Rosenthal Collins Group, LLC et al. – s. 38 of the CFA

Headnote

Application for a ruling pursuant to section 38 of the Commodity Futures Act granting relief from the dealer registration requirement set out in section 22 of the CFA and the trading restrictions in section 33 of the CFA in connection with certain trades in Exchange-Traded Futures on Non-Canadian Exchanges where the Applicants are acting as principal or agent in such trades to, from or on behalf of i) Permitted Clients, or ii) Specified Corporate Hedger Clients – relief subject to sunset clause.

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20. as am., ss. 22, 38.

January 9, 2018

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

R.S.O. 1990, c. C.20, AS AMENDED

(the CFA)

AND

IN THE MATTER OF

ROSENTHAL COLLINS GROUP, LLC,

WHITE COMMERCIAL CORPORATION,

ADVANCE TRADING INC. AND

SWEET FUTURES 1 LLC

RULING

(Section 38 of the CFA)

UPON the application (the Application) of Rosenthal Collins Group, LLC (RCG), White Commercial Corporation (White Commercial), Advance Trading Inc. (Advance Trading) and Sweet Futures 1 LLC (Sweet Futures) (and together with RCG, White Commercial and Advance Trading, the Applicants) to the Ontario Securities Commission (the Commission) for:

(a)           a ruling of the Commission, pursuant to section 38 of the CFA, that the Applicants are not subject to the dealer registration requirements in the CFA (as defined below) or the trading restrictions in the CFA (as defined below) in connection with trades in Exchange-Traded Futures (as defined below) on exchanges located outside Canada (Non-Canadian Exchanges) where the Applicants are acting as principal or agent in such trades to, from or on behalf of i) Permitted Clients (as defined below), or ii) Specified Corporate Hedger Clients (as defined below); and

(b)           a ruling of the Commission, pursuant to section 38 of the CFA, that neither a Permitted Client nor a Specified Corporate Hedger Client is subject to the dealer registration requirements in the CFA or the trading restrictions in the CFA in connection with trades in Exchange-Traded Futures on Non-Canadian Exchanges, where the Applicants act in respect of the trades in Exchange-Traded Futures on behalf of the Permitted Client and Specified Corporate Hedger Client pursuant to the above ruling.

AND WHEREAS for the purposes of this ruling (the Decision):

(a)           the following terms shall have the following meanings

“CEA” means the United States Commodity Exchange Act;

“CFTC” means the United States Commodity Futures Trading Commission;

“dealer registration requirements in the CFA” means the provisions of section 22 of the CFA that prohibit a person or company from trading in Exchange-Traded Futures unless the person or company satisfies the applicable provisions of section 22 of the CFA;

“Eligible Contract Participant” means an eligible contract participant as that term is defined in Section 1a(18) of the CEA, and includes, for clarity,

(a)           a person or company, other than an individual, with more than $10 million in assets, or any entity guaranteed by such entity; and

(b)           an entity with a net worth of at least $1 million that is hedging commercial risk.

“Exchange Act” means the United States Securities Exchange Act of 1934;

“Exchange-Traded Futures” means a commodity futures contract or a commodity futures option that trades on one or more organized exchanges located outside of Canada and that is cleared through one or more clearing corporations located outside of Canada;

“FINRA” means the Financial Industry Regulatory Authority in the U.S.;

“Introducing Brokers” means White Commercial, Advance Trading and Sweet Futures, or individually an “Introducing Broker”;

“NI 31-103” means National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations;

“NFA” means the National Futures Association in the United States;

“OSA Staff Notice 33-744” means OSC Staff Notice 33-744 Availability of registration exemptions to foreign dealers in connection with trades in options and futures contracts under the Commodity Futures Act (Ontario);

“Permitted Client” means a client in Ontario that is a “permitted client” as that term is defined in section 1.1 of NI 31-103;

“SEC” means the United States Securities and Exchange Commission;

“specified affiliate” has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information;

“Specified Corporate Hedger Client” means a person or company, other than an individual, that

