Ruken Family Office Corporation – 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 to the Filer, a commercial end user, in connection with certain trades in Electricity Contracts on, or through the facilities of, Non-Canadian Exchanges that are conducted by the Filer as principal for its own account -- relief subject to sunset clause.
Statutes Cited
Commodity Futures Act, R.S.O. 1990, c. C.20, as am., ss. 22, 33 and 38.
IN THE MATTER OF THE COMMODITY FUTURES ACT, R.S.O. 1990, c. C.20, AS AMENDED (the CFA) AND IN THE MATTER OF RUKEN FAMILY OFFICE CORPORATION (the Filer)
RULING
(Section 38 of the CFA)
UPON the application (the Application) of the Filer to the Ontario Securities Commission (the Commission) for a ruling of the Commission pursuant to section 38 of the CFA (the Ruling) that the Filer be exempted from the dealer registration requirements in the CFA (as defined below) and the trading restrictions in the CFA (as defined below) in connection with trades in Electricity Contracts (as defined below) on, or through the facilities of, exchanges located outside Canada (Non-Canadian Exchanges) that are conducted by the Filer as principal for its own account:
(a) through a person or company (i) relying on the exemption from the dealer registration requirements in the CFA and the trading restrictions in the CFA contained in Ontario Securities Commission Rule 32-506 (Under the Commodity Futures Act) Exemptions for International Dealers, Advisers and Sub-Advisers (32-506) or in an order of the Commission and (ii) registered, licensed or otherwise authorized under the laws of the United States of America to act as a dealer with respect to trades in Electricity Contracts on the relevant Non-Canadian Exchange (a US Registrant); or
(b) as a direct electronic access trade that is made on, or through the facilities of, a Non-Canadian Exchange that has obtained from the Commission an order granting an exemption from the requirement to be recognized as an exchange under the OSA (as defined below) and the requirement to be registered as a commodity futures exchange under the CFA (a Direct Access Trade).
AND WHEREAS for the purposes of this Ruling:
(i) "CISO" means the California Independent System Operator;
"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;
"Electricity Contract" means an Exchange-Traded Futures that has an electricity price as its underlying interest;
"Exchange-Traded Futures" means a commodity futures contract or a commodity futures option that trades on, or through the facilities of, one or more Non-Canadian Exchanges and that is cleared through one or more clearing corporations located outside of Canada;
"NCE Exemption" means any order granting an exemption from the requirement to be recognized as a stock exchange under the OSA (as defined below) and the requirement to be registered as a commodity futures exchange under the CFA that has been granted by the Commission to a Non-Canadian Exchange;
"NYISO" means New York Independent System Operator;
"OSA" means the Securities Act (Ontario); and
"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; and
(ii) terms used in this Ruling that are defined in the OSA, and not otherwise defined in this Ruling 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 Filer having represented to the Commission as follows:
1. The Filer is incorporated under the Business Corporations Act (Ontario).
2. The Filer's principal office is located in Toronto, Ontario.
3. The Filer is entirely owned and operated by Mr. Abdalla Ruken. Mr. Ruken was formerly registered with the Commission and the Alberta Securities Commission as an advising representative (portfolio manager).
4. The Filer is a proprietary trading firm funded by Mr. Ruken and his wife and children, and trades in listed securities, commodity futures and exchange-traded funds. The Filer does not invest on behalf of any other person or company or advise any person or company with respect to securities, commodity futures or derivatives.
5. The Filer is not registered under the securities, commodity futures or derivatives legislation of any of the provinces or territories of Canada in any capacity. The Filer trades through a dealer that is appropriately registered, or relies on an exemption from registration, under the OSA and the CFA for such trades.
6. The Filer is not in default of securities, commodity futures or derivatives legislation in any province or territory of Canada.
7. The Filer is a "CFA permitted client", as that term is defined in 32-506.
8. The Filer intends for one its primary strategies to be trading in Electricity Contracts.
9. The Filer is an approved participant in two wholesale electricity markets: the wholesale electricity market managed by the NYISO, a not-for-profit independent company responsible for managing New York State's electric grid and its competitive wholesale electric marketplace and the wholesale electricity market managed by the CISO, a not-for-profit company which oversees the operation of California's bulk electric power system, transmission lines, and electricity market generated and transmitted by its member utilities.
10. The Filer wishes to engage in the trading of Electricity Contracts on Non-Canadian Exchanges for three reasons:
a. To hedge the Filer's price risks as a participant on the NYISO's and the CISO's virtual power marketplace;
b. To engage in financial spread trading between Ontario and certain U.S. jurisdictions and to hedge the commodity price risk exposure of its Ontario short and long positions; and
c. To trade for profit based on the Filer's views of electricity prices in different geographic locations.
11. The Filer does not currently trade in Electricity Contracts on any Non-Canadian Exchange. The Filer seeks to trade for its own account and not in an intermediary capacity.
12. When trading Electricity Contracts on, or through the facilities of, Non-Canadian Exchanges, the Filer intends to utilize the clearing and settlement services that are available from its prime clearing member, a US Registrant. Trades in Electricity Contracts by the Filer would be subject to the US Registrant's credit and risk control infrastructure which seeks to mitigate the risks associated with the Filer's trading activities.
13. The Filer seeks the Ruling to allow the Filer to conduct Direct Access Trades with a Non-Canadian Exchange that engages in such trading activity in reliance upon a NCE Exemption.
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 Filer is not subject to the dealer registration requirements in the CFA and the trading restrictions in the CFA in connection with trades in Electricity Contracts on, or through the facilities of, Non-Canadian Exchanges that are conducted by the Filer as principal for its own account:
(a) through a US Registrant in accordance with 32-506 or in accordance with the terms and conditions of an order granting the US Registrant an exemption from both the dealer registration requirements in the CFA and the trading restrictions in the CFA; or
(b) as a Direct Access Trade in accordance with the terms and conditions of the NCE Exemption granted to the Non-Canadian Exchange.
This Ruling 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 Ruling.
DATED: November 25, 2024
OSC File #: 2024/0568