[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: 17CFR31.25]

[Page 377-378]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 31_LEVERAGE TRANSACTIONS--Table of Contents
 
Sec.  31.25  Bid and ask prices; carrying charges.

    (a) A leverage transaction merchant must use the same bid price at 
any particular point in time to purchase a leverage contract from a 
leverage customer (initiation of a short transaction) and to repurchase 
a leverage contract from a leverage customer (close-out of a long 
transaction), and a leverage transaction merchant must use the same ask 
price at any particular point in time to sell a leverage contract to a 
leverage customer (initiation of a long transaction) and to resell a 
leverage contract to a leverage customer (close-out of a short 
transaction), with respect to contracts involving the same leverage 
commodity.
    (b) A leverage transaction merchant must apply a carrying charge 
rate on a short leverage contract that is within one percent per annum 
of the carrying charge rate that it applies to a long leverage contract. 
In the case of a short leverage contract, the leverage customer must be 
credited with carrying

[[Page 378]]

charges computed on the total initial value of the contract, using the 
bid price when the contract was executed, plus any margin deposits made 
by the leverage customer in connection with the contract, and the same 
carrying charge rate must be applied to the total initial value of the 
contract and to the margin deposits. In the case of a long leverage 
contract, the leverage customer must be assessed carrying charges only 
on the unpaid balance of the contract, which is the total initial value 
of the contract, using the ask price when the contract was executed, 
minus any margin deposits made in connection with the contract: 
Provided, however, That in the case of a long leverage contract, 
interest on unpaid carrying charges may be assessed at the same rate as 
the interest rate component of the carrying charges and, if such an 
assessment were made and if the leverage transaction merchant offers 
short leverage contracts, payment of interest on carrying charges that 
have been credited to the leverage customer's account and not withdrawn 
must be made at the same rate as the interest rate component of the 
carrying charges.

[50 FR 36416, Sept. 6, 1985, as amended at 54 FR 41082, Oct. 5, 1989]