(a)           carries on agricultural, mining, forestry, processing, manufacturing or other commercial activities and, as a necessary part of these activities, becomes exposed from time to time to a risk attendant upon fluctuations in the price of a commodity and offsets that risk through trading in futures contracts and options on futures contracts on exchanges located outside Canada;

(b)           is an eligible contract participant under the U.S. CEA; and

(c)           holds a license issued by the federal or provincial government (or an agency thereof) relating to agriculture or commodity production including licenses issued under The Grains Act (Ontario) as an Elevator Operator and/or a Dealer in Grain as issued by Agricorp, a provincial Crown corporation (or a successor organization).

“trading restrictions in the CFA” means the provisions of section 33 of the CFA that prohibit a person or company from trading in Exchange-Traded Futures unless the person or company satisfies the applicable provisions of section 33 of the CFA;

“U.S.” means the United States of America; and

(b)           terms used in this Decision that are defined in the Securities Act (Ontario) (OSA), and not otherwise defined in this Decision or in the CFA, shall have the same meaning as in the OSA, unless the context otherwise requires;

AND UPON considering the Application and the recommendation of staff of the Commission;

AND UPON the Applicants having represented to the Commission as follows:

Rosenthal Collins Group, LLC

1.             RCG is a limited liability company organized under the laws of the state of Illinois. Its main office is located at 216 W Jackson Blvd., Suite 400, Chicago, IL 60606-6918, U.S.

2.             RCG provides futures commission merchant (FCM) services including commodity clearing and execution services to a network of introducing broker offices, including the Introducing Brokers, as well as commercial hedgers and financial, industrial, and agricultural entities.

3.             RCG is a privately held entity owned directly and indirectly by its two principals, Leslie Rosenthal and J. Robert Collins.

4.             RCG is registered as an FCM with the CFTC and is a member of the NFA. RCG is not registered with the SEC, is not a member of FINRA and does not carry on a securities business in the U.S.

5.             RCG is a clearing member of Intercontinental Exchange, Inc. (including ICE Futures U.S., Inc. and ICE Futures Europe), CME Group, Inc. (including Chicago Board of Trade, Chicago Mercantile Exchange and New York Mercantile Exchange), Minneapolis Grain Exchange and a non-clearing member of ICE Futures Canada, Inc., Eurex and Euronext Paris.

6.             RCG is not registered in any capacity under the CFA or the OSA. Subject to the matter to which this Decision relates, RCG is (a) not in default of securities or commodity futures legislation in any jurisdiction of Canada, and (b) in compliance in all material respects with U.S. securities and commodity futures laws.

White Commercial Corporation

7.             White Commercial is a company formed under the laws of Florida with a head office in Stuart, Florida.

8.             Since 1971, White Commercial’s primary business has been to educate and support grain businesses. White Commercial is dedicated to grain merchandising risk management and its clients include grain elevators, feedmills, and rice dryers.

9.             White Commercial is a privately held entity owned directly and indirectly primarily by its two principals, Donald White and John Werner.

10.          As part of its risk-management services, White Commercial is registered as an introducing broker with the CFTC and a member of the NFA. This registration allows White Commercial’s clients to utilize futures and options on futures to hedge the risk between the buying and selling of their cash grains.

11.          White Commercial is not registered with the SEC, is not a member of FINRA and does not carry on a securities business in the U.S. White Commercial is not a member of any exchanges.

12.          White Commercial is not registered in any capacity under the CFA or the OSA. Subject to the matter to which this Decision relates, White Commercial is (a) not in default of securities or commodity futures legislation in any jurisdiction of Canada, and (b) in compliance in all material respects with U.S. securities and commodity futures laws.

Advance Trading Inc.

13.          Advance Trading is a company formed under the laws of Illinois with a head office in Bloomington, Illinois, United States of America.

14.          Since 1980, Advance Trading’s primary business has been to provide risk management and market guidance to grain producers, commercial elevators, and end users including energy producers and livestock feeders.

