The Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission has issued no-action relief and interpretive guidance for futures commission merchants (FCMs) with customers that trade foreign futures and foreign options (i.e., 30.7 customers). As background, CFTC Regulation 30.7(c) limits the amount of 30.7 customer funds that FCMs may hold outside the United States with foreign brokers or other permitted depositories to no more than 120 percent of the required margin for 30.7 customers’ foreign futures and foreign options positions. The no-action relief authorizes an FCM to exclude from the calculation of 30.7 customer funds permitted to be held outside of the US, those 30.7 customer funds held in a properly titled account established by the FCM in a bank or trust company located outside of the United States, provided the bank or trust company (1) maintains regulatory capital of at least $1 billion, and (2) provides the FCM a written acknowledgment letter in the form required by Appendix E to Part 30 prior to, or contemporaneously with, the opening of the account.
DSIO has also issued interpretations on two additional matters relating to 30.7 customer funds. Because of inherent delays in transferring 30.7 customer funds between US and non-US markets, DSIO has clarified that an FCM may net the funds it has requested from a foreign broker or clearing organization with the amount of funds the foreign broker or clearing organization is requesting from the FCM. Two separate transactions are not required in such situations.
DSIO has also clarified that transactions that rebalance an FCM’s 30.7 customer accounts are for the benefit of the FCM’s customers when the FCM first deposits US dollars into the accounts prior to withdrawing the equivalent amount in foreign currencies from the accounts. Because these transactions are for the benefit of customers, the FCM does not have to complete certain required daily computations before withdrawing the equivalent amount from the accounts.
CFTC Letter No. 14-138 is available here.