Securities Law & Instruments

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 Applicant is acting as principal or agent in such trades to, from or on behalf of Permitted Clients -- relief subject to sunset clause.

Statutes Cited

Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 1, 14, 22, 32, 33, 38.

July 3, 2020

IN THE MATTER OF THE COMMODITY FUTURES ACT, R.S.O. 1990, c. C.20, AS AMENDED (the CFA) AND IN THE MATTER OF INTL FCSTONE LTD.

RULING (Section 38 of the CFA)

UPON the application by INTL FCStone Ltd. (the Filer) to the Ontario Securities Commission (the Commission) for

(a) a ruling of the Commission, pursuant to Section 38 of the CFA, that the Filer is 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 Non-Canadian Exchanges (as defined below) where the Filer is acting as principal or agent in such trades to, from or on behalf of Permitted Clients (as defined below); and

(b) a ruling of the Commission, pursuant to section 38 of the CFA, that a Permitted Client is not 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 Filer acts in respect of the trades in Exchange-Traded Futures on behalf of the Permitted Client pursuant to the above ruling (the Requested Relief);

AND WHEREAS for the purposes of this ruling and exemption (collectively, the Decision):

(i)

"CFTC" means the U.S. 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;

"EEA" means European Economic Area;

"EEA Member States" means Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the U.K.;

"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;

"FCA" means the U.K. Financial Conduct Authority;

"FCA Handbook" means the U.K. Financial Conduct Authority's Handbook of rules and guidance;

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

"Investment Firm" means an entity authorised and regulated in the EU in order to provide investment services;

"NFA" means the National Futures Association in the U.S.;

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

"Non-Canadian Exchanges" means exchanges located outside Canada;

"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 U.S. Securities and Exchange Commission;

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

"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.K." means the United Kingdom of Great Britain and Northern Ireland;

"U.S." means the United States of America; and

(ii) terms used in this Decision that are defined in the OSA, and not otherwise defined in this Decision or in the CFA, 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 Filer having represented to the Commission and the Director as follows:

1. The Filer is a company incorporated under the laws of England and Wales. Its registered and head office is located at 1st Floor, Moor House, 120 London Wall, London EC2Y 5ET U.K.

2. The Filer is not a reporting issuer in any jurisdiction of Canada.

3. The Filer is a wholly-owned subsidiary of INTL FCStone Inc. which is a public corporation which is listed on the NASDAQ under the ticker symbol INTL.

4. The Filer is authorized and regulated by the FCA to provide the following regulated products to eligible counterparties and professional clients:

(a) Certificates representing certain security

(b) Commodity Future

(c) Commodity option and option on commodity future

(d) Contract for Differences (excluding a spread bet and, a rolling spot forex contract and a binary bet)

(e) Debenture

(f) Future (excluding a commodity future and a rolling spot forex contract)

(g) Government and public security

(h) Option (excluding a commodity option and an option on a commodity future)

(i) Rights to or interests in investments (Contractually Based Investments)

(j) Rights to or interests in investments (Security)

(k) Rolling spot forex contract

(l) Share

(m) Unit

(n) Warrant

The Filer is also registered with the CFTC as an Introducing Broker and foreign exempt firm and member of the NFA.

5. The Filer is a member of major international securities and commodity futures exchanges and clearing houses, including Eurex, Eurex Clearing, Euronext Derivatives, European Commodity Clearing AG (ECC), European Energy Exchange AG (EEX), ICE Clear Europe Limited, ICE Futures Europe, LCH Clearnet SA, LME Clear Limited, London Metal Exchange and Norexco.

6. The Filer is relying on the international dealer exemption in section 8.18 of NI 31-103 in Ontario and Québec. The Filer is not registered pursuant to securities or commodity futures legislation in any jurisdiction of Canada.

7. The Filer provides futures clearing and execution services to various institutional customers.

8. The Filer is not in default of securities legislation in any jurisdiction in Canada or under the CFA, subject to the matter to which this Decision relates. The Filer is in compliance in all material respects with U.K. securities and commodity futures laws.

9. Pursuant to its registrations and memberships, the Filer is authorized to handle customer orders and receive and hold customer margin deposits, and otherwise act as an Investment Firm. The rules of the FCA require the Filer 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, trading limits, counterparty credit due diligence, delivery of confirmation statements, clearing deposits and initial and maintenance margins. These rules require the Filer to treat Permitted Clients materially the same as its EEA customers with respect to transactions made on exchanges in the U.K. and EEA Member States. In order to protect customers in the event of the insolvency or financial instability of the Filer, the Filer complies with the Client Asset rules contained in the FCA Handbook, which ensure that cash balances are treated as client money and as such are segregated from the Filer's own money. The Filer does not accept securities from clients as collateral for the purposes of clearing financial derivatives. Where the Filer accepts securities from clients, the securities would be treated as custody and as such, segregated and held separately from the Filer's own securities.

