See supra note 48 and accompanying text.
---------------------------------------------------------------------------

Business Conduct Requirements
    In the course of complying with certain Exchange Act requirements,
rules and regulations thereunder, and SRO rules relating to business
conduct, broker-dealers must address their retail forex business. For
example, as discussed above, FINRA Rule 2010 (formerly NASD Rule 2110),
which requires broker-dealers, in the conduct of their business, to
observe high standards of commercial honor and just and equitable
principles of trade, applies to all of a broker-dealer's business,
including its retail forex business.\53\ FINRA has noted that the
following examples of conduct in relation to a retail forex business
are prohibited under FINRA Rule 2010, including: Misappropriating or
mishandling customer funds; using, selling, or leasing electronic
trading platforms that allow ``slippage'' of trade executions in a
manner that disproportionately or unfairly affects the customer;
manipulating or displaying false quotes; offering mock, or
``demonstration,'' accounts that do not accurately reflect the risks of
forex trading; making post-execution price adjustments that are
inappropriate and unfavorable to the customer; soliciting business for
and introducing customers to a forex dealer without conducting adequate
due diligence on the forex dealer, or in a way that misleads the
customer about the forex dealer or forex trading, including how
customer funds will be held; failing to conduct due diligence on any
solicitors that introduce forex customers to the broker-

dealer; and accepting forex-related trades from an entity or individual
that solicits retail forex business on behalf of the firm in a
misleading or deceptive way.\54\
---------------------------------------------------------------------------

    \53\ See FINRA Forex Notice, supra note 18.
    \54\ See id.
---------------------------------------------------------------------------

    Broker-dealers also need to address retail forex transactions in
connection with the customer reserve bank account requirements under
Exchange Act Rule 15c3-3. In calculating what amount, if any, a broker-
dealer must deposit on behalf of its customers in a reserve bank
account pursuant to Exchange Act Rule 15c3-3(e), the broker-dealer must
use the formula set forth in Exchange Act Rule 15c3-3a. Specifically,
the Commission staff has interpreted Exchange Act Rule 15c3-3 to
require that the broker-dealer must include the net balance due to
customers in non-regulated commodity accounts, reduced by any deposits
of cash or securities with any clearing organization or clearing broker
in connection with the open contracts in such accounts.\55\
---------------------------------------------------------------------------

    \55\ See Division of Market Regulation's Interpretations of Rule
15c3-3 under the Securities Exchange Act of 1934, Exchange Act
Release No. 9922 (Jan. 2, 1973); see also FINRA Forex Notice, supra
note 18 (stating that the requirement in Exchange Act Rule 15c3-3
applies to forex transactions).
---------------------------------------------------------------------------

    Furthermore, Exchange Act section 15(b)(4)(E) authorizes the
Commission to impose sanctions against a broker-dealer for failing
reasonably to supervise another person subject to the firm's
supervision who committed a violation of specified laws, including the
CEA, unless the broker-dealer established procedures, and a system for
applying such procedures, that would reasonably be expected to prevent
and detect, insofar as practicable, the violation of law.\56\ Thus,
broker-dealers engaged in a retail forex business should include in
their policies and procedures mechanisms to prevent and detect
potential violations of applicable laws and regulations in connection
with that business.
---------------------------------------------------------------------------

    \56\ See 15 U.S.C. 78o(b)(4)(E).
---------------------------------------------------------------------------

    The examples provided above are not inclusive of all regulatory
requirements administered by the Commission that are implicated by
retail forex business conducted by broker-dealers. By providing these
examples, the Commission does not intend to suggest that other
provisions, rules and regulations, including antifraud provisions and
SRO rules, may not apply to retail forex business. At the same time,
this interim final temporary rule is not intended to impose new
regulatory obligations for broker-dealers, in connection with such
business.

C. Rule 15b12-1T(c): Broker-Dealers Deemed To Be Acting Pursuant to a
Commission Rule

    Rule 15b12-1T(c) provides that any registered broker or dealer that
engages in a retail forex business in compliance with paragraph (b) of
this rule on or after the effective date of this rule will be deemed,
until July 16, 2012, to be acting pursuant to rule or regulation
described in CEA section 2(c)(2)(E)(ii)(I), as amended by section 742
of the Dodd-Frank Act. This rule will allow broker-dealers that engage
in a retail forex business to do so until July 16, 2012, subject to
compliance with existing applicable requirements.
    Rule 15b12-1T(c) applies to broker-dealers that prior to the
effective date of the rule had entered into retail forex transactions
that continue after the effective date. The rule also applies to
broker-dealers that begin after the rule's effective date to engage in
retail forex transactions. As the Commission explained above, FINRA has
advised its member firms that a broker-dealer that expands into a
retail forex business must first apply for and receive approval to
conduct this activity, as a change in business operations pursuant to
NASD Rule 1017(a).\57\
---------------------------------------------------------------------------

    \57\ See FINRA Forex Notice, supra note 18.
---------------------------------------------------------------------------

D. Rule 15b12-1T(d): Expiration

    Rule 15b12-1T(d) provides that the rule will expire and no longer
be effective on July 16, 2012. The Commission believes that the sunset
date is appropriate because it will allow the existing regulatory
framework for a retail forex business to continue for a defined period
and thereby give the Commission sufficient time to determine what
further appropriate steps, if any, to take with respect to a retail
forex business.

