[Code of Federal Regulations]
[Title 17, Volume 1]
[Revised as of April 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR31.4]

[Page 350-353]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 31_LEVERAGE TRANSACTIONS--Table of Contents
 
Sec.  31.4  Definitions.

    For the purposes of this part:
    (a)-(b) [Reserved]
    (c) Promotional material includes:
    (1) Any text of a standard oral presentation, or any communication 
for publication in any newspaper, magazine or similar medium or for 
broadcast over television, radio, or other electronic medium which is 
disseminated or directed to a leverage customer or prospective leverage 
customer;
    (2) Any standardized form of report, letter, circular, memorandum, 
or publication which is disseminated or directed to a leverage customer 
or prospective leverage customer; or
    (3) Any other written literature or advice disseminated or directed 
to a leverage customer or prospective leverage customer for the purpose 
of soliciting the entry into a leverage contract;
    (d) Leverage customer means any person who, directly or indirectly, 
enters into, purchases, sells, or otherwise acquires for value any 
interest in a leverage contract with, from or to a leverage transaction 
merchant: Provided, however, That an owner or holder of a proprietary 
leverage account as defined in paragraph (e) of this section shall not 
be deemed to be a customer within the meaning of Sec. Sec.  31.11(a)-(j) 
and (l), 31.12 and 31.26, and such an owner or holder of such a 
proprietary leverage account shall otherwise be deemed to be a leverage 
customer within the meaning of all other sections of these rules.
    (e) Proprietary leverage account means a leverage account carried on 
the books and records of an individual, a partnership, corporation or 
other type association (1) for one of the following persons, or (2) of 
which ten percent or more is owned by one of the following persons, or 
an aggregate of ten percent or more of which is owned by more than one 
of the following persons:
    (i) Such individual himself, or such partnership, corporation or 
association itself;
    (ii) In the case of a partnership, a general partner in such 
partnership;
    (iii) In the case of a limited partnership, a limited or special 
partner in such partnership whose duties include:
    (A) The management of the partnership business or any part thereof,
    (B) The handling of the trades of leverage customers or of the 
leverage customer funds of such partnership,
    (C) The keeping of records pertaining to the trades of leverage 
customers or to the leverage customer funds of such partnership, or

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    (D) The signing or co-signing of checks or drafts on behalf of such 
partnership;
    (iv) In the case of a corporation or association, an officer, 
director or owner of ten percent or more of the capital stock, of such 
organization;
    (v) An employee of such individual, partnership, corporation or 
association whose duties include:
    (A) The management of the business of such individual, partnership, 
corporation or association or any part thereof,
    (B) The handling of the trades of leverage customers or of the 
leverage customer funds of such individual, partnership, corporation or 
association,
    (C) The keeping of records pertaining to the trades of leverage 
customers or to the leverage customer funds of such individual, 
partnership, corporation or association, or
    (D) The signing or co-signing of checks or drafts on behalf of such 
individual, partnership, corporation or association;
    (vi) A spouse or minor dependent living in the same household of any 
of the foregoing persons;
    (vii) A business affiliate that, directly or indirectly, controls 
such individual, partnership, corporation or association;
    (viii) A business affiliate that, directly or indirectly, is 
controlled by or is under common control with, such individual, 
partnership, corporation or association.
    (f) Commercial leverage account means an account of a commercial 
enterprise, such as a producer, processor, dealer or end user of a 
leverage commodity which is the subject of a leverage contract, or the 
products or by-products thereof;
    (g) Leverage commodity means a commodity (gold bullion, silver 
bullion, bulk gold coins, bulk silver coins, or platinum) which is the 
subject of a leverage contract offered for purchase or sale, or 
purchased or sold, by a particular leverage transaction merchant, the 
value of which is reflected in a widely accepted and broadly 
disseminated commercial or retail cash price series for cash market 
transactions, which price series reasonably reflects the price for the 
leverage commodity which the customer can expect to pay or receive in 
normal commercial or retail market channels, including, if applicable, 
specified premiums or discounts; each leverage commodity is defined by 
reference to the following distinguishing characteristics:
    (1) The nominal size, composition and tolerable ranges of the 
delivery pack or the actual size, composition and tolerable range of the 
component of the delivery pack;
    (2) Minimum guaranteed quality, deliverable countries of origin, 
deliverable markings or imprints, and deliverable refiners or mints;
    (3) The method of pricing; and
    (4) The delivery specifications or alternatives including type and 
location of delivery facilities, packaging, transportation, registration 
and associated costs.
    (h) Ask price of a leverage contract means the price at which a 
leverage transaction merchant sells or is willing to sell a long 
leverage contract to a leverage customer or the price at which a 
leverage transaction merchant resells or is willing to resell a short 
leverage contract to a leverage customer;
    (i) Bid price of a leverage contract means the price at which a 
leverage transaction merchant purchases or is willing to purchase a 
short leverage contract from a leverage customer, or the price at which 
a leverage transaction merchant repurchases or is willing to repurchase 
a long leverage contract from a leverage customer;
    (j) Bid-ask spread of a leverage contract means the difference 
between a leverage transaction merchant's ask price and bid price;
    (k) Initial charges for a leverage contract includes all fees and 
commissions payable to a leverage transaction merchant which are 
incurred when a leverage contract is initially entered into by a 
leverage customer;
    (l) Carrying charges for a leverage contract includes all service 
and interest changes paid periodically by a leverage customer to a 
leverage transaction merchant, or accrued by a leverage transaction 
merchant, while a long leverage contract remains open, or all

