[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR31.11]

[Page 359-366]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 31_LEVERAGE TRANSACTIONS--Table of Contents
 
Sec.  31.11  Disclosure.

    (a) Except as provided in paragraph (i) of this section, prior to 
the opening of a leverage customer account, a leverage transaction 
merchant soliciting an order for any leverage contract shall furnish to 
the prospective leverage customer a dated Disclosure Document and 
receive from such prospective leverage customer a signed and dated copy 
of the risk disclosure statement contained in such document which 
acknowledges that the customer received and understood the Disclosure 
Document. The Disclosure Document shall contain then current information 
with respect to the leverage contract being offered by the person 
soliciting the order therefor, and shall contain:
    (1) The following bold-faced risk disclosure statement in at least 
ten-point type on the first page of the Disclosure Document:

    BECAUSE OF THE UNPREDICTABLE NATURE OF THE PRICES OF PRECIOUS AND 
OTHER METALS, LEVERAGE CONTRACTS INVOLVE A HIGH DEGREE OF RISK AND ARE 
NOT SUITABLE FOR MANY MEMBERS OF THE PUBLIC. THE LEVERAGE CUSTOMER 
SHOULD BE AWARE THAT THE VALUE OF A LEVERAGE CONTRACT ORIGINALLY 
PURCHASED BY A CUSTOMER (``LONG LEVERAGE CONTRACT'') MUST EXCEED THE 
BREAK-EVEN PRICE BEFORE IT IS POSSIBLE TO REALIZE A PROFIT ON THE 
CONTRACT. SIMILARLY, THE VALUE OF A LEVERAGE CONTRACT ORIGINALLY SOLD BY 
A LEVERAGE CUSTOMER (``SHORT LEVERAGE CONTRACT'') MUST BE LESS THAN THE 
BREAK-EVEN PRICE BEFORE IT IS POSSIBLE TO REALIZE A PROFIT ON THE 
CONTRACT. A FILLED IN VERSION OF THE CUSTOMER CONFIRMATION STATEMENT 
REFLECTING A SINGLE TRANSACTION IN A REPRESENTATIVE LEVERAGE COMMODITY