III. Request for Comment

    The Commission is requesting comments from all members of the
public regarding all aspects of the interim final temporary rule and
the current market practices involving retail forex transactions, as
well as any investor protection or other concerns that should be
addressed by Commission rulemaking. The Commission particularly
requests comments from the point of view of broker-dealers that are
presently engaged in a retail forex business, broker-dealers that plan
to engage in such a business, customers that use retail forex
transactions, and ECPs. Together with continued discussions with market
participants and other regulators, the Commission considers this
rulemaking to be an important avenue for gathering more information
from affected parties about the current scope and nature of retail
forex transactions. Such information will inform the Commission's
thoughtful review of the appropriate regulatory framework for retail
forex transactions before or beyond the expiration of the interim final
rule. The Commission also seeks comment on the particular questions
below, which have been designed to elicit a robust discussion of the
uses and reasons for such transactions as they occur today, as well as
the potential need for additional regulation. The Commission will
carefully consider all comments received, and will benefit especially
from detailed comments and comments responding to other commentary in
the public file for this rulemaking.

Interim Final Temporary Rule

    1. Should the Commission clarify or modify any of the definitions
included in Rule 15b12-1T? If so, which definitions and what specific
modifications are appropriate or necessary?
    2. Are the requirements in Rule 15b12-1T sufficiently clear? Is
additional guidance from the Commission necessary?
    3. Rule 15b12-1T is an interim final temporary rule that is set to
expire on July 16, 2012. Should the Commission extend the expiration
date of the rule and if so, for how long?

Possible Permanent Rule Regulating a Retail Forex Business

    4. Should the Commission propose new rules relating to the retail
forex business operated by broker-dealers for public comment, issue a
final rule amending the interim final temporary rule, issue a final
rule adopting the interim final temporary rule as final, or allow the
interim final temporary rule to expire without further action, which
would allow the statutory prohibition to take effect? If further
rulemaking is appropriate, what should those rules provide?
    5. Should the Commission prohibit a broker-dealer from engaging in
retail forex transactions altogether? Alternatively, should the
Commission prohibit a broker-dealer from engaging in retail forex
transactions other than forex transactions engaged in solely (1) to
effect the purchase or sale of a foreign security or in order to clear
or settle such purchase or sale, or (2) to facilitate distribution to
customers of monies or securities received through corporate actions
(e.g., coupons, dividends, class action settlements, and rights
offerings)

with respect to foreign securities? Should the Commission permit other
retail forex transactions that otherwise facilitate customers'
securities transactions and minimize risk exposure to customers from
changes in foreign currency rates? Do investors have adequate recourse
against broker-dealers for any misconduct related to retail forex
transactions? Would retail forex customers be harmed if broker-dealers
were unable to provide them with certain forex-related services? Which
services? What benefits might retail forex customers receive in
connection with forex-related services offered by broker-dealers, as
compared to other intermediaries? Would the benefits outweigh potential
harm?
    6. Should the Commission adopt rules modeled on the Final CFTC
Retail Forex Rule, the Final FDIC Retail Forex Rule, or the Proposed
OCC Retail Forex Rule? If so, which aspects of those rules should the
Commission consider adopting? What would be the associated costs and
benefits?
    7. Should the Commission adopt final permanent rules governing
retail forex transactions? If so, what should those rules address?
    8. Are there any requirements or prohibitions not covered in the
Final CFTC Retail Forex Rule, the Final FDIC Retail Forex Rule, or the
Proposed OCC Retail Forex Rule that the Commission should address? Do
existing Exchange Act provisions, rules and regulations thereunder, and
SRO rules governing broker-dealers appropriately protect retail forex
customers of broker-dealers? Should the Commission consider rulemaking
to address any concerns that are not adequately addressed under the
current regulatory framework?
    9. What distinctive characteristics of retail forex transactions
should the Commission take into consideration if it were to engage in
further rulemaking relating to such transactions? Are there certain
types of retail forex transactions (e.g., rolling spot transactions)
that warrant Commission rulemaking to address specific disclosure and
other investor protection concerns? \58\
---------------------------------------------------------------------------

    \58\ See, e.g., Gregory Zuckerman, Carrick Mollenkamp & Lingling
Wei, Suspicion of Forex Gouging Spreads, The Wall Street Journal
(Feb. 10, 2011) at A1 (describing allegations of overcharging of
customers by custody banks in currency trades).
---------------------------------------------------------------------------