15.          Advance Trading is a privately held entity owned directly and indirectly primarily by its employees pursuant to an employee stock option plan.

16.          As part of its risk management services, Advance Trading is registered as an introducing broker with the CFTC and a member of the NFA.

17.          Advance Trading is not registered with the SEC, is not a member of FINRA and does not carry on a securities business in the U.S. Advance Trading is not a member of any exchanges.

18.          Advance Trading is not registered in any capacity under the CFA or the OSA. Subject to the matter to which this Decision relates, Advance Trading is (a) not in default of securities or commodity futures legislation in any jurisdiction of Canada, and (b) in compliance in all material respects with U.S. securities and commodity futures laws.

Sweet Futures 1 LLC

19.          Sweet Futures is a limited liability company formed under the laws of Illinois with a head office in Chicago, Illinois, United States of America.

20.          Sweet Futures is an independent introducing broker that services retail, institutional and corporate clients in both listed and over-the-counter derivatives.

21.          Sweet Futures is a privately held entity owned directly and indirectly primarily by its founder, Ian Sweet.

22.          As part of its risk management services, Sweet Futures is registered as an introducing broker with the CFTC and a member of the NFA.

23.          Sweet Futures is not registered with the SEC, is not a member of FINRA and does not carry on a securities business in the U.S. Sweet Futures is not a member of any exchanges.

24.          Sweet Futures is not registered in any capacity under the CFA or the OSA. Subject to the matter to which this Decision relates, Sweet Futures is (a) not in default of securities or commodity futures legislation in any jurisdiction of Canada, and (b) in compliance in all material respects with U.S. securities and commodity futures laws.

Background to Application for relief from the dealer registration requirement

25.          The Applicants have been providing FCM services, in the case of RCG, and introducing broker services, in the case of the Introducing Brokers, to certain non-individual clients in Ontario that are either Permitted Clients or Specified Corporate Hedger Clients based on a good faith belief that they may rely on one or more exemptions from the dealer registration requirement in the CFA when providing such services. However, having reviewed OSC Staff Notice 33-744 and other recent rulings of the Commission that have been granted to U.S. FCMs, the Applicants have now concluded that these exemptions may not be available and are seeking exemptive relief from the dealer registration requirement, on a time-limited basis, to be able to continue providing such services.

26.          The Applicants understand that, in other recent rulings that have been granted to U.S. FCMs and introducing brokers, the relief has been granted by analogy to the international dealer exemption in section 8.18 of NI 31-103, and the relief has been limited to providing FCM or introducing broker services in relation to trades in Exchange-Traded Futures on Non-Canadian Exchanges to Permitted Clients. However, the Applicants have certain existing relationships with certain non-individual clients that are Specified Corporate Hedger Clients.

27.          The Specified Corporate Hedger Clients

(a)           carry on agricultural, mining, forestry, processing, manufacturing or other commercial activities and, as a necessary part of these activities, become exposed from time to time to a risk attendant upon fluctuations in the price of a commodity and offset that risk through trading in futures contracts and options on futures contracts on exchanges located outside Canada;

(b)           are eligible contract participants under the U.S. CEA; and

(c)           hold a license issued by the federal or provincial government (or an agency thereof) relating to agriculture or commodity production including licenses issued under The Grains Act (Ontario) as an Elevator Operator and/or a Dealer in Grain as issued by Agricorp, a provincial Crown corporation (or a successor organization).

28.          As set out in the conditions to this Decision, the Applicants will

(a)           take reasonable steps to confirm that the customer is a bona fide hedger for such trading activities and shall not solely rely on a customer’s self-certification of its hedger status; and

(b)           as part of its account-opening procedures, require clients resident in Ontario to represent the following: i) it is a Specified Corporate Hedger Client; ii) it acknowledges that this representation is deemed to be repeated by it each time it enters an order for an Exchange-Traded Futures and that the customer must be a Specified Corporate Hedger Client for the purposes of each trade resulting from such an order; iii) it is only seeking to trade in Exchange-Traded Futures on Non-Canadian Exchanges; iv) the client agrees to notify the Applicants if it ceases to be a Specified Corporate Hedger Client; and v) the client represents that it will only enter orders for its own account.

