The Commodity Futures Trading Commission has issued an order granting limited relief from the provisions of CFTC Rule 1.25 that will allow derivatives clearing organizations (DCOs) to invest euro-denominated futures and cleared swap customer funds in euro-denominated sovereign debt issued by France and Germany. Among other requirements, the order provides that the dollar-weighted average of the time-to-maturity of a DCO’s portfolio of investments in each sovereign’s debt must not exceed 60 days. In addition, any direct investment in foreign sovereign debt must have a remaining maturity of 180 days or less.
The order further permits DCOs to use customer funds to enter into repurchase agreements with foreign banks and foreign securities broker-dealers for euro-denominated sovereign debt issued by France and Germany. DCOs also may hold the sovereign debt purchased under a repurchase agreement in a safekeeping account at a foreign bank.
The CFTC issued the order in response to a petition from ICE Clear Credit, ICE Clear US and ICE Clear Europe.