CFTC Excludes Certain "30.7 Customer Funds" from FCM Non-US Margin Calculations | Practical Law

CFTC Excludes Certain "30.7 Customer Funds" from FCM Non-US Margin Calculations | Practical Law

CFTC has excluded "30.7 customer funds" deposited with foreign banks or trust companies from calculation of amounts FCMs may hold with depositories in accounts maintained outside of the US.

CFTC Excludes Certain "30.7 Customer Funds" from FCM Non-US Margin Calculations

Practical Law Legal Update 4-589-3205 (Approx. 3 pages)

CFTC Excludes Certain "30.7 Customer Funds" from FCM Non-US Margin Calculations

by Practical Law Finance
Published on 25 Nov 2014 • USA (National/Federal)
CFTC has excluded "30.7 customer funds" deposited with foreign banks or trust companies from calculation of amounts FCMs may hold with depositories in accounts maintained outside of the US.
On November 13, 2014, the CFTC issued No-action Letter 14-138 (No-action 14-138), permitting futures commission merchants (FCMs) to exclude "30.7 customer funds" deposited with foreign banks or trust companies from counting toward the aggregate margin amount that an FCM may hold with depositories in accounts maintained outside of the US.
Regulation 30.1(h) defines the term "30.7 customer funds" as any money, securities or other property received by an FCM from, for or on behalf of 30.7 customers to margin, guarantee or secure foreign futures or foreign option positions, or money, securities or other property accruing to 30.7 customers as a result of foreign futures and foreign options positions. Regulation 30.7(c) prohibits an FCM from holding 30.7 customer funds in accounts maintained outside the US in an amount in excess of 120% of the required customer margin under Regulation 30.7 on customers' foreign futures and foreign options positions. Under Regulation 30.7(b), an FCM may deposit 30.7 customer funds only with:
  • A bank or trust company located in the US.
  • A bank or trust company located outside of the US that maintains in excess of $1 billion of regulatory capital.
  • Another FCM.
  • The clearing organization of any FBOT.
  • A member of any FBOT.
  • The designated depositories of a member of an FBOT or a foreign clearing organization.
Regulation 30.1(f) refers to the term "30.7 customer" as both US-domiciled customers and foreign-domiciled customers of an FCM that trade foreign futures and foreign options on, or subject to the rules of, a foreign board of trade (FBOT).
This relief is conditioned upon the FCM complying with all other requirements regarding the holding of 30.7 customer funds under Regulation 30.7, including that:
  • The foreign bank or trust company maintains a minimum of $1 billion of regulatory capital (17 CFR section 30.7(b)).
  • The FCM obtains a written acknowledgment letter from the foreign bank or trust company in the form required by Appendix E to Part 30 of the CFTC's regulations prior to, or contemporaneously with, the opening of the account (17 CFR section 30.7(d)).