CFTC Extends Relief to FCMs from Certain Commingling Requirements

On April 7, the Commodity Futures Trading Commission’s Division of Swap Dealer and Intermediary Oversight (DSIO) issued CFTC No-Action Letter No. 14-45, extending to June 30 the relief previously granted in CFTC No-Action Letter No. 14-02. This relief is set to expire on April 14.

The earlier letter provided time-limited relief from the provisions of CFTC Regulations 1.20, 22.2 and 30.7, which prohibit the commingling of customer segregated funds, cleared swaps customer collateral and secured amount customer funds. The relief permits a futures commission merchant (FCM) to accept customer funds in a single payment for deposit into the customer’s segregated funds, cleared swaps customer collateral or secured amount account without initially receiving the funds into the customer’s segregated funds account and simultaneously recording book entry credits to the customer’s cleared swaps collateral and/or secured amount account, as directed by the customer, upon the receipt and recording of cash into the customer’s segregated funds account. An FCM relying on this relief is required to hold sufficient funds in its segregated funds, cleared swaps customer collateral and secured amount accounts to meet the net liquidating equities of all its customers in each respective account origin at all times. 

Letter No. 14-02 was discussed in the Corporate and Weekly Financial Digest edition of January 17, 2014.   

CFTC Letter No. 14-45 is available here.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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