CORRECTED-Some dealers to suspend US precious retail trading

Wed Jun 22, 2011 4:44pm EDT

(Corrects to remove background, details related to the CFTC)

* Some dealers to suspend retail precious metals trading

* Dodd-Frank section 742 to go into effect on July 16

NEW YORK, June 21 (Reuters) - Some dealers are expected to suspend U.S. retail trading of over-the-counter precious metals on leverage due to a provision of the Dodd-Frank Wall Street reform law that is set to go into effect on July 16.

Online dealer, owned by GAIN Capital Holdings Inc (GCAP.N), told clients in a letter that it must discontinue metals trading for U.S. residents by July 15, and all open metal positions must be closed by that date.

A spokeswoman of cited a specific section of the Dodd-Frank law regarding CFTC's oversight over off-exchange commodity transactions on a leveraged basis with retail customers.

That section, 742 of the Dodd-Frank law, passed nearly a year ago, requires that as of July 16, transactions in certain commodities, other than foreign currency, that are entered into with a non-eligible contract participants (ECP) on a leveraged basis, and that are not actually delivered within 28 days, must be conducted on a regulated futures exchange. A non-ECP is essentially a retail customer.

Precious metals that are fully paid for or actually delivered within 28 days are not affected. (Reporting by Frank Tang; Editing by David Gregorio)