Deutsche Bank Securities Inc. - s. 38

Headnote

The Applicant will offer to certain of its clients in Ontario (Institutional Clients) the ability to trade in futures contracts that trade on exchanges located outside Canada through the Applicant. The Institutional Clients are the same as "designated institutions" as that term is defined in section 204(1) of Ont. Reg. 1015 -- General Regulation made under the Securities Act (Ontario) (OSA).

Relief granted to permit the Applicant to execute trades in exchange-traded futures for its own account as well as those placed by its Institutional Clients in Ontario on a basis that it is exempt from registration, except that the Applicant is, and will continue to be, registered as an international dealer under the OSA.

Statutes Cited

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

IN THE MATTER OF

THE COMMODITY FUTURES ACT,

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

(the Act)

AND

IN THE MATTER OF

DEUTSCHE BANK SECURITIES INC.

ORDER

(Section 38 of the Act)

UPON the application (the Application) of the Deutsche Bank Securities Inc. (the Applicant) to the Ontario Securities Commission (the Commission), in connection with trades (Futures Trades) in commodity futures contracts and options on commodity futures contracts (collectively, Futures Contracts) that trade on certain exchanges located outside Canada (Exchange Traded Futures) for its own account and by certain of its clients who fall within the category of investors listed in Appendix I to this Order (Institutional Clients), for an order pursuant to section 38 of the Act;

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

1. The Applicant is a corporation incorporated under the laws of the state of Delaware. Its head office is located at 60 Wall Street, New York, New York, 10005.

2. The Applicant is a subsidiary of Deutsche Bank AG which is domiciled in Frankfurt, Germany. Deutsche Bank AG was formed by the re-amalgamation of Norddeutsche Bank AG, Deutsche Bank AG West and Süddeutsche Bank AG, which had been founded in 1952 as successor institutions to the former Deutsche Bank. Deutsche Bank AG and its subsidiaries provide a range of investment banking products and services worldwide. In Canada, Deutsche Bank operates through Deutsche Bank AG, Canada branch.

3. The Applicant is a broker-dealer registered with the U.S. Securities and Exchange Commission (U.S. SEC), a member of the U.S. National Association of Securities Dealers, Inc. (U.S. NASD), a registered futures commission merchant with the U.S. Commodity Futures Trading Commission (U.S. CFTC), and a member of the U.S. National Futures Association (U.S. NFA).

4. The Applicant is one of 23 firms registered with the Federal Reserve Bank of New York as a primary dealer in U.S. Government securities. It is a market maker for U.S. agency securities and acts as broker for customers buying and selling equity and/or debt securities, and as a broker for futures and options on futures contracts. Its clients include financial institutions, corporations and hedge funds.

5. The Applicant is also a member of the American Stock Exchange, the Boston Stock Exchange, the Chicago Board Options Exchange, the CME Group (includes the Chicago Board of Trade), the Chicago Stock Exchange, the New York Board of Trade (includes FINEX), the New York Mercantile Exchange (includes COMEX), the New York Stock Exchange, the Philadelphia Board of Trade, The Pacific Exchange, Inc. and the Philadelphia Stock Exchange.

6. In Ontario, where a foreign dealer may register as an international dealer, the Applicant has obtained such registration under the Securities Act (Ontario).

7. The Applicant proposes to (a) trade in Exchange-Traded Futures for its own account, and (b) offer certain of its Institutional Clients in Ontario the ability to trade in Exchange-Traded Futures through the Applicant.

8. The Applicant will solicit business only from persons in Ontario who qualify as Institutional Clients.

9. Institutional Clients of the Applicant will only be offered the ability to trade Exchange-Traded Futures trading on exchanges located outside Canada (the Recognised Exchanges).

10. The Exchange-Traded Futures to be traded by Institutional Clients will include, but will not be limited to, Futures Contracts for equity index, interest rate, energy, agricultural and other commodity products.

11. Institutional Clients will be able to execute trades in Exchange-Traded Futures through the Applicant by contacting the Applicant's exchange floor staff or global execution desk. Institutional Clients may also be able to self execute trades electronically in Exchange Traded Futures via an independent service vendor and/or other electronic trading routing.

