May 3, 2006
Via Facsimile and U.S. Mail
J. Eugene Marans, Esq.
Dear Mr. Marans:
In your letter dated April 10, 2006, you request, on behalf of your client Eurex Deutschland ("Eurex") and its related parties, a modification to the terms of the no-action letter issued by the Division of Market Regulation on July 27, 2005 ("Eurex No-Action Letter"). In the Eurex No-Action Letter, we stated that the Division would not recommend enforcement action to the Securities and Exchange Commission if employees of Eurex Frankfurt AG and Deutsche Borse AG, and Eurex participants, acted as described in the Eurex No-Action Letter to familiarize certain registered broker-dealers and large financial institutions in the United States with Eurex and certain equity, index, and exchange-traded fund options traded on Eurex.1
In requesting the Eurex No-Action Letter, you represented that Eurex would institute rules requiring Eurex participants to furnish to Eligible Broker-Dealers and Eligible Institutions a Eurex Disclosure Document before accepting an order from that Eligible Broker-Dealer or Eligible Institution to purchase or sell Options. The rules also would require that Eurex participants obtain written representations from any Eligible Broker-Dealer or Eligible Institution seeking to purchase or sell Options, signed by an appropriate officer, to the following effect:
In your letter, you state that Eurex has concluded that the German legal framework does not contain a specific legal basis for exchanges to adopt compliance rules referring to foreign law. Accordingly, Eurex proposes to incorporate the substance of the foregoing rules into a compliance circular issued by Eurex as an order rather than as rules. You attached as an exhibit to your letter a form of the compliance circular to be issued by Eurex to its participants, together with a form letter to be executed by a Eurex participant upon receipt of the circular, in which the Eurex participant agrees to comply with the requirements outlined in the Eurex No-Action Letter as set forth in the circular.
Eurex further represents that Eurex is authorized under German public law to issue orders addressed to all Eurex participants that impose one-time or continuing obligations on these participants. Eurex also represents that, pursuant to the German Exchange Act, Eurex is required to establish and maintain a disciplinary committee that has the express authority to impose sanctions on participants for violations of exchange orders as well as German Exchange Act provisions and the rules thereunder. Eurex notes that such sanctions may include a reprimand, fine or exclusion from trading on the exchange.
We confirm that the actions Eurex proposes to take, as summarized above and set forth more fully in your letter dated April 10, 2006, are consistent with the relief granted to your client in the Eurex No-Action Letter. Except as expressly provided herein, nothing in this letter shall be deemed to waive or modify any of the provisions of the Eurex No-Action Letter.
The position of the Division in this letter concerns enforcement action only and does not represent a conclusion on the applicability of statutory or regulatory provisions of the federal securities laws. Furthermore, the position of the Division in this letter is based on the representations made in the April 10, 2006 letter and in the July 22, 2005 letter requesting no-action relief. Any different facts or conditions might require a different response, and this position is subject to modification or revocation if the facts and representations are altered.
Elizabeth K. King
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