September 3, 2013
CFTC Orders Macquarie Futures USA LLC to Pay a $150,000 Penalty for Failing to Maintain Adequate Funds in Secured Accounts in Connection with Conversion by Exchange of Certain Off-Exchange Instruments to On-Exchange Products
Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and simultaneously settling charges against Macquarie Futures USA LLC (Macquarie), a New York-based registered Futures Commission Merchant (FCM), for failing to maintain adequate funds in secured accounts, in violation of CFTC Regulation 30.7. The CFTC Order requires Macquarie to pay a $150,000 civil monetary penalty and to cease and desist from violating CFTC Regulation 30.7.
The Order finds that on October 15, 2012, ICE Clear Europe converted its existing OTC swaps and options to U.S. exchange-listed futures and options to be listed for trading on ICE Futures U.S. Energy Division and ICE Futures Europe (ICE conversion). Assets held by ICE Clear Europe corresponding to assets under secured funds were to be re-designated as segregated funds. Notice was given to all concerned firms, including Macquarie, with instructions and support provided by ICE Clear Europe, according to the Order.
In anticipation of this conversion, on October 15, 2012, Macquarie transferred certain secured assets to its segregated accounts, and kept certain positive balances in its secured accounts. However, later on October 15, consistent with the notice given to Macquarie, ICE Clear Europe re-designated approximately $45 million of Macquarie’s secured funds to segregated funds, making the funds segregated assets rather than secured assets, the Order finds. Because all of the secured assets pertaining to the ICE conversion were moved to the segregated account(s), but the entire secured client liability pertaining to the conversion was not timely moved on Macquarie’s books to segregated account(s), a secured deficiency occurred, according to the Order.
The Commodity Exchange Act and CFTC Regulations contain provisions to protect the funds of customers trading on both U.S. and foreign exchanges. In relation to customers trading on foreign exchanges, an FCM must account for and maintain money, securities, and property in an amount at least sufficient to cover or satisfy all of its current obligations to foreign futures and options customers in a separate “secured account.” The funds in a secured account are referred to as secured funds.
On October 16, 2012, Macquarie discovered that it was undersecured in the amount of $36.6 million, based on calculations made from balances as of the close of business on October 15. After learning of the deficiency, Macquarie immediately provided notice to the CFTC, the National Futures Association, and various exchanges, in accordance with its regulatory obligations. Macquarie also transferred approximately $45 million from its segregated account to its secured account, curing the deficiency.
During the relevant time, Macquarie maintained sufficient funds to satisfy its secured deficiency; however, funds required to be held in secured accounts are distinct from funds required to be held in segregated accounts, according to the Order.
Macquarie immediately undertook measures to avoid a similar deficiency from occurring in the future, according to the Order.
The CFTC Division of Enforcement staff responsible for this matter are Brian M. Walsh, Elizabeth L. Davis, Rick Glaser, and Richard Wagner, with assistance from CFTC Division of Swap Dealer and Intermediary Oversight staff Margaret Gal, James DeSalvo, Melissa Hendrickson, and Kevin Piccoli.
Last Updated: September 3, 2013