For Release: September 6, 2000
CFTC Proposes to Revise Its Interpretation of
the Rule 30.7 Foreign Futures and Foreign
Options Secured Amount Requirement
Washington -- The Commodity Futures Trading Commission (Commission) has proposed to revise its interpretation of Commission rule 30.7 governing the treatment of foreign futures and foreign options customer funds. Rule 30.7 generally requires futures commission merchants (FCMs) who accept funds from foreign futures and foreign options customers: (1) to maintain in a separate account or accounts such funds in an amount at least sufficient to cover or satisfy all of its current obligations to those customers (i.e., the foreign futures and foreign options secured amount); and (2) to obtain and retain in its files an acknowledgment from the depository that the depository was informed that such funds are held for or on behalf of foreign futures and foreign options customers and are being held in accordance with the provisions of rule 30.7. As set forth in the proposed, revised interpretation to rule 30.7, the Commission believes that the rule 30.7 acknowledgment only applies to the treatment of those funds by the initial depository receiving such funds, and not to the manner in which any subsequent depository holds or subsequently transmits those funds. As proposed, the revised interpretation would become the new Appendix B to Part 30 of the Commission’s rules.
Currently, rule 30.7 has been interpreted to require that an FCM make an inquiry to determine whether either the initial or any subsequent depository of foreign futures and foreign options customer funds treats those funds in a manner consistent with rule 30.7. In the event that the FCM learns that any depository does not treat foreign futures and foreign options customer funds in accordance with rule 30.7, the FCM would be required to set aside its own funds in an amount at least sufficient to cover or satisfy all of its current obligations to those customers. Under the proposed, revised interpretation of rule 30.7, an FCM who accepts funds from foreign futures and foreign options customers no longer would be required to inquire as to the treatment of customer funds beyond that of the initial depository (and, if necessary, set aside the requisite matching funds in a so-called "mirror" account), provided that the FCM furnishes to each of its foreign futures and foreign options customers, regardless of the level of each customer’s sophistication, a written disclosure statement explaining that the treatment of customer funds outside the U.S. may not afford the same level of protection offered in the U.S. The proposed interpretation of rule 30.7 would apply to all firms registered with the Commission as FCMs and to certain foreign firms exempt from such registration pursuant to rule 30.10.
These amendments were published in the Federal Register on September 6, 2000. Copies may be obtained by contacting the Commission's Office of the Secretariat, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, (202) 418-5100, or by accessing the Commission's website, http://www.cftc.gov/foia/fedreg00/foi000906a.pdf