29.          RCG has post-trade surveillance procedures in place to ensure that the Specified Corporate Hedger Clients trading in Exchange-Traded Futures are for hedging purposes and not for speculation.

30.          As set out in the conditions to this Decision, RCG on behalf of itself and the Introducing Brokers, will submit a certificate no more than 30 days after its fiscal year end specifying the following:

(a)           Particulars of the dealer and any individual acting on its behalf that traded with a Specified Corporate Hedger Client;

(b)           Particulars of the Specified Corporate Hedger Client;

(c)           Annual cumulative trading data for the Specified Corporate Hedger Client;

(d)           A signed statement from the Specified Corporate Hedger Client confirming that it meets the definition of Specified Corporate Hedger Client and has entered into the futures trades solely for the purposes of hedging; and

(e)           A signed statement from the chief compliance officer of RCG or designate confirming that they have complied with the requirements of this Decision.

31.          In the interest of not disrupting existing trading relationships with the Specified Corporate Hedger Clients, and in view of these additional steps being taken in respect of Specified Corporate Hedger Clients, RCG requests that the present relief from the dealer registration requirement be extended to include providing FCM services to Specified Corporate Hedger Clients.

Current authorizations of the Applicants under the U.S. CEA

32.          Pursuant to its registrations and memberships, RCG is authorized to handle customer orders and receive and hold customer margin deposits, and otherwise act as a futures broker, in the United States. Rules of the CFTC and NFA require RCG to maintain adequate capital levels, make and keep specified types of records relating to customer accounts and transactions, and comply with other forms of customer protection rules, including rules respecting: know-your-customer obligations, account-opening requirements, anti-money laundering checks, credit checks, delivery of confirmation statements, clearing deposits and initial and maintenance margins. These rules require RCG to treat Permitted Clients and Specified Corporate Hedger Clients consistently with RCG’s U.S. customers with respect to transactions made on U.S. exchanges. With respect to transactions made on U.S. exchanges, in order to protect customers in the event of the insolvency or financial instability of RCG, RCG is required to ensure that customer securities and monies be separately accounted for, segregated at all times from the securities and monies of RCG and custodied exclusively with such banks, trust companies, clearing organizations or other licensed futures brokers and intermediaries as may be approved for such purposes under the CEA and the rules promulgated by the CFTC thereunder (collectively, the RCG Approved Depositories). RCG is further required to obtain acknowledgements from any RCG Approved Depository holding customer funds or securities related to U.S.-based transactions or accounts that such funds and securities are to be separately held on behalf of such customers, with no right of set-off against RCG’s obligations or debts.

33.          Pursuant to its registrations and memberships, each of the Introducing Brokers is authorized to introduce customers to an executing broker registered as a futures commission merchant, and otherwise act as an introducing broker in the United States. Rules of the CFTC and NFA require the Introducing Brokers to maintain adequate capital levels, make and keep specified types of records relating to customer accounts and transactions, and comply with other forms of customer protection rules, including rules respecting: know-your-customer obligations, client identification and account-opening requirements, anti-money laundering checks, dealing and handling customer order obligations including managing conflicts of interests and best execution rules. These rules require the Introducing Brokers to treat Permitted Clients and Specified Corporate Hedger Clients consistently with the Introducing Brokers’ U.S. customers with respect to transactions made on exchanges in the U.S. In respect of Exchange-Traded Futures, none of the Introducing Brokers provide direct execution or clearing services and are not authorized to receive or hold client money in any jurisdiction.

34.          The Applicants propose to offer their Permitted Clients and Specified Corporate Hedger Clients in Ontario the ability to trade in Exchange-Traded Futures through RCG, in its capacity as FCM, and the Introducing Brokers, as an introducing broker to RCG.