Business Practices of Broker-Dealers Engaged in Retail Forex
Transactions

    10. What is the extent of the retail forex business currently
conducted by broker-dealers? Does the retail forex business currently
conducted by broker-dealers consist solely or primarily of forex
transactions to facilitate customers' securities transactions and
minimize risk exposure to customers from changes in foreign currency
rates? In general, what proportion of the retail forex business
currently conducted by broker-dealers do such transactions account for?
Please provide as comprehensive of a description as possible of the
retail forex activities of broker-dealers.
    11. For what other reasons do broker-dealers engage in retail forex
transactions and what proportion of the retail forex business currently
conducted by broker-dealers do such transactions account for? What
benefits do these transactions provide to customers? What risks do
customers face by engaging in such transactions?
    12. Provide estimates of the absolute size of the retail forex
business (in both dollar amounts and numbers of transactions) conducted
by the broker-dealer. What does this business represent as an estimated
percent of the broker-dealer's total business? As an estimated percent
of its total forex business?
    13. What is the estimated absolute size of the retail forex
business (in both dollar amounts and numbers of transactions) conducted
by broker-dealers overall? What does this business represent as a
percent of their total business? As a percent of their total forex
business?
    14. What types of customers engage in retail forex transactions,
including rolling spot forex transactions?
    15. Is the existing regulatory framework for retail forex business
as currently conducted by broker-dealers consistent with the protection
of investors, the maintenance of fair, orderly, and efficient markets,
and the facilitation of capital formation?
    16. What disclosures do broker-dealers provide to their customers
regarding forex transactions that are conducted to facilitate
settlement of securities transactions? What disclosures do broker-
dealers provide to customers regarding forex transactions that are
conducted for other purposes (e.g., at the customer's request to hedge
against currency exchange risk exposure associated with securities
transactions, or to engage in speculative activity)? Do broker-dealers
adequately and fully disclose the risks associated with forex trading?
Do broker-dealers provide information to customers regarding pricing of
forex transactions (e.g., pricing methodology, exchange rates for
foreign currencies, how the price was calculated)? If so, is this
information provided in advance of or following the forex transactions?
    17. On what basis do broker-dealers price retail forex
transactions? For example, do broker-dealers use the end-of-day
currency exchange rate or some other benchmark? Do broker-dealers
maintain policies and procedures that govern how forex transactions are
handled and priced for retail forex customers? If broker-dealers do not
provide pricing information to retail customers, what documentation
does the broker-dealer maintain to demonstrate the price provided in
retail forex transactions?
    18. Are transaction-time records for retail forex transactions
currently created and provided to retail customers? If not, what would
be the cost to create transaction-time records for retail forex
transactions? What would be the cost to report to customers the
transaction time and/or the source or basis for the currency exchange
rate provided on retail forex transactions?
    19. For broker-dealers that provide custody services to retail
customers, please describe any retail forex business conducted with
respect to these custody services. What disclosures are provided to
retail customers in connection with custody services? What pricing
information is provided to retail customers in connection with forex
transactions conducted in relation to custody services (e.g., pricing
methodology, exchange rates for foreign currencies, how the price was
calculated)? If pricing information is provided, is this information
provided in advance of or following the forex transactions? On what
basis do broker-dealers price retail forex transactions conducted in
connection with custody services? Do broker-dealers maintain policies
and procedures that govern how forex transactions are handled and
priced in connection with custody services for retail forex customers?
If broker-dealers do not provide pricing information to retail
customers in connection with their custody business, what documentation
do broker-dealers maintain to demonstrate to examiners the price
provided in retail forex transactions?
    20. Do broker-dealers provide retail customers alternatives for
obtaining prevailing prices on retail forex transactions? For example,
do broker-dealers inform customers that the customer can choose whether
the broker-dealers will handle retail forex transactions at rates set
under a ``standing instruction'' (i.e., non-negotiated trades, where a
customer provides the broker-dealer discretion with respect to handling
the forex transaction) or as a negotiated trade? Where a broker-dealer
provides a

``standing instruction'' process for customers, what methods are used
to determine the appropriate exchange rate? Do retail customers receive
the interbank rate or some other rate?
    21. What conflicts of interest exist in connection with broker-
dealers handling and pricing of retail forex transactions? How do
broker-dealers manage these conflicts of interest? Do broker-dealers
disclose when they are acting as a counterparty to a forex transaction
with a retail customer?
    22. What compensation structures do broker-dealers apply to retail
forex transactions (e.g., per trade commissions, spreads, both)? Do
broker-dealers charge retail forex customers rolling fees or additional
transaction fees, such as maintenance charges, software licensing fees,
commissions paid to introducing brokers or other third-party service
providers? Are there breakpoints offered to retail customers based on,
for example, volume or number of trades? If so, are the breakpoints
available to all retail customers?
    23. What fees are charged by broker-dealers for each type of retail
forex trade? What is the prevailing market rate for retail forex
transactions? How does this differ from the prevailing market rate for
forex transactions with ECPs? Does the prevailing market rate differ
for standing instruction fees and negotiated trade fees?
    24. Do broker-dealers disclose all compensation charged to retail
customers? At what point during the customer relationship are
compensation disclosures made (e.g., prior to any forex transactions,
following a forex transaction)? What is the scope and breadth of those
disclosures? Should the Commission consider rules that would expand
broker-dealers' disclosure obligations?
    25. In light of the authority provided under section 742 of the
Dodd-Frank Act for the Commission to consider any other standards or
requirements in connection with retail forex transactions that it
determines to be necessary, when a broker-dealer solicits business for
and introduces customers to a forex dealer, what due diligence does the
broker-dealer conduct about the forex dealer? What policies and
procedures do broker-dealers have in place, if any, regarding
supervision of unregistered solicitors that introduce forex customers
to the broker-dealer and that are employees or agents of the broker-
dealer?
    26. What policies and procedures do broker-dealers have in place
regarding advertisements and marketing materials related to forex
services offered to retail customers?
    27. Do broker-dealers provide information to customers regarding
access to the interbank currency market?
    28. What disclosures do broker-dealers make to retail customers
regarding the performance and accuracy (including slippage rates) of
electronic trading platforms or software sold or licensed by or through
the firm to customers in connection with forex trading?
    29. What information do retail customers believe is important for
them to receive from broker-dealers regarding their forex transactions?
    30. What business conduct concerns do retail customers have
regarding the manner in which their broker-dealers handle and price
forex transactions?
    31. Do broker-dealers provide structured products to retail
customers that require forex transactions at maturity? In connection
with these types of products, how are the foreign exchange conversion
fees calculated and disclosed? Is the cost of the conversion embedded
in the transaction itself, or must investors pay additional fees for
conversion?
    32. What alternatives for handling forex transactions outside of
broker-dealers are available to retail investors? Would a transition of
retail forex business out of broker-dealers be efficient or costly from
the standpoint of customers?

