The Commodity Futures Trading Commission (CFTC) has released a new interpretation aimed at clarifying the conditions under which futures commission merchants (FCMs) can use customer-owned securities and those purchased with customer funds as collateral when dealing with foreign brokers and clearing organizations. This move is designed to ensure compliance with Part 30 of CFTC regulations for margining customers’ positions in foreign futures and options markets.
Acting Chairman Caroline D. Pham stated, "As part of the Administration’s commitment to promote American competitiveness and reduce unnecessary regulatory costs, I am pleased to announce that the CFTC today addressed longstanding issues that disadvantaged U.S. customers that access foreign futures markets. The commodity derivatives market is global, and American businesses should be able to hedge their risks overseas without being penalized. This interpretation to clarify our existing rules will unlock over $22 billion dollars of collateral that can then be redeployed to support U.S. economic growth. It is the latest cost savings that the CFTC has delivered this year under my leadership to benefit all Americans."
According to the CFTC, this interpretation provides legal clarity on Regulation 30.7 requirements, which staff believe will lower costs for market participants operating in foreign markets. It also aims to address competitive disadvantages faced by FCMs whose clients trade internationally.
The Market Participants Division issued this clarification following a request from the Futures Industry Association.
