Securities Lawyer's Deskbook
                         published by The University of Cincinnati College of Law
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General Rules and Regulations
under the
Securities Exchange Act of 1934

Rule 3b-12 -- Definition of OTC Derivatives Dealer

The term OTC derivatives dealer means any dealer that is affiliated with a registered broker or dealer (other than an OTC derivatives dealer), and whose securities activities:
  1. Are limited to:

    1. Engaging in dealer activities in eligible OTC derivative instruments that are securities;

    2. Issuing and reacquiring securities that are issued by the dealer, including warrants on securities, hybrid securities, and structured notes;

    3. Engaging in cash management securities activities;

    4. Engaging in ancillary portfolio management securities activities; and

    5. Engaging in such other securities activities that the Commission designates by order pursuant to Rule 15a-1(b)(1); and

  2. Consist primarily of the activities described in paragraphs (a)(1), (a)(2), and (a)(3) of this section; and

  3. Do not consist of any other securities activities, including engaging in any transaction in any security that is not an eligible OTC derivative instrument, except as permitted under paragraphs (a)(3), (a)(4), and (a)(5) of this section.

  4. For purposes of this section, the term hybrid security means a security that incorporates payment features economically similar to options, forwards, futures, swap agreements, or collars involving currencies, interest or other rates, commodities, securities, indices, quantitative measures, or other financial or economic interests or property of any kind, or any payment or delivery that is dependent on the occurrence or nonoccurrence of any event associated with a potential financial, economic, or commercial consequence (or any combination, permutation, or derivative of such contract or underlying interest).

Regulatory History

63 FR 59362, 59394, Nov. 3, 1998

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