35.          Each of the Introducing Brokers will introduce Exchange-Traded Futures, and RCG will execute and clear such trades on behalf of Permitted Clients and Specified Corporate Hedger Clients in Ontario in the same manner that it introduces or executes and clears trades on behalf of its U.S. clients. Each of the Applicants will follow the same know-your-customer and segregation of assets procedures, or in the case of the applicable Introducing Broker, order handling procedures, that it follows in respect of its U.S. clients. Permitted Clients and Specified Corporate Hedger Clients will be afforded the benefits of compliance by the Applicants with the requirements of the CEA and the regulations thereunder, and the Exchange Act and the regulations thereunder. Permitted Clients and Specified Corporate Hedger Clients in Ontario will have the same contractual rights against the Applicants as U.S. clients of the Applicants.

36.          The Applicants will not maintain an office, sales force or physical place of business in Ontario.

37.          The Applicants will solicit trades in Exchange-Traded Futures in Ontario only from persons who qualify as Permitted Clients or Specified Corporate Hedger Clients.

38.          Permitted Clients and Specified Corporate Hedger Clients of the Applicants will only be offered the ability to effect trades in Exchange-Traded Futures on Non-Canadian Exchanges.

39.          The Exchange-Traded Futures to be traded by Permitted Clients and Specified Corporate Hedger Clients will include, but will not be limited to, Exchange-Traded Futures for equity indices, interest rate, energy, currency, bond, agricultural and other commodity products.

40.          Permitted Clients and Specified Corporate Hedger Clients of the Applicants will be able to submit orders and execute Exchange-Traded Futures orders by contacting the Introducing Brokers’ client order handling desk, through RCG’s global execution desk or by submitting orders electronically via RCG’s proprietary electronic order routing system. Permitted Clients and Specified Corporate Hedger Clients may also be able to self-execute Exchange-Traded Futures orders electronically via an independent service vendor and/or other electronic trading routing. Permitted Clients and Specified Corporate Hedger Clients may also be able to execute Exchange-Traded Futures orders through third party brokers and then “give up” the transaction for clearance through RCG.

41.          RCG may execute a Permitted Client's and Specified Corporate Hedger Client’s order on the relevant Non-Canadian Exchange in accordance with the rules and customary practices of the exchange, or engage another broker to assist in the execution of orders. RCG will remain responsible for all executions when RCG is listed as the executing broker of record on the relevant Non-Canadian Exchange.

42.          RCG may perform both execution and clearing functions for trades in Exchange-Traded Futures or may direct that a trade executed by it be cleared through a carrying broker if RCG is not a clearing member of the Non-Canadian Exchange on which the trade is executed. Alternatively, the Permitted Client or the Specified Corporate Hedger Client will be able to direct that trades executed by RCG be cleared through clearing brokers not affiliated with RCG (each a Non-RCG Clearing Broker).

43.          If RCG performs only the execution of a Permitted Client’s or Specified Corporate Hedger Client’s Exchange-Traded Futures order and “gives-up” the transaction for clearance to a Non-RCG Clearing Broker, such clearing broker will also be required to comply with the rules of the exchanges of which it is a member and any relevant regulatory requirements, including requirements under the CFA as applicable. Each such Non-RCG Clearing Broker will represent to RCG, in an industry-standard give-up agreement, that it will perform its obligations in accordance with applicable laws, governmental, regulatory, self-regulatory, exchange and clearing house rules and the customs and usages of the exchange or clearing house on which the relevant Permitted Client's or Specified Corporate Hedger Client’s Exchange-Traded Futures order will be executed and cleared. RCG will not enter into a give-up agreement with any Non-RCG Clearing Broker located in the United States unless such clearing broker is registered with the CFTC and is registered or has obtained an exemption from the dealer registration requirement from the Commission.

