[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: 17CFR32.12]

[Page 389-392]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER I--COMMODITY FUTURES TRADING COMMISSION
 
PART 32_REGULATION OF COMMODITY OPTION TRANSACTIONS--Table of Contents
 
Sec.  32.12  Exemption from suspension of commodity option transactions.

    (a) The provisions of Sec.  32.11 shall not apply to the 
solicitation or acceptance of orders for, or the acceptance of money, 
securities, or property in connection with, the purchase or sale of any 
commodity option on a physical commodity granted by a person domiciled 
in the United States who, on May 1, 1978, was both in the business of 
granting options on a physical commodity and in the business of buying, 
selling, producing, or otherwise utilizing that commodity, if all of the 
following conditions are met at the time of the solicitation or 
acceptance:
    (1) The grantor has a net worth of at least $1,000,000;
    (2) Under the express contractual terms of each option offered by 
the grantor (or under such terms and conditions as are found 
satisfactory to the Commission which would provide option customers 
substantially equivalent financial protection), the grantor is liable 
jointly and severally with any person that sells its options to an 
option customer for all damages sustained by any option customer in 
connection with the offer and sale of an option as the result of any 
unlawful act or omission or any breach of contract by any person or firm 
who sold the option to the option customer or by any agent or employee 
of that person;
    (3) The grantor segregates daily, exclusively for the benefit of 
option customers, money, ``exempted securities'' (within the meaning of 
section 3(a)(12) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(12)), commercial paper, bankers' acceptances, commercial bills, 
or unencumbered warehouse receipts, equal to an amount by which the 
value of each transaction exceeds the amount received or to be received 
by the grantor for such transaction;
    (4) The grantor provides an identification number for each 
transaction;
    (5) The grantor provides to the futures commission merchant selling 
the option a confirmation of all orders for such transactions executed, 
including striking price and premium and a transaction identification 
number;
    (6) Each person who is offering and selling the option to an option 
customer (i) is fully in compliance with each and every requirement of 
this part 32, (ii) includes in the confirmation statement required by 
Sec.  32.5(d) to be furnished to option customers the transaction 
identification number provided by the grantor, (iii) makes such reports 
to the Commission as are provided for in paragraphs (f) and (h) of this 
section and as the Commission may otherwise require by rule or 
regulation or order, and (iv) keeps a record in permanent form which 
shows, for each commodity option account carried by such person
    (A) The principal occupation or business of the option customer 
owning the account,
    (B) The name and address of any other person having a financial 
interest in such account,
    (C) The name, address and principal business or occupation of any 
other person exercising any trading control with respect to such 
account, and
    (D) An indicator of whether the account is traded for speculative 
purposes or for other than speculative purposes;
    (7) Neither the grantor nor the person who is offering and selling 
the option to any option customer nor any officer or director or 
principal shareholder or partner or controlling person of either:
    (i) Has within ten years been convicted of any felony or misdemeanor 
involving the purchase or sale of any commodity or security, or any 
option on any commodity or security, or
    (ii) Is permanently or temporarily enjoined by order, judgment or 
decree of any court of competent jurisdiction from acting as a commodity 
pool operator, futures commission merchant, or floor broker, or as an 
affiliated person or employee of any of the foregoing, or from engaging 
in or continuing any conduct or practice in connection with any such 
activity or in connection with the purchase or sale of commodities or 
securities or options on commodities or securities; or
    (iii) Is subject to an outstanding order of the Commission denying 
trading privileges on any contract market to such person, or suspending 
or revoking the registration of such person as a commodity trading 
advisor, commodity pool operator, futures commission merchant, 
associated person of a

[[Page 390]]