IV. Other Matters

    The Administrative Procedure Act generally requires an agency to
publish notice of a proposed rulemaking in the Federal Register.\59\
This requirement does not apply, however, if the agency ``for good
cause finds * * * that notice and public procedure are impracticable,
unnecessary, or contrary to the public interest.'' \60\ Further, the
Administrative Procedure Act also generally requires that an agency
publish an adopted rule in the Federal Register 30 days before it
becomes effective.\61\ This requirement, however, does not apply if the
agency finds good cause for making the rule effective sooner.\62\ The
Commission, for the reasons discussed above and below, finds that
notice and solicitation of comment before the effective date of Rule
15b12-1T is impracticable, unnecessary, and contrary to the public
interest.\63\
---------------------------------------------------------------------------

    \59\ See 5 U.S.C. 553(b).
    \60\ Id.
    \61\ See 5 U.S.C. 553(d).
    \62\ Id.
    \63\ This finding also satisfies the requirements of 5 U.S.C.
808(2), allowing the rules to become effective notwithstanding the
requirement of 5 U.S.C. 801 (if a federal agency finds that notice
and public comment are ``impractical, unnecessary or contrary to the
public interest,'' a rule ``shall take effect at such time as the
federal agency promulgating the rule determines'').
---------------------------------------------------------------------------

    It was not until mid-June 2011 that market participants first
informed the Commission of a possible disruption of a potentially
important forex service provided by broker-dealers to retail investors
if the Commission did not act swiftly to adopt a rule allowing retail
forex transactions by July 16, 2011, the effective date of section 742
of the Dodd-Frank Act.\64\ As noted above, one representative of
certain market participants stated that ``it would expose both broker-
dealers and their retail customers to needless operational, price,
credit and other risks if the [Commission did] not allow broker-dealers
to engage in foreign exchange activity that is ancillary to the broker-
dealer's ordinary securities execution, clearing, settlement and
booking activity.'' \65\ The Commission believes that Congress, in
enacting section 742 of the Dodd-Frank Act, may not have intended to
prohibit certain types of foreign exchange activity, which might be
beneficial to retail investors. To allow the existing regulatory
framework for retail forex transactions to continue for a defined
period, to avoid potentially unintended consequences from broker-
dealers immediately discontinuing their retail forex business, and to
provide the Commission sufficient time to determine the appropriate
regulatory framework regarding retail forex transactions, the
Commission is adopting on an interim final temporary basis Rule 15b12-
1T. The Commission does not intend to create new regulatory obligations
for broker-dealers in adopting this interim final temporary rule. The
Commission further emphasizes that it is requesting comment on all
aspects of the rule. The Commission will carefully consider the
comments it receives.
---------------------------------------------------------------------------

    \64\ See Morgan Lewis Memo, supra note 15.
    \65\ Id.
---------------------------------------------------------------------------

V. Paperwork Reduction Act

    The Commission notes that interim final temporary Rule 15b12-1T
does not create new regulatory obligations for broker-dealers, and
therefore does not impose any new ``collections of information'' within
the meaning of the Paperwork Reduction Act of 1995 (``PRA''),\66\ nor
does it create any new filing, reporting, recordkeeping, or disclosure
reporting requirements for broker-dealers that are or plan to be
engaged in a retail forex business.

Accordingly, the Commission did not submit the interim final temporary
rule to the Office of Management and Budget for review in accordance
with the PRA. The Commission requests comment on its conclusion that
there are no collections of information.
---------------------------------------------------------------------------

    \66\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

VI. Economic Analysis

A. Introduction

    Exchange Act section 23(a)(2) requires the Commission, when
adopting rules under the Exchange Act, to consider the impact that any
new rule would have on competition, and prohibits the Commission from
adopting any rule that would impose a burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Exchange
Act. Furthermore, section 2(b) of the Securities Act of 1933 and
Exchange Act section 3(f) require the Commission, when engaging in
rulemaking where it is required to consider or determine whether an
action is necessary or appropriate in the public interest, to also
consider, in addition to the protection of investors, whether the
action will promote efficiency, competition, and capital formation.
    As noted above, section 742(c) of the Dodd-Frank Act amended the
CEA to prohibit broker-dealers from engaging in retail forex
transactions after July 16, 2011, absent rulemaking by the Commission
to allow such transactions. If there is no such rulemaking in place,
then certain transactions that may be considered beneficial to retail
investors, such as hedging transactions and securities conversion
trades that take more than two days to settle, may no longer be
conducted by broker-dealers. Retail investors who transact in foreign
securities through a broker-dealer may find it difficult to minimize
their currency risk exposure if risk-minimizing hedging transactions
are moved outside the broker-dealer.
    The Commission is adopting interim final temporary Rule 15b12-1T to
allow broker-dealers to engage in a retail forex business for one year.
This rule keeps in place the regulatory framework that currently exists
for broker-dealers, and preserves the ability of broker-dealers to
provide, among other services, hedging and conversion trades, to retail
investors while the Commission considers what further appropriate steps
to take, if any.