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FOR A LONG LEVERAGE TRANSACTION AND A SHORT LEVERAGE TRANSACTION WHICH 
INCLUDES A FORMULA FOR CALCULATING AN ESTIMATE OF THE LEVERAGE 
CONTRACT'S BREAK-EVEN VALUE IS ATTACHED TO THIS DOCUMENT. THIS IS IN THE 
SAME FORMAT AS THE CONFIRMATION STATEMENT YOU WILL RECEIVE TO CONFIRM 
YOUR ACTUAL TRANSACTION. BE CERTAIN THAT YOU UNDERSTAND THE INFORMATION 
PROVIDED BY THIS STATEMENT BEFORE YOU ENTER INTO A LEVERAGE TRANSACTION.
    YOU SHOULD ALSO UNDERSTAND THAT THE CHARGES FOR SIMILAR LEVERAGE 
CONTRACTS WHICH ARE REFLECTED ON THE FILLED-IN CONFIRMATION STATEMENT AS 
ESTIMATED MAY VARY AMONG LEVERAGE FIRMS, AND THAT SUCH FIRMS HAVE 
COMPLETE DISCRETION IN SETTING THEIR CHARGES AND THE PRICE OF THE 
LEVERAGE CONTRACTS THEY OFFER. PRIOR TO ENTERING INTO ANY LEVERAGE 
CONTRACT A PROSPECTIVE LEVERAGE CUSTOMER SHOULD COMPARE THE CHARGES AND 
PRICES OF SUCH FIRMS WITH EACH OTHER AND WITH THE COMMISSIONS FOR AND 
PRICES OF FUTURES CONTRACTS TRADED ON DESIGNATED EXCHANGES.
    YOU SHOULD ALSO BE AWARE THAT YOU ARE SUBJECT TO MARGIN CALLS. THE 
LEVERAGE FIRM RESERVES THE RIGHT TO LIQUIDATE YOUR POSITION IF YOU DO 
NOT RESPOND TO A MARGIN CALL WITHIN THE TIME SPECIFIED IN YOUR LEVERAGE 
AGREEMENT. IN ANY EVENT, IF THE EQUITY IN YOUR CONTRACT AT ANY TIME 
FALLS BELOW 50% OF THE MINIMUM MARGIN, YOUR CONTRACT MAY BE LIQUIDATED 
WITHOUT PRIOR NOTICE. YOU MUST, HOWEVER, BE NOTIFIED OF LIQUIDATION 
WITHIN NO MORE THAN 24 HOURS THEREAFTER AND PERMITTED TO REESTABLISH 
YOUR CONTRACT FOR A PERIOD OF 5 BUSINESS DAYS. LEVERAGE CONTRACTS 
PURCHASED FROM A LEVERAGE TRANSACTION MERCHANT ARE RE-ESTABLISHED AT THE 
THEN PREVAILING BID PRICE AND LEVERAGE CONTRACTS SOLD TO A LEVERAGE 
TRANSACTION MERCHANT ARE RE-ESTABLISHED AT THE THEN PREVAILING ASK PRICE 
WITHOUT COMMISSIONS, FEES OR OTHER MARK-UPS OR CHARGES UNDER RULES SET 
BY THE COMMODITY FUTURES TRADING COMMISSION, AS MORE COMPLETELY 
DESCRIBED IN THIS DISCLOSURE DOCUMENT. IN CASE OF LIQUIDATION, ALL OF 
YOUR FUNDS MAY BE USED TO SETTLE THE DEFICIT IN THE ACCOUNT, AND YOU MAY 
BE LIABLE FOR ADDITIONAL FUNDS TO SETTLE IN FULL.
    IF YOU ARE A FIRST-TIME LEVERAGE CUSTOMER, YOU MAY RESCIND YOUR 
FIRST LEVERAGE TRANSACTION SUBJECT ONLY TO ACTUAL PRICE LOSSES BUT 
OTHERWISE WITHOUT PENALTY FOR THREE BUSINESS DAYS FOLLOWING AND 
INCLUDING THE DAY OF RECEIPT OF THE CONFIRMATION.
    YOU SHOULD BE AWARE THAT IN ORDER TO REALIZE ANY VALUE FROM A LONG 
LEVERAGE CONTRACT, THE LEVERAGE TRANSACTION MERCHANT WHICH SOLD YOU THE 
LEVERAGE CONTRACT MUST REPURCHASE IT, OR YOU MUST PAY THE LEVERAGE 
TRANSACTION MERCHANT THE FULL PURCHASE PRICE FOR THE LEVERAGE CONTRACT, 
TAKE DELIVERY OF THE LEVERAGE COMMODITY, AND THEN SELL THE LEVERAGE 
COMMODITY, POSSIBLY AT A LOWER PRICE THAN THE PRICE PAID TO PURCHASE THE 
LEVERAGE COMMODITY FROM THE LEVERAGE TRANSACTION MERCHANT. YOU SHOULD 
ALSO BE AWARE THAT IN ORDER TO REALIZE ANY VALUE FROM A SHORT LEVERAGE 
CONTRACT, THE LEVERAGE TRANSACTION MERCHANT TO WHICH YOU SOLD THE 
LEVERAGE CONTRACT MUST RESELL IT TO YOU, OR YOU MUST ACQUIRE THE 
LEVERAGE COMMODITY IN ORDER TO MAKE DELIVERY TO THE LEVERAGE TRANSACTION 
MERCHANT, POSSIBLY AT A HIGHER PRICE THAN THE PRICE YOU WILL RECEIVE 
FROM THE LEVERAGE TRANSACTION MERCHANT.
    THERE IS NO MARKET FOR THE LEVERAGE CONTRACT ITSELF OTHER THAN TO 
HAVE IT REPURCHASED BY OR RESOLD TO THE LEVERAGE TRANSACTION MERCHANT. A 
LEVERAGE TRANSACTION MERCHANT IS UNDER NO OBLIGATION TO OFFER TO 
REPURCHASE OR RESELL A LEVERAGE CONTRACT AT ALL TIMES, ALTHOUGH THE 
LEVERAGE TRANSACTION MERCHANT MUST OFFER TO REPURCHASE ANY LONG LEVERAGE 
CONTRACT PREVIOUSLY PURCHASED BY A LEVERAGE CUSTOMER AND MUST ALSO OFFER 
TO RESELL ANY SHORT LEVERAGE CONTRACT PREVIOUSLY SOLD BY A LEVERAGE 
CUSTOMER AT ANY TIME DURING WHICH THE LEVERAGE TRANSACTION MERCHANT IS 
OFFERING TO ENTER INTO NEW LONG OR SHORT LEVERAGE CONTRACTS WITH 
CUSTOMERS INVOLVING THE SAME LEVERAGE COMMODITY. AS NOTED ABOVE, 
HOWEVER, A LEVERAGE TRANSACTION MERCHANT HAS COMPLETE DISCRETION IN 
SETTING THE PRICE AND ANY CHARGES RELATED THERETO.
    THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE 
MERITS OF THESE LEVERAGE CONTRACTS AS AN INVESTMENT VEHICLE