futures commission merchant or floor broker, or suspending or expelling 
such person from membership on any contract market;
    (8) Before any grantor of any option shall commence to offer and 
sell options under authority of this paragraph the grantor shall (i) 
notify the Commission in writing of the name of each person selling its 
options and that it meets each and every requirement set forth in this 
paragraph, (ii) provide evidence of compliance with each provision of 
this section by affidavit executed upon actual knowledge by the 
proprietor of a sole proprietorship grantor, a general partner of a 
partnership grantor, or the chief executive officer or chief financial 
officer of a corporate grantor, and (iii) submit to the Commission its 
most recent annual financial statements for a fiscal year subsequent to 
May 31, 1977, certified by an independent certified public accountant in 
accordance with generally accepted accounting principles;
    (b)(1) The grantor of any option publicly offered pursuant to 
paragraph (a) of this section shall keep full, complete and systematic 
records together with all pertinent data and memoranda of or relating to 
such transactions and make such reports to the Commission as provided 
for in paragraphs (g) and (h) of this section and as the Commission may 
otherwise require by rule or regulation or order.
    (2) It shall be unlawful for any grantor to sell an option through 
any person that acquires the option with a view to resale to an option 
customer (i) if the identity of that person has not previously been 
reported in writing to the Commission; (ii) if the grantor knows or has 
reason to know that the person is disqualified pursuant to paragraph 
(a)(7) of this section; or (iii) if the grantor knows or has reason to 
know that the person or firm is not complying with the requirements of 
this part 32 in any respect.
    (3) It shall be unlawful for any futures commission merchant to 
offer or sell an option acquired from a grantor to any other futures 
commission merchant.
    (4) The grantor of any option offered and sold to an option customer 
pursuant to paragraph (a) shall be liable jointly and severally with any 
person that sells its options to option customers for all damages 
sustained by the option customer in connection with the offer and sale 
of an option as the result of any unlawful act or omission or any breach 
of contract by any person who sold the option to the option customer or 
by any agent or employee of that person except to the extent that the 
Commission may find other terms and conditions satisfactory to provide 
option customers substantially equivalent financial protection pursuant 
to paragraph (a)(2). Upon timely application the grantor may intervene 
in any reparation proceeding brought by an option customer pursuant to 
section 14 of the Commodity Exchange Act based upon any act or omission 
for which the grantor may be liable.
    (c) Upon written application the Commission may for good cause shown 
in any particular case waive the requirements of any provision of 
paragraph (a) or (b) of this section subject to such other terms and 
conditions as the Commission may find appropriate in the public interest 
and for the protection of option customers.
    (d) [Reserved]
    (e) In the event that any provision of this section or the 
application thereof to any person or circumstance should be held 
invalid, the validity of Sec.  32.11 to those or other persons or 
circumstances shall not be affected thereby.
    (f) Each person registered as a futures commission merchant which 
offers or sells options to option customers pursuant to paragraph (a) of 
this section shall file a report with the Commission on form CFTC-145 
for any month during which such person entered into an option 
transaction with an option customer or acquired an option for its own 
account from a Sec.  32.12 grantor. Such reports shall be filed with the 
Commission office in New York, N.Y., by the tenth business day of the 
month following the month covered by the report and shall contain the 
following information by option grantor and option contract:
    (1) For option-customer accounts:
    (i) The number of open option contracts, end of month.

[[Page 391]]

    (ii) The number of open option contracts, end of month, held in 
accounts classified by the FCM as being traded for other than 
speculative purposes.
    (iii) The number of option contracts entered into during the month.
    (iv) The number of option contracts entered into during the month 
for accounts classified by the FCM as being traded for other than 
speculative purposes.
    (v) The aggregate purchase price, as defined in Sec.  32.1(d), 
received and due from option customers for option contracts entered into 
during the month.
    (vi) The total of premiums and fees paid to and due to the option 
grantor for option contracts entered into by option customers during the 
month.
    (2) For proprietary accounts of such person, as defined in Sec.  
1.3(y): (i) The number of open option contracts, end of month.
    (ii) The number of option contracts entered into with the option 
grantor during the month.
    (iii) The total of premiums and fees paid to and due to the option 
grantor for option contracts entered into during the month.
    (g) The grantor of any option publicly offered or sold during any 
calendar month pursuant to paragraph (a) of this section shall file 
reports with the Commission at its office in New York, N.Y. with respect 
to all commodity-option transactions entered into by the grantor during 
such month. Such reports are due by the tenth business day of the month 
following the month covered by the reports and shall be filed on forms 
CFTC 146, 147, 148, 149, 150, 151, 152, 153 and 154.
    (1) Such reports shall contain the following information with 
respect to all commodity options that were not publicly offered pursuant 
to paragraph (a) of this section:
    (i) By commodity, call or put, and expiration month:
    (A) The total quantity of the underlying commodity on which options 
were bought directly from or granted directly to accounts classified by 
the grantor as being traded for other than speculative purposes.
    (B) The total quantity of the underlying commodity on which options, 
bought directly from or granted directly to accounts classified by the 
grantor as being traded for other than speculative purposes, were open 
as of the last business day of the month.
    (ii) By commodity and call or put;
    (A) The total quantity of the underlying commodity on which options 
bought directly from or granted directly to accounts classified as being 
traded for other than speculative purposes were exercised during the 
month.
    (B) The total quantity of the underlying commodity on which options 
bought directly from or granted directly to accounts classified as being 
traded for other than speculative purposes expired during the month.
    (2) Such reports shall contain the following information with 
respect to all commodity options that were publicly offered pursuant to 
paragraph (a) of this section:
    (i) By option contract and expiration date:
    (A) The value of option contracts repurchased from option customers 
through FCM's during the month.
    (B) The value of new sales to option customers through FCM's during 
the month.
    (ii) By option contract, expiration date and strike price:
    (A) The number of option contracts repurchased from and granted to 
option customers through FCM's during the month.
    (B) The number of option contracts granted to option customers 
through FCM's which were open as of the last business day of the month.
    (C) The bid and ask option premiums available to option customers 
through FCM's as of the last business day of the month.
    (iii) By option contract:
    (A) The number of option contracts previously bought by option 
customers through FCM's which were exercised during the month.
    (B) The number of option contracts previously bought by option 
customers through FCM's which expired during the month.
    (iv) By option contract and offering FCM:
    (A) The value of premiums and fees received by and due to the 
grantor for option contracts sold through FCM's during the month.