B. Benefits and Impact on Efficiency, Competition, and Capital
Formation

    Rule 15b12-1T is intended to minimize market disruptions that may
occur when section 724(c) of the Dodd-Frank Act goes into effect.
Absent rulemaking by the Commission, broker-dealers would be required
to exit the retail forex business. Consequently, retail customers who
transact with a broker-dealer for their foreign investments may need to
find another service provider for their foreign exchange transactions,
which could interrupt the customers' ability to trade in forex,
depending on the availability of retail forex-related services outside
of broker-dealers.
    The interim final temporary rule preserves retail customers' access
to the forex markets through broker-dealers. To the extent that this
provides hedging opportunities for foreign investments or otherwise
promotes an efficient investment opportunity set by, for example,
permitting the continued use of forex in connection with clearing
trades in foreign securities, economic benefits accrue to retail
investors, assuming that no close substitutes exist or that retail
access to forex is not easily available elsewhere.
    Furthermore, by preserving a channel for retail customers to access
forex transactions, the interim final temporary rule prevents any loss
of competition in the retail forex space that could result if broker-
dealers were required to exit the business. Potential effects of
reduced competition include, but are not limited to, higher customer
fees for retail forex transactions charged by remaining service
providers, as well as reduced availability of forex services to retail
customers if customers no longer have access to these transactions
through broker-dealers.

C. Costs and Impact on Efficiency, Competition, and Capital Formation

    Because Rule 15b12-1T preserves the regulatory regime that is in
place prior to the effective date of section 742(c) of the Dodd-Frank
Act, the rule imposes no new regulatory burdens beyond those that
already exist for broker-dealers engaged in a retail forex business.
The Commission recognizes, however, that broker-dealers will face
regulatory costs and requirements associated with operating in the
retail forex market, which are costs and requirements that they already
shoulder from doing business. These include costs related to
disclosure, recordkeeping and documentation, capital and margin,
reporting, and business conduct. For example, a broker-dealer that
presently engages in forex transactions with retail customers incurs
costs associated with establishing, maintaining, and implementing
policies and procedures to comply with regulatory requirements;
preparing disclosure documents; establishing and maintaining forex-
related business records; and preparing filings with the Commission,
which may include legal and accounting fees.
    As discussed above, the Commission is aware of potentially abusive
practices that may be occurring in the retail forex market. To the
extent that such practices continue, for example, lack of disclosure
about fees and forex pricing, or insufficient capital or margin
requirements, the retail forex market may bear costs associated with
the inefficient provision of retail forex services. The Commission
believes, however, that the cost of market disruption that may occur if
the Commission does not promulgate the interim final temporary rule is
greater than the cost of maintaining the current regulatory regime
while the Commission seeks comment and evaluates whether a more
comprehensive regulatory regime is necessary.
    Because the regulatory requirements for broker-dealers operating in
the retail forex market will remain unchanged, Rule 15b12-1T will
impose no new burden on competition. Similarly, since the rule
preserves an existing regulatory structure, the Commission does not
expect any potential impairment of the capital formation process.
Finally, because the rule allows hedging transactions, securities
conversions, and other transactions that allow investors to continue to
have access to these vehicles, the Commission believes that the interim
temporary final rule will promote efficiency.

VII. Regulatory Flexibility Certification

    The Commission hereby certifies that pursuant to 5 U.S.C. 605(b)
the interim final temporary rule contained in this release will not
have a significant economic impact on a substantial number of small
entities. The interim final temporary rule applies to broker-dealers
that may engage in retail forex transactions. However, the Commission
does not intend for the interim final temporary rule to impose new
regulatory obligations, costs, or burdens on such broker-dealers. While
the rule applies to broker-dealers that may be small businesses, any
costs or regulatory burdens incurred as a result of the rule are the
same as those incurred by small broker-dealers prior to the effective
date of section 742 of the Dodd-Frank Act. Broker-dealers have already
incurred those costs and regulatory burdens through establishing
compliance with the rules adopted by the Commission under the Exchange
Act applicable to broker-dealers. Further, the interim final temporary
rule does not change the burdens on small broker-dealers relative to
large broker-dealers. Accordingly, the

interim final temporary rule should not have a significant economic
impact on a substantial number of small entities. The Commission
requests comment on its conclusion that Rule 15b12-1T should not have a
significant economic impact on a substantial number of small entities.

VIII. Statutory Basis and Text of Amendments

    The Commission is adopting Exchange Act Rule 15b12-1T pursuant to
section 2(c)(2) of the Commodity Exchange Act, as well as pursuant to
the Exchange Act, as amended.

List of Subjects in 17 CFR Part 240

    Brokers, Consumer protection, Currency, Reporting and recordkeeping
requirements.

    In accordance with the foregoing, the Securities and Exchange
Commission is amending Title 17, chapter II of the Code of Federal
Regulations as follows:

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
1. The general authority citation for part 240 is revised to read as
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i,
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 78p, 78q,
78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 80a-37,
80b-3, 80b-4, 80b-11, and 7201 et. seq.; 18 U.S.C. 1350; 12 U.S.C.
5221(e)(3); and 7 U.S.C. 2(c)(2)(E), unless otherwise noted.
* * * * *

0
2. Add Sec.  240.15b12-1T to read as follows:

Sec.  240.15b12-1T  Brokers or dealers engaged in a retail forex
business.