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NOR UPON THE ACCURACY OR ADEQUACY OF THIS DISCLOSURE DOCUMENT. ANY 
REPRESENTATION TO THE CONTRARY IS A VIOLATION OF THE COMMODITY EXCHANGE 
ACT AND THE REGULATIONS THEREUNDER.

    (2) Immediately following the statement required by paragraph (a)(1) 
of this section, a section, captioned ``Provisions of Leverage 
Contract'' in at least ten point type, containing the terms and 
conditions of the leverage contract being offered. This information must 
be provided in the order specified in paragraphs (a)(2) (i) through (xi) 
of this section, with a clear demarcation or separation between each 
item according to the paragraph of the section to which it corresponds, 
and include:
    (i) The duration or expiration date of the leverage contract;
    (ii) The distinguishing characteristics of the contract and of the 
leverage commodity, including, in particular, those characteristics of 
the leverage commodity enumerated in Sec.  31.4(g)(1)-(4) of this part;
    (iii) A description of the following charges for each leverage 
contract:
    (A) Initial charges;
    (B) Carrying charges;
    (C) Termination charges;
    (iv) A description of the bid and ask prices of each leverage 
contract;
    (v) An explanation of the margins applicable to each leverage 
contract, including, as required, initial margins, minimum margins and 
maintenance margins;
    (vi) A description of the leverage customer's responsibilities with 
respect to margin calls, including the timing of such calls and, if 
applicable, the circumstances under which, time after which, and the 
order in which the leverage transaction merchant may, consistent with 
Sec.  31.18 liquidate a customer's position in the leverage contract;
    (vii) A description of the manner in which a leverage customer may 
seek to have a leverage contract repurchased or resold by the leverage 
transaction merchant, including an explanation of the procedure to be 
followed by the leverage transaction merchant to effect such repurchase 
or resale and the manner in which the repurchase or resale price is 
determined;
    (viii) A statement to the effect that other persons may be unwilling 
to buy from the leverage customer the leverage commodity that is 
deliverable on the leverage contract without first requiring an 
inspection or assay at the expense of the leverage customer; a statement 
to the effect that the leverage transaction merchant may be unwilling to 
accept delivery and pay for such leverage commodity without first 
requiring an inspection or assay at the expense of the leverage 
customer; and a description of any other requirements for the delivery 
of a leverage commodity by a leverage customer to a leverage transaction 
merchant in connection with a short leverage contract;
    (ix) A clear explanation of any force majeure clauses pertaining to 
each leverage contract;
    (x) A description of any material risks not included in the 
statements required by paragraph (a)(1) of this section; and
    (xi) An identification of the commercial or retail cash price series 
filed in accordance with Sec.  31.6, along with clearly specified 
premiums and discounts, if applicable, which the leverage customer or 
prospective leverage customer can use to evaluate a leverage contract 
and a widely available source from which such price quotes may be 
obtained on a timely basis.
    (3) A filled-in version of the customer Confirmation Statement in 
the format specified by the Commission for a representative single long 
leverage contract and a representative single short leverage contract 
which includes a formula which can be used to estimate the break-even 
price.
    (4)(i) The name, address of the main business office, main business 
telephone number and form of organization of the leverage transaction 
merchant. If the address of the main business office is a post office 
box number, the leverage transaction merchant must state where its books 
and records will be kept;
    (ii) The name of each principal of the leverage transaction 
merchant;
    (iii) The business background, for the five years preceding the date 
of the statement, of:
    (A) The leverage transaction merchant; and

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    (B) Each principal of the leverage transaction merchant.

