The Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight somewhat moderated the adverse impact on futures commission merchants and their customers of a recently adopted rule related to the handling of customer funds in connection with non-US futures and related options—so-called 30.7 secured funds. This CFTC rule (30.7(c)) permits FCMs to maintain no more than 120% of their customers’ margin and pre-funding margin requirements related to such positions in authorized depositories outside the United States.
Going forward, FCMs will not have to include in computing their compliance with this 120% requirement customer funds held with foreign banks or trust companies outside the United States that maintain a minimum of US $1 billion of regulatory capital and provide an approved acknowledgement letter regarding the nature of the customer funds they hold.
Staff granted this relief because, with limited exception, US banks do not maintain foreign currency accounts in the United States, and FCMs have incurred increased operational and foreign currency risks as well as costs to comply with the new CFTC rule.
In addition, staff recognized that FCMs, on occasion, deposit their own US dollars into customer 30.7 secured funds accounts and then withdraw non-US dollars in order to accommodate their customers’ single currency margining needs. Staff indicated that this activity does not constitute a withdrawal of an FCM’s residual interest from customer funds that might trigger a reporting requirement to the CFTC or otherwise be barred because of the time of day it was done (for example, prior to the noon calculation by an FCM of certain required customer funds obligations).
Finally, staff also indicated that, where an FCM requested payment from a non-US broker or clearinghouse of customer funds on one day that ordinarily would not be processed until the following business day, the FCM could net those funds against customer funds it might have to pay that second business day because of market or other events. Two separate transactions are not necessary.