[[Page 392]]

    (B) The number of option contracts open as of the last business day 
of the month.
    (C) The number of option contracts sold during the month.
    (h) All information required upon special call as set forth in this 
paragraph (h) shall be prepared in such form and manner, and summarized 
in accordance with such instructions, and shall be transmitted at such 
time and to such office of the Commission, as may be specified in the 
call.
    (1) Upon call by the Commission, each futures commission merchant 
shall furnish to the Commission for the grantor(s), the option 
contract(s), the expiration date(s), the strike price(s) and the 
transaction date(s) any of the following information that is specified 
in such call for any accounts, including proprietary accounts of such 
futures commission merchant, in which open dealer-option contracts are 
carried on the records of such futures commission merchant:
    (i) The name(s) and address(es) of the account owner(s).
    (ii) The principal business or occupation and industry of the 
account owner(s).
    (iii) The kind of account.
    (iv) The name(s), address(es) and principal business or occupation 
and industry of any other person(s) who controls the trading of the 
account.
    (v) The name(s) and address(es) of any other person(s) having a 
financial interest in the account.
    (vi) Identification of those accounts that trade dealer options for 
other than speculative purposes.
    (vii) The number of open dealer-option contracts held or controlled 
by such traders.
    (viii) The aggregate purchase price (as defined in Sec.  32.1(d)) 
received from option customers for the purchase of dealer-option 
contracts.
    (ix) The premiums and fees paid to and due to the grantor for the 
purchase of dealer-option contracts.
    (2) Upon call by the Commission, each grantor shall furnish to the 
Commission for the option contract(s), the expiration date(s), the 
strike price(s) and the transaction date(s) any of the following 
information which is specified in such call:
    (i) Premium levels.
    (ii) For any accounts, including accounts owned or controlled by the 
grantor, in which open option contracts are carried on the records of 
such option grantor:
    (A) The name(s) and address(es) of the account owner(s);
    (B) The principal business or occupation and industry of the account 
owner(s), other than the account of an FCM selling such grantor's 
options to the public;
    (C) The kind of account, other than the account of an FCM selling 
such grantor's options to the public;
    (D) Identification of those accounts, other than the account of an 
FCM selling such grantor's options to the public, that trade such 
options for other than speculative purposes;
    (E) The number of open option contracts in the account;
    (F) The number of option contracts exercised.
    (i)(1) For purposes of paragraphs (a), (f), (g) and (h) of this 
section, accounts classified as being ``traded for other than 
speculative purposes'' shall be limited to accounts of producers, 
processors, commercial users or merchants which handle the commodity 
which is the subject of the commodity-option transaction, or the 
products or by-products thereof, as part of their business.
    (2) The term ``option contract'' as used in paragraphs (f), (g) and 
(h) of this section shall refer to either a call or a put on a specified 
weight of the underlying commodity.

(The information collection requirements contained in Sec.  32.12 were 
approved by the Office of Management and Budget under control number 
3038-0001; in paragraph (a) under control number 3038-0003)

[43 FR 23707, June 1, 1978, as amended at 43 FR 52469, Nov. 13, 1978; 43 
FR 54226, Nov. 21, 1978; 46 FR 63036, Dec. 30, 1981]