(a) Internal rules, procedures, and controls required. A banking
institution engaging in retail forex transactions shall establish
and implement internal rules, procedures, and controls designed, at
a minimum, to:
(1) Ensure, to the extent reasonable, that each order
received from a retail forex customer that is executable at or near
the price that the banking institution has quoted to the customer
is entered for execution before any order in any retail forex transaction
for:
(i) A proprietary account;
(ii) An account in which
a related person has an interest, or any account for which such a
related person may originate orders without the prior specific consent
of the account owner, if the related person has gained knowledge of
the retail forex customer’s order prior to the transmission of an
order for a proprietary account;
(iii) An account in which a related
person has an interest, if the related person has gained knowledge
of the retail forex customer’s order prior to the transmission of
an order for a proprietary account; or
(iv) An account in which a related person
may originate orders without the prior specific consent of the account
owner, if the related person has gained knowledge of the retail forex
customer’s order prior to the transmission of an order for a proprietary
account;
(2) Prevent banking institution related persons from placing orders,
directly or indirectly, with another person in a manner designed to
circumvent the provisions of paragraph (a)(1) of this section; and
(3) Fairly and objectively
establish settlement prices for retail forex transactions.
(b) Disclosure of retail
forex transactions. No banking institution engaging in retail
forex transactions may disclose that an order of another person is
being held by the banking institution, unless the disclosure is necessary
to the effective execution of such order or the disclosure is made
at the request of the Board.
(c) Handling of retail forex accounts of related
persons of retail forex counterparties. No banking institution
engaging in retail forex transactions shall knowingly handle the retail
forex account of any related person of another retail forex counterparty
unless the banking institution:
(1) Receives written authorization from
a person designated by such other retail forex counterparty with responsibility
for the surveillance over such account;
(2) Prepares immediately upon receipt of
an order for the account a written record of the order, including
the account identification and order number, and records thereon to
the nearest minute, by time-stamp or other timing device, the date
and time the order is received; and
(3) Transmits on a regular basis to the
other retail forex counterparty copies of all statements for the account
and of all written records prepared upon the receipt of orders for
the account pursuant to paragraph (c)(2) of this section.
(d) Related person of banking
institution establishing account at another retail forex counterparty. No related person of a banking institution working in the banking
institution’s retail forex business may have an account, directly
or indirectly, with another retail forex counterparty unless the other
retail forex counterparty:
(1) Receives written authorization to open
and maintain the account from a person designated by the banking institution
of which it is a related person with responsibility for the surveillance
over the account pursuant to paragraph (a)(2) of this section;
(2) Prepares immediately
upon receipt of an order for the account a written record of the order,
including the account identification and order number, and records
thereon to the nearest minute, by time-stamp or other timing device,
the date and time the order is received; and
(3) Transmits on a regular basis to the
banking institution copies of all statements for the account and of
all written records prepared by the other retail forex counterparty
upon receipt of orders for such account pursuant to paragraph (d)(2)
of this section.
(e) Prohibited trading practices. No banking
institution engaging in retail forex transactions may:
(1) Enter into a retail forex transaction,
to be executed pursuant to a market or limit order at a price that
is not at or near the price at which other retail forex customers, during that
same time period, have executed retail forex transactions with the
banking institution;
(2) Adjust or alter prices for a retail forex transaction after the
transaction has been confirmed to the retail forex customer;
(3) Provide a retail forex
customer a new bid price for a retail forex transaction that is higher
than its previous bid without providing a new asked price that is
also higher than its previous asked price by a similar amount;
(4) Provide a retail forex
customer a new bid price for a retail forex transaction that is lower
than its previous bid without providing a new asked price that is
also lower than its previous asked price by a similar amount; or
(5) Establish a new position
for a retail forex customer (except one that offsets an existing position
for that retail forex customer) where the banking institution holds
outstanding orders of other retail forex customers for the same currency
pair at a comparable price.