44.          As is customary for all trades in Exchange-Traded Futures, a clearing corporation appointed by the exchange or clearing division of the exchange is substituted as a universal counterparty on all trades in Exchange-Traded Futures and Permitted Client and Specified Corporate Hedger Client orders that are submitted to the exchange in the name of the Non-RCG Clearing Broker or RCG or, on exchanges where RCG is not a member, in the name of another carrying broker. The Permitted Clients and the Specified Corporate Hedger Clients are responsible to RCG for payment of daily mark-to-market variation margin and/or proper margin to carry open positions and RCG, the carrying broker or the Non-RCG Clearing Broker is in turn responsible to the clearing corporation/division for payment.

45.          Permitted Clients and Specified Corporate Hedger Clients that direct RCG to give-up transactions in Exchange-Traded Futures for clearance and settlement by Non-RCG Clearing Brokers will execute the give-up agreements described above.

46.          Permitted Clients and Specified Corporate Hedger Clients will pay commissions for trades to the Applicants or the Non-RCG Clearing Broker, or such commissions may be shared by the Applicants with the Non-RCG Clearing Broker.

47.          The trading restrictions in the CFA apply unless, among other things, an Exchange-Traded Future is traded on a recognized or registered commodity futures exchange and the form of the contract is approved by the Director. To date, no Non-Canadian Exchanges have been recognized or registered under the CFA.

48.          If each of the Applicants were registered under the CFA as a “futures commission merchant”, they could rely upon certain exemptions from the trading restrictions in the CFA to effect trades in Exchange-Traded Futures to be entered into on certain Non-Canadian Exchanges.

AND UPON the Commission being satisfied that it would not be prejudicial to the public interest to do so;

IT IS RULED pursuant to section 38 of the CFA, that the Applicants are not subject to the dealer registration requirements set out in the CFA or the trading restrictions in the CFA in connection with trades in Exchange-Traded Futures where the Applicants are acting as principal or agent in such trades to, from or on behalf of Permitted Clients and Specified Corporate Hedger Clients provided that:

(a)           each client effecting trades in Exchange-Traded Futures is a Permitted Client or a Specified Corporate Hedger Client;

(b)           any Non-RCG Clearing Broker has represented and covenanted to RCG, and RCG has taken reasonable steps to verify, that it is appropriately registered under the CFA, is entitled to rely on an exemption under the CFA, or has been granted exemptive relief from the registration requirements in the CFA, in connection with the Permitted Client or Specified Corporate Hedger Client effecting Futures Trades;

(c)           the Applicants only introduce, in the case of the Introducing Brokers, and execute and clear, in the case of RCG, trades in Exchange-Traded Futures for Permitted Clients and Specified Corporate Hedger Clients on Non-Canadian Exchanges;

(d)           at the time trading activity is engaged in, RCG:

(i)            has its head office or principal place of business in the U.S.;

(ii)           is registered as an FCM with the CFTC;

(iii)          is a member firm of the NFA; and

(iv)          engages in the business of an FCM in Exchange-Traded Futures in the United States.

(e)           at the time trading activity is engaged in, each of the Introducing Brokers:

(i)            has its head office or principal place of business in the United States;

(ii)           is registered as an Introducing Broker with the CFTC;

(iii)          is a member firm of the NFA; and

(iv)          engages in the business of an introducing broker in Exchange-Traded Futures in the United States.

(f)            each of the Applicants has provided to the Permitted Client or the Specified Corporate Hedger Client the following disclosure (Client Disclosure Document) in writing:

(i)            a statement that the Applicant is not registered in Ontario to trade in Exchange-Traded Futures as principal or agent;

(ii)           a statement that the Applicant’s head office or principal place of business is located in the U.S.;

(iii)          a statement that all or substantially all of the Applicant’s assets may be situated outside of Canada;

(iv)          a statement that there may be difficulty enforcing legal rights against the Applicant because of the above;

(v)           the name and address of the Applicant’s agent for service of process in Ontario; and

(vi)          that any trading in the Exchange-Traded Futures with the Applicant are not protected by any investor protection scheme including the Canadian Investor Protection Fund or US Securities Investor Protection Corporation;

(g)           the Applicants have submitted to the Commission a completed Submission to Jurisdiction and Appointment of Agent for Service in the form attached as Appendix “A” hereto;