In accordance with FCA rules, the Filer treats affiliates as arm's length customers. Money belonging to customers that are affiliates is held alongside money belonging to non-affiliate customers. Affiliates' money is not held separately, but together within the client money pool.

Client money and securities are custodied exclusively with such banks, trust companies, clearing organizations or other licensed futures brokers and intermediaries as may be approved for such purposes.

FCA rules specifically require:

• any banks, trust companies or other licensed futures brokers and intermediaries to acknowledge that client money held is held on behalf of the Filer's clients and cannot be set-off against any amount the Filer may owe to the bank or Investment Firm;

• in the case of clearing organizations that are approved Central Counterparties (QCCPs), that the Filer sends the QCCP such a statement, but the QCCP is not required to acknowledge the statement.

10. Certain of the Permitted Clients of the Filer have requested to trade in Exchange-Traded Futures through the Filer and the Filer has traded for such Permitted Clients in Exchange Traded Futures in the past, and wishes to continue to do so upon such Permitted Clients' request.

11. The Filer has and wishes to continue to execute and clear trades in Exchange-Traded Futures on behalf of Permitted Clients in Ontario in the same manner that it executes and clears trades on behalf of its U.K. clients and EEA clients, all of which are "Eligible Counterparty" or "Professional Clients" as defined in the FCA Handbook. The Filer will follow the same know-your-customer and segregation of assets procedures that it follows in respect of its U.K. clients and EEA clients. Permitted Clients will be afforded the benefits of compliance by the Filer with the requirements of the FCA Handbook and the regulations thereunder. Permitted Clients in Ontario will have the same contractual rights against the Filer as U.K. clients of the Filer.

12. The Filer is required under U.K. securities laws to categorize its clients using three categories (who are afforded a descending level of regulatory protection): (1) retail clients; (2) professional clients; and (3) eligible counterparties. Permitted Clients would generally fall into the categories of "professional clients" and "eligible counterparties". The levels of regulatory protection afforded to these categories of clients are substantially similar to those afforded to Permitted Clients. The Filer is not permitted to provide investment services to clients that are categorized as retail clients.

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

14. The Filer will solicit trades in Exchange-Traded Futures in Ontario only from persons who qualify as Permitted Clients.

15. Permitted Clients of the Filer will only be offered the ability to effect trades in Exchange-Traded Futures on Non-Canadian Exchanges.

16. The Exchange-Traded Futures to be traded by Permitted Clients will include, but will not be limited to, Exchange-Traded Futures for equity index, single stock equity, interest rate, foreign exchange, bond, energy, environmental, agricultural and other commodity products.

17. Permitted Clients of the Filer in Ontario will be able to trade Exchange-Traded Futures through the Filer by communicating with the Filer's authorized representatives or via the Filer's proprietary electronic order routing system. Permitted Clients may also be able self-execute trades in Exchange-Traded Futures electronically via an independent service vendor and/or other electronic trading order routing systems.

18. The Filer may execute a Permitted 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. The Filer will remain responsible for all executions when the Filer is listed as the executing broker of record on the relevant Non-Canadian Exchange.

19. The Filer 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 the Filer is not a clearing member of the Non-Canadian Exchange on which the trade is executed and cleared. Alternatively, the Permitted Client of the Filer will be able to direct that trades executed by the Filer be cleared through clearing brokers not affiliated with the Filer in any way (each a Non-INTL FCStone Clearing Broker).

20. If the Filer perform only the execution of a Permitted Client's Exchange-Traded Futures order and "give-up" the transaction for clearance to a Non-INTL FCStone 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-INTL FCStone Clearing Broker will represent to the Filer, 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 Exchange-Traded Futures order will be executed and cleared. The Filer will not enter into a give-up agreement with any Non-INTL FCStone Clearing Broker located in (i) the U.S. unless such clearing broker is registered with the CFTC and/or the SEC, as applicable, or (ii) the U.K. unless such clearing broker is authorized by the FCA, as required.

21. 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 orders that are submitted to the exchange in the name of the Non-INTL FCStone Clearing Broker or the Filer or, on exchanges where the Filer is not a member, in the name of another carrying broker. The Permitted Client of the Filer is responsible to the Filer for payment of daily mark-to-market variation margin and/or proper margin to carry open positions and the Filer, the carrying broker or the Non-INTL FCStone Clearing Broker is in turn responsible to the clearing corporation/division for payment. Note however, that where a Permitted Client of the Filer is not also a member of the LME, a Client Contract subject to the Rules of the LME will come into effect between the Filer and the Permitted Client.