The leverage transaction merchant must include in the description of the 
business background of each such person the name and main business of 
that person's employers, business associations or business ventures and 
the nature of the person's duties performed for the employers or in 
connection with the associations or ventures.
    (5)(i) A statement whether any principal of the leverage transaction 
merchant has entered into or intends to enter into long or short 
leverage contracts for his own account and, if so, whether leverage 
customers will be permitted to inspect the records of that person's 
trades; and
    (ii) If principals of the leverage transaction merchant will not 
enter into or do not intend to enter into long or short leverage 
contracts for their own account, the leverage transaction merchant must 
so state with respect to each principal.
    (6)(i) Any material administrative or civil action involving any 
activity or conduct, or related to any statute, set forth in sections 
8a(2) or 8a(3) of the Act, or any material criminal action brought 
within the five years preceding the date of the document against the 
leverage transaction merchant or any principal of the leverage 
transaction merchant; and
    (ii) If there has been no such action against any of the foregoing 
persons, the leverage transaction merchant must make a statement to that 
effect with respect to each such person.
    (b)(1) If the leverage transaction merchant knows or should know 
that the Disclosure Document is materially inaccurate or incomplete in 
any respect, it must correct that defect and must distribute the 
correction to:
    (i) All existing leverage customers within 30 calendar days after 
the date upon which the leverage transaction merchant first knows or has 
reason to know of the defect; and
    (ii) Each prospective leverage customer prior to opening an account 
for such person.

The leverage transaction merchant may furnish the correction by means of 
an amended document, a sticker on the document, a notice in a monthly 
statement or by other similar means.
    (2) The leverage transaction merchant may not use the document until 
such correction is made.
    (c) The leverage transaction merchant must date each document and 
amendment thereto as of the date it is first used.
    (d) Subject to the provisions of paragraph (b) of this section, all 
information contained in the document must be current as of the date of 
the document.
    (e)(1) The leverage transaction merchant must file with the National 
Futures Association three copies and with the Commission at its 
Washington, DC headquarters, Attn: Secretariat, one copy of the document 
for each leverage contract that it offers or that it intends to offer 
not less than 21 calendar days prior to the date the leverage 
transaction merchant first intends to furnish the document to a 
prospective leverage customer. The leverage transaction merchant must 
specify with the filing the date it first intends to deliver the 
document to a prospective leverage customer;
    (2) Subject to paragraphs (h) and (m) of this section, the leverage 
transaction merchant must file with the National Futures Association 
three copies and with the Commission at its Washington, DC headquarters, 
Attn: Secretariat, one copy of all subsequent amendments to the document 
for each leverage contract that it offers or that it intends to offer 
within 30 calendar days after the date upon which the leverage 
transaction merchant first knows or has reason to know of the defect 
requiring the amendment.
    (f) This section does not relieve a leverage transaction merchant 
from any obligation under the Act or the regulations thereunder, 
including the obligation to disclose all material information to 
existing or prospective leverage customers even if the information is 
not specifically required by this section.
    (g) If any contract term set forth in accordance with paragraph 
(a)(2) of this section provides that such term is subject to change, the 
leverage transaction merchant must ensure that this fact, the conditions 
under which the