(h)           each of the Applicants shall notify the Commission of any regulatory action initiated after the date of this ruling in respect of themselves, or any predecessors or specified affiliates of the applicable Applicant, by completing and filing with the Commission Appendix “B” hereto within ten days of the commencement of such action;

(i)            if RCG does not rely on the international dealer exemption in section 8.18 of NI 31-103, by December 31st of each year, RCG shall pay a participation fee based on its specified Ontario revenues for its previous financial year in compliance with the requirements of Part 3 and section 6.4 of OSC Rule 13-502 Fees as if RCG relied on the international dealer exemption;

(j)            if the applicable Introducing Broker does not rely on the international dealer exemption in section 8.18 of NI 31-103, by December 31st of each year, the applicable Introducing Broker shall pay a participation fee based on its specified Ontario revenues for its previous financial year in compliance with the requirements of Part 3 and section 6.4 of OSC Rule 13-502 Fees as if the applicable Introducing Broker relied on the international dealer exemption;

(k)           by December 1st of each year, each Applicant shall notify the Commission of its continued reliance on the exemption from the dealer registration requirement granted pursuant to this Decision by filing Form 13-502F4 Capital Markets Participation Fee Calculation;

(l)            with regards to the Specified Corporate Hedger Clients, the Applicants shall:

(i)            take reasonable steps to confirm that the customer is a bona fide hedger for such trading activities and shall not solely rely on a customer’s self-certification of its hedger status;

(ii)           as part of its account-opening procedures, require clients resident in Ontario to represent the following: a) it is a Specified Corporate Hedger Client; b) it acknowledges that this representation is deemed to be repeated by it each time it enters an order for an Exchange-Traded Futures and that the customer must be a Specified Corporate Hedger Client for the purposes of each trade resulting from such an order; c) it is only seeking to trade in Exchange-Traded Futures on Non-Canadian Exchanges; d) the client agrees to notify the Applicants if it ceases to be a Specified Corporate Hedger Client; and e) the client represents that it will only enter orders for its own account.

(m)          RCG, on behalf of itself and the Introducing Brokers, shall submit to the Commission no more than 30 days after its fiscal year end, a certificate which would include the following information:

(i)            full name, address (including postal code) and telephone number of the dealer and any individual acting on behalf of the dealer that entered into the contract on the instructions of the Specified Corporate Hedger Client;

(ii)           full name and address (including postal code) of the Specified Corporate Hedger Client;

(iii)          annual cumulative trading data for the Specified Corporate Hedger Client setting out the futures contracts traded and on which exchange;

(iv)          a signed statement from the Specified Corporate Hedger Client confirming that (x) it is a Specified Corporate Hedger Client; and (y) that it has entered into the futures trades disclosed solely for the purposes of hedging; and

(v)           a signed statement from the Chief Compliance Officer of RCG or designate, confirming that (x) they have all necessary inquiries to determine whether the client qualifies as a Specified Corporate Hedger Client and (y) have complied with all of the requirements of this Decision with respect to the trades described in the form;

(n)           this Decision will terminate on the earliest of:

(i)            the expiry of any transition period as may be provided by operation of law, after the effective date of the repeal of the CFA;

(ii)           six months, or such other transition period as provided by operation of law, after the coming into force of any amendment to Ontario commodity futures law or Ontario securities law (as defined in the OSA) that affects the dealer registration requirements in the CFA or the trading restrictions in the CFA; and

(iii)          five years after the date of this Decision.

AND IT IS FURTHER RULED, pursuant to section 38 of the CFA, that neither a Permitted Client nor a Specified Corporate Hedger Client is subject to the dealer registration requirement in the CFA or the trading restrictions in the CFA in connection with trades in Exchange-Traded Futures on Non-Canadian Exchanges where the Applicants acts in connection with trades in Exchange-Traded Futures on behalf of the Permitted Clients and Specified Corporate Hedger Clients pursuant to the above ruling.