22. Permitted Clients that direct the Filer to give up transactions in Exchange-Traded Futures for clearance and settlement by Non-INTL FCStone Clearing Brokers will execute the give-up agreements described above.

23. Permitted Clients will pay commissions for trades to the Filer. In the event that a Permitted Client directs the Filer to give-up a trade to Permitted Client's Non-INTL FCStone Clearing Broker(s), the Permitted Client will be responsible for any fees levied by the Non-INTL FCStone Clearing Broker. Where the Filer itself directs Permitted Client's orders to, and utilizes the services of, a Non-INTL FCStone Clearing Broker for clearing or execution at its own initiative, that Filer will generally be responsible for any fees levied by the Non-FCStone Clearing Broker.

24. 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.

25. If the Filer were registered under the CFA as a "futures commission merchant", it 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 and Director being satisfied that it would not be prejudicial to the public interest to grant the exemptions requested;

IT IS RULED, pursuant to section 38 of the CFA, that the Filer is 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 Filer is acting as principal or agent in such trades to, from or on behalf of Permitted Clients provided that:

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

(b) any Non-INTL FCStone Clearing Broker has represented and covenanted to the applicable Filer that it is appropriately registered or exempt from registration under the CFA;

(c) the Filer only execute and clear trades in Exchange-Traded Futures for Permitted Clients on Non-Canadian Exchanges;

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

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

(ii) is authorised and regulated by the FCA; and

(iii) engages in the business of a futures commission merchant in Exchange-Traded Futures in the U.K.;

(e) the Filer has provided to the Permitted Client the following disclosure in writing:

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

(ii) a statement that the Filer's head office or principal place of business is located in London, U.K.;

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

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

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

(f) the Filer has submitted to the Commission a completed Submission to Jurisdiction and Appointment of Agent for Service in the form attached as Appendix "A" hereto;

(g) the Filer notifies the Commission of any regulatory action initiated after the date of this ruling in respect of the Filer, or any predecessors or specified affiliates of the Filer, by completing and filing with the Commission Appendix "B" hereto within ten days of the commencement of such action;

(h) if the Filer does not rely on the international dealer exemption by December 31st of each year, each of the Filer pays 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 Filer relied on the international dealer exemption;

(i) by December 1st of each year, the Filer notifies 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; and

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

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

(ii) six months, or such other transition period as may be provided by law, after the coming into force of any amendment to Ontario commodity futures law (as defined in the CFA) 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 a Permitted Client is not 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 Filer acts in connection with trades in Exchange-Traded Futures on behalf of the Permitted Clients pursuant to the above ruling.

Date: July 3, 2020

"Commissioner Lawrence Haber"
"Commissioner Frances Kordyback"
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; and

(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}

1. Has the firm, or any predecessors or specified affiliates 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:

- - - - - - - - - - - - - - - - - - - -

Name of entity

Regulator/organization

Date of settlement (yyyy/mm/dd)

Details of settlement

Jurisdiction

- - - - - - - - - - - - - - - - - - - -

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

Yes

No

(a)

Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization?

_____

_____

(b)

Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission?

_____

_____

(c)

Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm?

_____

_____

(d)

Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm?

_____

_____

(e)

Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm?

_____

_____

(f)

Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm?

_____

_____

(g)

Issued an order (other than an exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)?

_____

_____

If yes, provide the following information for each action:

Name of entity

Type of action

Regulator/organization

Date of action (yyyy/mm/dd)

Reason for action

Jurisdiction

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

Yes

_____

No

_____

If yes, provide the following information for each investigation:

- - - - - - - - - - - - - - - - - - - -

Name of entity

Reason or purpose of investigation

Regulator/organization

Date of investigation commenced (yyyy/mm/dd)

Jurisdiction

- - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - -

Name of firm:

Name of firm's authorized signing officer or partner

Title of firm's authorized signing officer or partner

Signature

Date (yyyy/mm/dd)

- - - - - - - - - - - - - - - - - - - -

Witness

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

- - - - - - - - - - - - - - - - - - - -

Name of witness

Title of witness

Signature

Date (yyyy/mm/dd)

- - - - - - - - - - - - - - - - - - - -

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

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

{1} Terms defined for the purposes of Form 33-506F6 Firm Registration to Ontario Securities Commission Rule 33-506 (Commodity Futures Act) Registration Information have the same meaning if used in this Appendix except that any reference to "firm" means the person or company relying on relief from the requirement to register as an adviser or dealer under the Commodity Futures Act (Ontario).