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change may take place, and the foreseeable consequences of the change 
are clearly stated in the Disclosure Document, in describing that 
contract term.
    (h) A leverage transaction merchant must transmit a notification to 
each leverage customer within 24 hours of making any change not 
otherwise permitted under the contract terms set forth in accordance 
with paragraph (a)(2) of this section. A notification of any change in 
the interest rate charged by the leverage transaction merchant must also 
be transmitted to each leverage customer within twenty-four hours of 
each change: Provided, however, That no notification is required if the 
change in interest rate is one percent or less as compared to the rate 
charged at the prior month-end and the new interest rate is made 
available to customers by means of a toll-free telephone call, and such 
availability is set forth in the Disclosure Document. The notification 
required by this paragraph must be transmitted by first class mail or 
other, at least equivalent, means of communication.
    (i) A person soliciting or accepting an order for a leverage 
contract is not required to deliver a Disclosure Document leverage to a 
leverage customer, as required by paragraph (a) of this section, if a 
disclosure document meeting all of the requirements of this section 
previously has been delivered by the person to the leverage customer: 
Provided, however, That such a Disclosure Document must be delivered:
    (1) Upon the request of a leverage customer, or
    (2) If the previously delivered Disclosure Document has become 
outdated or has become inaccurate in any material respect.
    (j) Prior to the entry into a leverage contract, the person 
soliciting the order therefor shall inform the leverage customer or the 
prospective leverage customer, to the extent these amounts are known or 
can reasonably be approximated, of all charges for the initiation, 
carrying and termination of a leverage contract and the leverage 
transaction merchant's bid-ask spread on the leverage contract as set 
forth in paragraph (a)(2)(iii) and (a)(2)(iv), respectively, of this 
section and the margins applicable to such contracts as set forth in 
paragraph (a)(2)(v) and (a)(2)(vi) of this section.
    (k)(1) Not later than the next business day after the entry into a 
long leverage contract with a customer, each leverage transaction 
merchant shall furnish to such customer, by first-class mail or other, 
at least equivalent, means of communication, a written Confirmation 
Statement in a format specified by the Commission containing:
    (i) For a leverage customer's first leverage transaction, the 
following bold-faced statement in at least ten-point type:

    IF YOU ARE A FIRST-TIME LEVERAGE CUSTOMER, YOU MAY RESCIND YOUR 
FIRST LEVERAGE TRANSACTION SUBJECT ONLY TO ACTUAL PRICE LOSSES BUT 
OTHERWISE WITHOUT PENALTY FOR THREE BUSINESS DAYS FOLLOWING AND 
INCLUDING RECEIPT OF THIS CONFIRMATION. ACTUAL LOSSES ON A LEVERAGE 
CONTRACT PURCHASED FROM A LEVERAGE TRANSACTION MERCHANT ARE CALCULATED 
BY SUBTRACTING THE ASK PRICE OF THE LEVERAGE CONTRACT AT THE TIME OF THE 
CUSTOMER'S RESCISSION FROM THE ASK PRICE AT WHICH THE LEVERAGE CONTRACT 
WAS PURCHASED AND WHICH APPEARS ON THIS CONFIRMATION. TO RESCIND THIS 
CONTRACT SEND A TELEGRAM TO (name and address of LTM) OR YOU MAY 
TELEPHONE (name of LTM) AT (telephone number). IF YOU RESCIND BY 
TELEPHONE, YOU MUST ALSO SEND IMMEDIATE WRITTEN AFFIRMATION BY TELEGRAM, 
CERTIFIED LETTER OR BY AT LEAST EQUIVALENT MEANS TO THE ADDRESS PROVIDED 
ABOVE; and

    (ii) For every leverage transaction, the following information:
    (A) The date the leverage contract was entered into;
    (B) The transaction identification number;
    (C) The name of the leverage commodity;
    (D) The expiration date of the leverage contract;
    (E) The total cost of the leverage contracts covered in the 
Confirmation Statement, which equals the leverage transaction merchant's 
ask price in dollars per unit multiplied by the number of units 
multiplied by the number of contracts;
    (F) The total unpaid balance for this transaction;

