For Release: October 11, 2000
CFTC Revises Its Interpretation of the Rule 30.7
Futures and Foreign Options Secured Amount Requirement
Washington -- The Commodity Futures Trading Commission (Commission) is revising 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 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. The revised interpretation will become the new Appendix B to Part 30 of the Commission’s rules, and will apply to all firms registered with the Commission as FCMs and to certain foreign firms exempt from such registration pursuant to rule 30.10, as set forth in the order issued concurrently with the new Appendix B to Part 30. The Commission proposed its revised interpretation of rule 30.7 on September 6, 2000 (65 Fed. Reg. 53946, Sept. 11, 2000) and received one favorable comment on the proposal.
Under the revised interpretation of rule 30.7, an FCM who accepts funds from foreign futures and foreign options customers no longer will 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 revised interpretation of rule 30.7 will apply similarly to certain foreign firms exempt from registration as FCMs pursuant to rule 30.10.
The revised interpretative statement and accompanying order were published in the Federal Register on October 11, 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/foi001011b.pdf.