    (a) Definitions. In addition to the definitions in this section,
the following terms have the same meaning as in the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.): ``broker,'' ``dealer,''
``person,'' ``registered broker or dealer,'' and ``self-regulatory
organization.''
    (1) Act means the Securities Exchange Act of 1934 (15 U.S.C. 78a et
seq.).
    (2) Retail forex business means engaging in one or more retail
forex transactions with the intent to derive income from those
transactions, either directly or indirectly.
    (3) Retail forex transaction means any account, agreement, contract
or transaction in foreign currency that is offered or entered into by a
broker or dealer with a person that is not an eligible contract
participant as defined in section 1a(18) of the Commodity Exchange Act
(7 U.S.C. 1a(18)) and that is:
    (i) A contract of sale of a commodity for future delivery or an
option on such a contract;
    (ii) An option, other than an option executed or traded on a
national securities exchange registered pursuant to section 6(a) of the
Act (15 U.S.C. 78(f)(a)); or
    (iii) Offered, or entered into, on a leveraged or margined basis,
or financed by a broker or dealer or any person acting in concert with
the broker or dealer on a similar basis, other than:
    (A) A security that is not a security futures product as defined in
section 1a(47) of the Commodity Exchange Act (7 U.S.C. 1a(47)); or
    (B) A contract of sale that:
    (1) Results in actual delivery within two days; or
    (2) Creates an enforceable obligation to deliver between a seller
and buyer that have the ability to deliver and accept delivery,
respectively, in connection with their line of business.
    (b) Any registered broker or dealer may engage in a retail forex
business provided that such broker or dealer complies with the Act, the
rules and regulations thereunder, and the rules of the self-regulatory
organization(s) of which the broker or dealer is a member, including,
but not limited to, the disclosure, recordkeeping, capital and margin,
reporting, business conduct, and documentation requirements, insofar as
they are applicable to retail forex transactions.
    (c) Any registered broker or dealer that is engaged in a retail
forex business in compliance with paragraph (b) of this section on or
after the effective date of this section shall be deemed, until the
date specified in paragraph (d) of this section, to be acting pursuant
to a rule or regulation described in section 2(c)(2)(E)(ii)(I) of the
Commodity Exchange Act (7 U.S.C. 2(c)(2)(E)(ii)(I)).
    (d) This section will expire and no longer be effective on July 16,
2012.

    By the Commission.

    Dated: July 13, 2011.
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-18009 Filed 7-13-11; 4:15 pm]
BILLING CODE 8011-01-P


[Federal Register Volume 77, Number 201 (Wednesday, October 17, 2012)]
[Notices]
[Pages 63829-63831]
[FR Doc No: 2012-25426]

-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OPP-2010-0014; FRL-9365-9]

Product Cancellation Order for Certain Pesticide Registrations

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: This notice announces EPA's order for the cancellations,
voluntarily requested by the registrants and accepted by the Agency, of
the products listed in Table 1 of Unit II., pursuant to the Federal
Insecticide, Fungicide, and Rodenticide Act (FIFRA). This cancellation
order follows a February 29, 2012 Federal Register Notice of Receipt of
Requests from the registrants listed in Table 2 of Unit II. to
voluntarily cancel these product registrations. In the February 29,
2012 notice, EPA indicated that it would issue an order implementing
the cancellations, unless the Agency received substantive comments
within the 180 day comment period that would merit its further review
of these requests, or unless the registrants withdrew their requests.
The Agency did not receive any comments on the notice. Further, the
registrants did not withdraw their requests. Accordingly, EPA hereby
issues in this notice a cancellation order granting the requested
cancellations. Any distribution, sale, or use of the products subject
to this cancellation order is permitted only in accordance with the
terms of this order, including any existing stocks provisions.

DATES: The cancellations are effective October 17, 2012.

FOR FURTHER INFORMATION CONTACT: John W. Pates, Jr., Pesticide Re-
evaluation Division (7508P), Office of Pesticide Programs,
Environmental Protection Agency, 1200 Pennsylvania Ave., NW.,
Washington, DC 20460-0001; telephone number:<PHONE_NUMBER>; email
address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    This action is directed to the public in general, and may be of
interest to a wide range of stakeholders including environmental, human
health, and agricultural advocates; the chemical industry; pesticide
users; and members of the public interested in the sale, distribution,
or use of pesticides. Since others also may be interested, the Agency
has not attempted to describe all the specific entities that may be
affected by this action.

B. How can I get copies of this document and other related information?

    The docket for this action, identified by docket identification
(ID) number EPA-HQ-OPP-2010-0014 is available at http://www.regulations.gov or at the Office of Pesticide Programs Regulatory
Public Docket (OPP Docket) in the Environmental Protection Agency
Docket Center (EPA/DC), EPA West Bldg., Rm. 3334, 1301 Constitution
Ave., NW., Washington, DC 20460-0001. The Public Reading Room is open
from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal
holidays. The telephone number for the Public Reading Room is (202)
566-1744, and the telephone number for the OPP Docket is (703) 305-
5805. Please review the visitor instructions and additional information
about the docket available at http://www.epa.gov/dockets.

II. What action is the agency taking?

    This notice announces the cancellation, as requested by
registrants, of 25 products registered under FIFRA section 3. These
registrations are listed in sequence by registration number in Table 1
of this unit.