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    (G) The total initial charges for the transaction;
    (H) The total initial margin for the transaction, in dollars and as 
a percentage of the contract price;
    (I) The total amount due (or paid) to initiate the transaction, 
which equals the total initial charges plus the total initial margin in 
dollars;
    (J) The current equity in the individual customer's account as of 
the date of this transaction, but excluding this transaction;
    (K) The total variable carrying charges to be billed each period, in 
dollars and as an annual percentage rate, based on the carrying charge 
rate prevailing at the time the contract is entered into;
    (L) The total bid/ask spread, based on prices prevailing at the time 
the contract is entered into;
    (M) The total termination charges incurred if the contract is 
repurchased, liquidated by the leverage transaction merchant or settled 
by delivery, based on charges prevailing at the time the contract is 
entered into;
    (N) Any other charges associated with terminating the transaction, 
based on charges prevailing at the time the contract is entered into;
    (O) Any special charges associated with liquidating the transaction, 
based on charges prevailing at the time the contract is entered into;
    (P) The total delivery charges incurred if the customer takes 
delivery on the contract, based on charges prevailing at the time the 
contract is entered into;
    (Q) The following formula enabling a customer to calculate the 
estimated total contract value to break-even: Initial contract value 
plus the bid-ask spread plus the intitial charges plus any other charges 
plus the termination charges plus the carrying charges for the period 
the contract is intended to be held open;
    (R) The total minimum margin, in dollars and as a percentage of 
contract price, based on the rate prevailing at the time the contract is 
entered into;
    (S) The total maintenance margin, in dollars and as a percentage of 
contract price, based on the rate prevailing at the time the contract is 
entered into;
    (T) The commercial or retail cash price series filed in accordance 
with Sec.  31.6 available to the leverage customer to evaluate the 
leverage contract (including any applicable premiums or discounts), and 
where quotes of this series can be obtained on a timely basis; and
    (2) Not later than the next business day after entry into a short 
leverage contract with a customer, each leverage transaction merchant 
shall furnish to such customer by first-class mail or other, at least 
equivalent, means of communication, a written Confirmation Statement in 
a format specified by the Commission containing:
    (i) For a leverage customer's first leverage transaction, the 
following bold-faced statement in at least ten-point type:

IF YOU ARE A FIRST-TIME LEVERAGE CUSTOMER, YOU MAY RESCIND YOUR FIRST 
LEVERAGE TRANSACTION SUBJECT ONLY TO ACTUAL PRICE LOSSES BUT OTHERWISE 
WITHOUT PENALTY FOR THREE BUSINESS DAYS FOLLOWING AND INCLUDING RECEIPT 
OF THIS CONFIRMATION. ACTUAL LOSSES ON A LEVERAGE CONTRACT SOLD TO A 
LEVERAGE TRANSACTION MERCHANT ARE CALCULATED BY SUBTRACTING THE BID 
PRICE AT WHICH THE CONTRACT WAS SOLD TO THE LEVERAGE TRANSACTION 
MERCHANT AND WHICH APPEARS ON THIS CONFIRMATION FROM THE BID PRICE OF 
THE LEVERAGE CONTRACT AT THE TIME OF THE CUSTOMER'S RESCISSION. TO 
RESCIND THIS CONTRACT SEND A TELEGRAM TO (name and address of LTM) OR 
YOU MAY TELEPHONE (name of LTM) AT (telephone number). IF YOU RESCIND BY 
TELEPHONE, YOU MUST ALSO SEND IMMEDIATE WRITTEN AFFIRMATION BY TELEGRAM, 
CERTIFIED LETTER OR BY AT LEAST EQUIVALENT MEANS TO THE ADDRESS PROVIDED 
ABOVE: and

    (ii) For every leverage transaction, the following information:
    (A) The date the leverage contract was entered into;
    (B) The transaction identification number;
    (C) The name of the leverage commodity;
    (D) The expiration date of the leverage contract;
    (E) The total cost of the leverage contracts covered in the 
Confirmation Statement, which equals the leverage transaction merchant's 
bid price in

