[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: 17CFR41.42]

[Page 473-475]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 41_SECURITY FUTURES PRODUCTS--Table of Contents
 
           Subpart E_Customer Accounts and Margin Requirements
 
Sec.  41.42  Customer margin requirements for security futures--
authority, purpose, interpretation, and scope.

    (a) Authority and purpose. Subpart E, Sec. Sec.  41.42 through 
41.49, and 17 CFR 242.400 through 242.406 (``this Regulation'') are 
issued by the Commodity Futures Trading Commission (``Commission'')

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jointly with the Securities and Exchange Commission (``SEC''), pursuant 
to authority delegated by the Board of Governors of the Federal Reserve 
System under section 7(c)(2)(A) of the Securities Exchange Act of 1934 
(``Exchange Act''). The principal purpose of this Regulation (Subpart E, 
Sec. Sec.  41.42 through 41.49) is to regulate customer margin collected 
by brokers, dealers, and members of national securities exchanges, 
including futures commission merchants required to register as brokers 
or dealers under section 15(b)(11) of the Exchange Act, relating to 
security futures.
    (b) Interpretation. This Regulation (Subpart E, Sec. Sec.  41.42 
through 41.49) shall be jointly interpreted by the SEC and the 
Commission, consistent with the criteria set forth in clauses (i) 
through (iv) of section 7(c)(2)(B) of the Exchange Act and the 
provisions of Regulation T (12 CFR part 220).
    (c) Scope. (1) This Regulation (Subpart E, Sec. Sec.  41.42 through 
41.49) does not preclude a self-regulatory authority, under rules that 
are effective in accordance with section 19(b)(2) of the Exchange Act or 
section 19(b)(7) of the Exchange Act and, as applicable, section 5c(c) 
of the Commodity Exchange Act (``Act''), or a security futures 
intermediary from imposing additional margin requirements on security 
futures, including higher initial or maintenance margin levels, 
consistent with this Regulation (Subpart E, Sec. Sec.  41.42 through 
41.49), or from taking appropriate action to preserve its financial 
integrity.
    (2) This Regulation (Subpart E, Sec. Sec.  41.42 through 41.49) does 
not apply to:
    (i) Financial relations between a customer and a security futures 
intermediary to the extent that they comply with a portfolio margining 
system under rules that meet the criteria set forth in section 
7(c)(2)(B) of the Exchange Act and that are effective in accordance with 
section 19(b)(2) of the Exchange Act and, as applicable, section 5c(c) 
of the Act;
    (ii) Financial relations between a security futures intermediary and 
a foreign person involving security futures traded on or subject to the 
rules of a foreign board of trade;
    (iii) Margin requirements that clearing agencies registered under 
section 17A of the Exchange Act or derivatives clearing organizations 
registered under section 5b of the Act impose on their members;
    (iv) Financial relations between a security futures intermediary and 
a person based on a good faith determination by the security futures 
intermediary that such person is an exempted person; and
    (v) Financial relations between a security futures intermediary and, 
or arranged by a security futures intermediary for, a person relating to 
trading in security futures by such person for its own account, if such 
person:
    (A) Is a member of a national securities exchange or national 
securities association registered pursuant to section 15A(a) of the 
Exchange Act; and
    (B) Is registered with such exchange or such association as a 
security futures dealer pursuant to rules that are effective in 
accordance with section 19(b)(2) of the Exchange Act and, as applicable, 
section 5c(c) of the Act, that:
    (1) Require such member to be registered as a floor trader or a 
floor broker with the Commission under section 4f(a)(1) of the Act, or 
as a dealer with the SEC under section 15(b) of the Exchange Act;
    (2) Require such member to maintain records sufficient to prove 
compliance with this paragraph (c)(2)(v) and the rules of the exchange 
or association of which it is a member;
    (3) Require such member to hold itself out as being willing to buy 
and sell security futures for its own account on a regular or continuous 
basis; and
    (4) Provide for disciplinary action, including revocation of such 
member's registration as a security futures dealer, for such member's 
failure to comply with this Regulation (Subpart E, Sec. Sec.  41.42 
through 41.49) or the rules of the exchange or association.
    (d) Exemption. The Commission may exempt, either unconditionally or 
on specified terms and conditions, financial relations involving any 
security futures intermediary, customer, position, or transaction, or 
any class of security futures intermediaries, customers, positions, or 
transactions,

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from one or more requirements of this Regulation (Subpart E, Sec. Sec.  
41.42 through 41.49), if the Commission determines that such exemption 
is necessary or appropriate in the public interest and consistent with 
the protection of customers. An exemption granted pursuant to this 
paragraph shall not operate as an exemption from any SEC rules. Any 
exemption that may be required from such rules must be obtained 
separately from the SEC.