                     Table 1--Product Cancellations
------------------------------------------------------------------------
     EPA registration No.          Product name        Chemical name
------------------------------------------------------------------------
000577-00539..................  Semi-transparent   Folpet, Tributyltin
                                 Wood               oxide.
                                 Preservative
                                 Stain A14T5.
000577-00544..................  Cuprinol Stain     Tributyltin oxide,
                                 and Wood           Chlorothalonil.
                                 Preservative.
000707-00120..................  Kathon 4200        Octhilinone.
                                 Fabric
                                 Mildewcide.
001448-00315..................  B-7-16...........  Poly(oxy-1,2-
                                                    ethanediyl(dimethyli
                                                    mino)-1,2-
                                                    ethanediyl(dimethyli
                                                    mino)-1,2-ethanediyl
                                                    dichloride).
001529-00029..................  Nuosept 635-W      Alkyl amine
                                 Preservative.      hydrochloride.
001529-00030..................  Fungitrol 158      Alkyl* amine
                                 Fungicide.         hydrochloride *(as
                                                    in fatty acids of
                                                    coconut oil),
                                                    Tributyltin
                                                    benzoate.
002829-00127..................  Vinyzene IT-3000   Octhilinone.
                                 DIDP.
002829-00139..................  Vinyzene DP 7000.  Triclosan.
002829-00145..................  Vinyzene SB-30...  Triclosan.
004822-00429..................  Waste Minders      Triclosan.
                                 with Stangard/4.
007313-00006..................  Olympic Clear      Tributyltin oxide,
                                 Wood               Folpet.
                                 Preservative.
007364-00022..................  Algimycin Winter   Poly(oxy-1,2-
                                 Algicide.          ethanediyl(dimethyli
                                                    mino)-1,2-
                                                    ethanediyl(dimethyli
                                                    mino)-1,2-ethanediyl
                                                    dichloride).
007364-00093..................  Poolcare Algastop  Poly(oxy-1,2-
                                                    ethanediyl(dimethyli
                                                    mino)-1,2-
                                                    ethanediyl(dimethyli
                                                    mino)-1,2-ethanediyl
                                                    dichloride).
047371-00084..................  Formulation HL-    Alkyl* dimethyl
                                 138D.              benzyl ammonium
                                                    chloride *(60%C14,
                                                    30%C16, 5%C18,
                                                    5%C12), Tributyltin
                                                    oxide.
053883-00259..................  Termini 9.1 SC...  Fipronil.
CO080003......................  Endura Fungicide.  Boscalid.
MD080002......................  Ridomil Gold       Copper hydroxide
                                 Copper.           D-Alanine, N-(2,6-
                                                    dimethylphenyl)-N-
                                                    (methoxyacetyl)-,
                                                    methyl ester.
OR000023......................  Daconil SDG......  Chlorothalonil.
WA000003......................  Daconil SDG......  Chlorothalonil.
WA030013......................  Thiodan 3 EC       Endosulfan.
                                 Insecticide.
WA030017......................  Thionex 50W        Endosulfan.
                                 Insecticide.
WA030018......................  Thiodan 3 EC       Endosulfan.
                                 Insecticide.
WA060006......................  Outlook Herbicide  dimethenamide-P.
WA060018......................  Prowl H2O          Pendemethalin.
                                 Herbicide.
WA860012......................  Furadan 15 G       Carbofuran.
                                 Insecticide-
                                 Nemanticide.
------------------------------------------------------------------------

    Table 2 of this unit includes the names and addresses of record for
all registrants of the products in Table 1 of this unit, in sequence by
EPA company number. This number corresponds to the first part of the
EPA registration numbers of the products listed in Table 1 of this
unit.

               Table 2--Registrants of Cancelled Products
------------------------------------------------------------------------
            EPA company No.                  Company name and address
------------------------------------------------------------------------
577....................................  The Sherwin-Williams Co., 101
                                          Prospect Avenue, Cleveland, OH
                                          44115.
707....................................  Rohm & Haas Co., 100
                                          Independence Mall, West
                                          Philadelphia, PA 19106.
1448...................................  Buckman Laboratories Inc., 1256
                                          North Mclean Boulevard,
                                          Memphis, TN 38108.
1529...................................  International Specialty
                                          Products, 1361 Alps Road,
                                          Wayne, NJ 07470.
2829...................................  Rohm and Haas Company, 100 S
                                          Independence Mall West, STE
                                          1A, Philadelphia, PA 19106.
4822...................................  S.C. Johnson & Son Inc., 1525
                                          Howe Street, Racine, WI 53403.
7313...................................  PPG Architectural Finishes
                                          Inc., 1 PPG Place, Pittsburgh,
                                          PA 15272.
7364...................................  GLB Pool & Spa, W175 N11163
                                          Stonewood Drive, Suite 234,
                                          Germantown, WI 53022.
47371..................................  H & S Chemical Division, 90
                                          Boroline Road, Allendale, NJ
                                          07401.
53883..................................  Control Solutions Inc., 5903
                                          Genoa-Red Bluff Road,
                                          Pasadena, TX 77507.
MD080002...............................  Syngenta Crop Protection, LLC,
                                          D/B/A Syngenta Crop
                                          Protection, Inc., P.O. Box
                                          18300, Greensboro, NC 27419-
                                          8300.
OR000023; WA000003.....................  GB Biosciences Corporation, 410
                                          Swing Road, P.O. Box 18300,
                                          Greensboro, NC 27419-5458.
WA030013; WA030017; WA030018...........  Makhteshim-Agan of North
                                          America, Inc., 3120 Highwoods
                                          Blvd., Suite 100, Raleigh, NC
                                          27604.
WA060006; WA060018; CO080003...........  BASF Corporation, Agricultural
                                          Products, 26 Davis Drive, P.O.
                                          Box 13528, Research Triangle
                                          Park, NC 27709-3528.
WA860012...............................  FMC Corp., Agricultural
                                          Products Group, 1735 Market,
                                          Room 1978, Philadelphia, PA
                                          19103.
------------------------------------------------------------------------