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service and interest charges paid periodically by a leverage transaction 
merchant to a leverage customer, or accrued by a leverage customer, 
while a short leverage contract remains open;
    (m) Termination charges for a leverage contract includes all fees 
and commission payable to a leverage transaction merchant which are 
associated with the liquidation, repurchase, resale or settlement by 
delivery on a leverage contract;
    (n) Liquidation of a leverage contract means the unilateral 
termination of a leverage contract by a leverage transaction merchant 
due to a leverage customer's failure to meet one or more margin calls or 
to make other required deposits on a timely basis or as otherwise 
permitted under Sec.  31.18;
    (o) Repurchase or resale of a leverage contract means the voluntary 
termination of a leverage contract by mutual agreement between the 
leverage customer and the leverage transaction merchant, which agreement 
is effected by entering into a transaction which is the opposite of the 
initial transaction. A repurchase by a leverage transaction merchant 
takes place if the initial transaction by the leverage customer was a 
purchase of a long leverage contract from the leverage transaction 
merchant, and a resale by a leverage transaction merchant takes place if 
the initial transaction by the leverage customer was a sale of a short 
leverage contract to the leverage transaction merchant;
    (p) Delivery on a leverage contract means the making (in the case of 
an initial sale by a leverage customer) or taking (in the case of an 
initial purchase by a leverage customer) of delivery by a leverage 
customer of the commodity subject to a leverage contract;
    (q) Initial leverage margin means the amount of funds, excluding 
initial charges, which a leverage customer is required to deposit with a 
leverage transaction merchant when entering into a leverage contract;
    (r) Minimum leverage margin means the amount of funds which a 
leverage transaction merchant requires a leverage customer to maintain 
on deposit for each open leverage contract in the leverage customer's 
account.
    (s) Maintenance leverage margin means the level to which the funds 
in a leverage customer's account must be restored after a margin call to 
the leverage customer has been effected by the leverage transaction 
merchant.
    (t) Leverage account equity means:
    (1) For all long leverage contracts in a leverage customer's 
account, the amount equal to the aggregate value of such leverage 
contracts in the leverage customer's account, based on the leverage 
transaction merchant's current bid prices for such contracts, less the 
amount owed to the leverage transaction merchant by the leverage 
customer pursuant to such contracts; and
    (2) For all short leverage contracts in a leverage customer's 
account, the aggregate amount owed to the leverage customer by the 
leverage transaction merchant pursuant to all such contracts less the 
amount equal to the value of all such leverage contracts in the leverage 
customer's account, based on the leverage transaction merchant's current 
ask prices for such contracts;
    (u)-(v) [Reserved]
    (w) Leverage contract means a contract, standardized as to terms and 
conditions, for the long-term (ten years or longer) purchase (``long 
leverage contract'') or sale (``short leverage contract'') by a leverage 
customer of a leverage commodity which provides for:
    (1) Participation by the leverage transaction merchant as a 
principal in each leverage transaction;
    (2) Initial and maintenance margin payments by the leverage 
customer;
    (3) Periodic payment by the leverage customer or accrual by the 
leverage transaction merchant of a variable carrying charge or fee on 
the unpaid balance of a long leverage contract, and periodic payment or 
crediting by the leverage transaction merchant to the leverage customer 
of a variable carrying charge or fee on the initial value of the 
contract plus any margin deposits made by the leverage customer in 
connection with a short leverage contract;
    (4) Delivery of a commodity in an amount and form which can be 
readily purchased and sold in normal commercial or retail channels;

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    (5) Delivery of the leverage commodity after satisfaction of the 
balance due on the contract; and
    (6) Determination of the contract purchase and repurchase, or sale 
and resale prices by the leverage transaction merchant; and
    (x) Leverage transaction means the purchase or sale of any leverage 
contract, the repurchase or resale of any leverage contract, the 
delivery of the leverage commodity, or the liquidation or rescission of 
any such leverage contract by or to the leverage transaction merchant.

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

[49 FR 5527, Feb. 13, 1984, as amended at 49 FR 25428, June 21, 1984; 50 
FR 26, Jan. 2, 1985; 50 FR 36414, Sept. 6, 1985; 54 FR 41078, Oct. 5, 
1989]