12. The Applicant may execute a client's order on the relevant Recognized Exchange in accordance with the rules and customary practices of the exchange, or engage another broker to assist in the execution of orders. The Applicant will remain responsible for the execution of each such trade.

13. The Applicant may perform both execution and clearing functions for Futures Trades or may direct that a trade executed by it be cleared through a carrying broker if the Applicant is not a member of the Recognized Exchange on which the trade is executed. Alternatively, the client will be able to direct that trades executed by the Applicant be cleared through clearing brokers not affiliated with the Applicant in any way (each a Non-DBSI Clearing Broker).

14. If the Applicant performs only the execution of a client's Futures Contract order and "gives-up" the transaction for clearance to a Non-DBSI 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 Act as applicable. Each such Non-DBSI Clearing Broker will represent to the Applicant in a 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 client's Futures Contract orders will be executed and cleared. The Applicant will not enter into a give-up agreement with any Non-DBSI Clearing Broker located in the United States unless such clearing broker is registered with the U.S. CFTC and/or U.S. SEC, as applicable.

15. As is customary for all trading 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 Futures Contracts and client orders are submitted to the exchange in the name of the Non-DBSI Clearing Broker or the Applicant or, on exchanges where the Applicant is not a member, in the name of another carrying broker. The client is responsible to the Applicant for payment of daily mark-to-market variation margin and/or proper margin to carry open positions and the Applicant, the carrying broker or the Non-DBSI Clearing Broker is in turn responsible to the clearing corporation/division for payment.

16. Clients that direct the Applicant to give up transactions in Exchange-Traded Futures for clearance and settlement by Non-DBSI Clearing Brokers will execute the give-up agreements described above.

17. Clients will pay commissions for trades to the Applicant or the Non-DBSI Clearing Broker or such commissions may be shared with the Non-DBSI Clearing Broker.

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

AND UPON the Commission being satisfied that it would not be prejudicial to the public interest to grant the order requested;

IT IS ORDERED pursuant to section 38 of the Act that the Applicant be exempted from the dealer registration requirements set out in the Act in connection with Exchange-Traded Futures for its own account and by certain of its clients who fall within the category of Institutional Clients, provided that:

(a) at the time trading activity is engaged in:

(i) the Applicant is registered with the U.S. SEC as a broker-dealer and with the U.S. CFTC as a futures commission merchant and is a member of the U.S. NASD and the U.S. NFA in good standing; and

(ii) the Applicant is registered as an international dealer under the Securities Act (Ontario); and

(b) each client in Ontario effecting Futures Trades is an Institutional Client and, if using a Non-DBSI Clearing Broker, has represented and covenanted that the broker is or will be appropriately registered or exempt from registration under the Legislation;

(c) the Applicant only executes Futures Trades for Ontario clients on exchanges located outside Canada, unless such Futures Trades are routed through an agent that is a dealer registered in Ontario under the Act; and

(d) each client in Ontario effecting Futures Trades receives disclosure upon entering into the agreement by which it establishes an account with the Applicant that includes:

(i) a statement that there may be difficulty in enforcing any legal rights against the Applicant or any of its directors, officers or employees because they are resident outside of Canada and all or substantially all of their assets are situated outside of Canada; and

(ii) a statement that the Applicant is not registered under Ontario commodities futures legislation and, accordingly, the protection available to clients of a dealer registered under such commodities futures legislation will not be available to clients of the Applicant.

December 7, 2007

Appendix 1

INSTITUTIONAL CLIENTS

In this Order, "Institutional Client" means:

a) a financial intermediary;

b) the Federal Business Development Bank;

c) a subsidiary of any company referred to in clause (a) or (b), where the company beneficially owns all of the voting securities of the subsidiary;

d) the Government of Canada or any province or territory of Canada;

e) any municipal corporation or public board or commission in Canada;

f) a mutual fund, other than a private mutual fund, having net assets of at least $5,000,000;

g) a trusteed pension plan or fund sponsored by an employer for the benefit of its employees and having net assets of at least $5,000,000;

h) a registered dealer;

i) a company or person, other than an individual, that is an accredited investor as defined in section 1.1 of National Instrument 45-106 Prospectus and Registration Exemptions; and

j) a person or company deemed to be a "designated institution" under subsection 204(2) of Ont. Reg. 1015 -- General Regulation made under the Securities Act (Ontario).