January 9, 2018

“Grant Vingoe”                                                                                     “Timothy Moseley”

Vice-Chair                                                                                             Vice-Chair

Ontario Securities Commission                                                       Ontario Securities Commission

APPENDIX “A”

SUBMISSION TO JURISDICTION AND APPOINTMENT OF AGENT FOR SERVICE

INTERNATIONAL DEALER OR INTERNATIONAL ADVISER EXEMPTED FROM

REGISTRATION UNDER THE COMMODITY FUTURES ACT, ONTARIO

1.             Name of person or company ("International Firm"):

2.             If the International Firm was previously assigned an NRD number as a registered firm or an unregistered exempt international firm, provide the NRD number of the firm:

3.             Jurisdiction of incorporation of the International Firm:

4.             Head office address of the International Firm:

5.             The name, e-mail address, phone number and fax number of the International Firm's individual(s) responsible for the supervisory procedure of the International Firm, its chief compliance officer, or equivalent.

Name:

E-mail address:

Phone:

Fax:

6.             The International Firm is relying on an exemption order under section 38 or section 80 of the Commodity Futures Act (Ontario) that is similar to the following exemption in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (the "Relief Order"):

  Section 8.18 [international dealer]

  Section 8.26 [international adviser]

  Other [specify]:

7.             Name of agent for service of process (the "Agent for Service"):

8.             Address for service of process on the Agent for Service:

9.             The International Firm designates and appoints the Agent for Service at the address stated above as its agent upon whom may be served a notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal or other proceeding (a "Proceeding") arising out of or relating to or concerning the International Firm's activities in the local jurisdiction and irrevocably waives any right to raise as a defence in any such proceeding any alleged lack of jurisdiction to bring such Proceeding.

10.          The International Firm irrevocably and unconditionally submits to the non-exclusive jurisdiction of the judicial, quasi-judicial and administrative tribunals of the local jurisdiction in any Proceeding arising out of or related to or concerning the International Firm's activities in the local jurisdiction.

11.          Until 6 years after the International Firm ceases to rely on the Relief Order, the International Firm must submit to the regulator

a.             a new Submission to Jurisdiction and Appointment of Agent for Service in this form no later than the 30th day before the date this Submission to Jurisdiction and Appointment of Agent for Service is terminated;

b.             an amended Submission to Jurisdiction and Appointment of Agent for Service no later than the 30th day before any change in the name or above address of the Agent for Service;

c.             a notice detailing a change to any information submitted in this form, other than the name or above address of the Agent for Service, no later than the 30th day after the change.

12.          This Submission to Jurisdiction and Appointment of Agent for Service is governed by and construed in accordance with the laws of the local jurisdiction.

Dated: _______________

________________________________________________

(Signature of the International Firm or authorized signatory)

________________________________________________

(Name of signatory)

________________________________________________

(Title of signatory)

Acceptance

The undersigned accepts the appointment as Agent for Service of _______________ [Insert name of International Firm] under the terms and conditions of the foregoing Submission to Jurisdiction and Appointment of Agent for Service.

Dated: ____________________

________________________________________________

(Signature of the Agent for Service or authorized signatory)

________________________________________________

(Name of signatory)

________________________________________________

(Title of signatory)

This form, and notice of a change to any information submitted in this form, is to be submitted through the Ontario Securities Commission’s Electronic Filing Portal:

https://www.osc.gov.on.ca/filings

APPENDIX “B”

NOTICE OF REGULATORY ACTION

1.             Has the firm, or any predecessors or specified affiliates[1] of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, SRO or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?

Yes _____ No _____

If yes, provide the following information for each settlement agreement:

2.             Has any financial services regulator, securities or derivatives exchange, SRO or similar organization:

If yes, provide the following information for each action:

3.             Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliates is the subject?

Yes _____ No _____

If yes, provide the following information for each investigation:

Witness

The witness must be a lawyer, notary public or commissioner of oaths.

This form is to be submitted through the Ontario Securities Commission’s Electronic Filing Portal:

https://www.osc.gov.on.ca/filings