III. Summary of Public Comments Received and Agency Response to
Comments

    During the public comment period provided, EPA received no comments
in response to the February 29, 2012 Federal Register notice announcing
the Agency's receipt of the requests for voluntary cancellations of
products listed in Table 1 of Unit II. In addition, five pesticide
products listed in the February 29, 2012 Federal Register notice
announcing the requests for voluntary cancellations were previously
cancelled under separate cancellation orders. EPA Reg. Nos. 000322-
00008,<PHONE_NUMBER>9,<PHONE_NUMBER>1,<PHONE_NUMBER>7, and<PHONE_NUMBER>4 were
previously canceled under separate Federal Register Notices. The
following table lists each product by FRL No. and date of cancellation.

          Table 3--Products Cancelled in Previous Publications
------------------------------------------------------------------------
                                                       Federal Register
      EPA registration No.            Docket No.         date and No.
------------------------------------------------------------------------
000322-00008....................  EPA-HQ-OPP-2012-04  7/27/12 (77 FR
008177-00071....................   89.                 44229) (FRL-9355-
035975-00004....................                       7)
001677-00199....................  EPA-HQ-OPP-2012-00  8/31/11 (76 FR
                                   14.                 54230) (FRL-8885-
                                                       6)
010807-00447 *..................  EPA-HQ-OPP-2009-10  2/15/12 (77 FR
                                   17.                 12299) (FRL-9336-
                                                       2)
------------------------------------------------------------------------
* Note: EPA Reg. No.<PHONE_NUMBER>7 was corrected on 8/31/12 (77 FR 53198)
  (FRL-9357-6) to include this number in the Federal Register instead of
<PHONE_NUMBER>8 that was made in error.

IV. Cancellation Order

    Pursuant to FIFRA section 6(f), EPA hereby approves the requested
cancellations of the registrations identified in Table 1 of Unit II.
Accordingly, the Agency hereby orders that the product registrations
identified in Table 1 of Unit II are canceled. The effective date of
the cancellations that are the subject of this notice is October 17,
2012. Any distribution, sale, or use of existing stocks of the products
identified in Table 1 of Unit II. in a manner inconsistent with any of
the provisions for disposition of existing stocks set forth in Unit VI.
below, will be a violation of FIFRA.

V. What is the agency's authority for taking this action?

    Section 6(f)(1) of FIFRA provides that a registrant of a pesticide
product may at any time request that any of its pesticide registrations
be canceled or amended to terminate one or more uses. FIFRA further
provides that, before acting on the request, EPA must publish a notice
of receipt of any such request in the Federal Register. Thereafter,
following the public comment period, the EPA Administrator may approve
such a request. The notice of receipt for this action was published for
comment in the Federal Register issue of February 29, 2012 (77 FR
12299) (FRL-9336-2). The comment period closed on August 27, 2012.

VI. Provisions for Disposition of Existing Stocks

    Existing stocks are those stocks of registered pesticide products
which are currently in the United States and which were packaged,
labeled, and released for shipment prior to the effective date of the
cancellation action. The existing stocks provisions for the products
subject to this order are as follows.

A. Registrations Listed in Table 1 of Unit II Except for Registration
No. WA860012

    The registrants may continue to sell and distribute existing stocks
of products listed in Table 1 of Unit II., except for Furadan 15 G
Insecticide Nemanticide, with Registration No. WA860012, until October
17, 2013, which is 1 year after the publication of

the Cancellation Order in the Federal Register. Thereafter, the
registrants are prohibited from selling or distributing products listed
in Table 1, except for export in accordance with FIFRA section 17, or
proper disposal. Persons other than the registrants may sell,
distribute, or use existing stocks of products listed in Table 1 of
Unit II., except for Furadan 15 G Insecticide Nemanticide, with
Registration No. WA860012, until existing stocks are exhausted,
provided that such sale, distribution, or use is consistent with the
terms of the previously approved labeling on, or that accompanied, the
canceled products.

B. Registration No. WA860012

    The effective date of cancellation of Furadan 15 G Insecticide-
Nemanticide, Registration No. WA860012 is October 17, 2012. Continued
sale and distribution of existing stocks of this product is no longer
allowed. Registrants are prohibited from selling and/or distributing
this product except for export consistent with FIFRA section 7 or for
proper disposal.

List of Subjects

    Environmental protection, Pesticides and pests.

    Dated: October 5, 2012.
Richard P. Keigwin, Jr.,
Director, Pesticide Re-evaluation Division, Office of Pesticide
Programs.
[FR Doc. 2012-25426 Filed 10-16-12; 8:45 am]
BILLING CODE 6560-50-P