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dollars per unit multiplied by the number of units multiplied by the 
number of contracts;
    (F) The total initial charges for the transaction;
    (G) The total initial margin for the transaction, in dollars and as 
a percentage of the contract price;
    (H) The total amount due (or paid) to initiate the transaction, 
which equals the total initial charges plus the total initial margin in 
dollars;
    (I) The current equity in the individual customer's account as of 
the date of this transaction, but excluding this transaction;
    (J) The total variable carrying charges to be credited each period, 
in dollars and as an annual percentage rate, based on the carrying 
charge rate prevailing at the time the contract is entered into;
    (K) The total bid/ask spread, based on prices prevailing at the time 
the contract is entered into;
    (L) The total termination charges incurred if the contract is 
resold, liquidated by the leverage transaction merchant or settled by 
delivery, based on charges prevailing at the time the contract is 
entered into;
    (M) Any other charges associated with terminating the transaction, 
based on charges prevailing at the time the contract is entered into;
    (N) Any special charges associated with liquidating the transaction, 
based on charges prevailing at the time the contract is entered into;
    (O) The total delivery (including assay) charges incurred if the 
customer makes delivery on the contract, based on charges prevailing at 
the time the contract is entered into;
    (P) The following formula enabling a customer to calculate the 
estimated total contract value to break-even: Initial contract value 
plus carrying charges for the period the contract is intended to be held 
open, minus the bid-ask spread, minus the initial charges, minus any 
other charges, minus the termination charges;
    (Q) The total minimum margin, in dollars and as a percentage of 
contract price, based on the rate prevailing at the time the contract is 
entered into;
    (R) The total maintenance margin, in dollars and as a percentage of 
contract price, based on the rate prevailing at the time the contract is 
entered into;
    (S) The commercial or retail cash price series filed in accordance 
with Sec.  31.6 available to the leverage customer to evaluate the 
leverage contract (including any applicable premiums or discounts), and 
where quotes of this series can be obtained on a timely basis.
    (l) Each leverage transaction merchant shall furnish, upon request, 
by first-class mail or other generally accepted means of communication, 
to all leverage customers with open leverage contracts and to 
prospective leverage customers who are being solicited to enter leverage 
contracts with it, a true copy of portions of the quarterly unaudited or 
annual audited financial statement most recently filed with the 
Commission pursuant to Sec.  31.13, except that the portions of those 
statements which will generally be accorded non-public treatment by the 
Commission need not be so furnished.
    (m)(1) Notwithstanding any other provision in this section, if a 
leverage transaction merchant is not offering to enter into, entering 
into or confirming the execution of, soliciting or accepting a leverage 
customer's order for, or accepting any leverage customer funds from a 
leverage customer to enter into or maintain any short leverage contract, 
the leverage transaction merchant may delete or disregard references to 
short leverage contracts in its Disclosure Document as follows:
    (i) The third sentence of the first paragraph of the required bold-
faced risk disclosure statement in paragraph (a)(1) of this section;
    (ii) The words ``and a short leverage transaction'' in the fourth 
sentence of the first paragraph of the required bold-faced risk 
disclosure statement in paragraph (a)(1) of this section;
    (iii) The words ``and leverage contracts sold to a leverage 
transaction merchant are re-established at the then prevailing ask 
price'' in the fifth sentence of the third paragraph of the required 
bold-faced risk disclosure statement in paragraph (a)(1) of this 
section;
    (iv) The second sentence of the fifth paragraph of the required 
bold-faced

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risk disclosure statement in paragraph (a)(1) of this section;
    (v) The words ``or resold to'' in the first sentence of the sixth 
paragraph of the required bold-faced risk disclosure statement in 
paragraph (a)(1) of this section;
    (vi) The words ``or resell,'' ``and must also offer to resell any 
short leverage contract previously sold by a leverage customer,'' and 
``or short'' in the second sentence of the sixth paragraph of the 
required bold-faced risk disclosure statement in paragraph (a)(1) of 
this section;
    (vii) The words ``or resold'' and ``or resale'' (twice) in paragraph 
(a)(2)(vii) of this section;
    (viii) All of the words following the first semicolon in paragraph 
(a)(2)(viii) of this section;
    (ix) The words ``and a representative single short leverage 
contract'' in paragraph (a)(3) of this section; and
    (x) The words ``or short'' in paragraphs (a)(5)(i) and (a)(5)(ii) of 
this section.
    (2) Any leverage transaction merchant using a Disclosure Document 
that deletes or disregards references to short leverage contracts as 
permitted by paragraph (m)(1) of this section must file, in accordance 
with the provisions of paragraph (e)(2) of this section, a new 
Disclosure Document meeting all of the requirements of paragraphs (a) 
through (i) of this section at least 30 calendar days before it begins 
to offer any short leverage contract.

(Secs. 8a(5) and 19 of the Commodity Exchange Act, as amended, 7 U.S.C. 
12a(5) and 23 (1982))

[49 FR 5532, Feb. 13, 1984; 49 FR 25427, June 21, 1984, as amended at 50 
FR 29, Jan. 2, 1985; 50 FR 36415, Sept. 6, 1985; 54 FR 41080, Oct. 5, 
1989; 54 FR 46503, Nov. 3, 1989]