Release Number 6977-14

August 18, 2014

CFTC Staff Issues No-Action Letter for the Chicago Mercantile Exchange, Inc.

Washington, DC — The U.S. Commodity Futures Trading Commission’s (Commission) Divisions of Clearing and Risk and Swap Dealer and Intermediary Oversight (Divisions) today issued a no-action letter stating that the Divisions will not recommend that the Commission take enforcement action against: (1) the Clearing House of the Chicago Mercantile Exchange, Inc. (CME Clearing), (2) certain clearing members of CME Clearing, or (3) depositories holding customer funds for such clearing members, in connection with the execution and submission to the Commission of a modified version of the template acknowledgment letter in Appendix A to Commission Regulation 1.20.

Regulation 1.20 requires futures commission merchants (FCMs) to obtain, from each depository with which the FCM deposits customer funds, a written acknowledgment that the depository had been informed that the funds deposited were customer funds being held in accordance with the Commodity Exchange Act. As part of its recent customer protection rulemaking, the Commission adopted a standardized template acknowledgment letter to be executed by FCMs and their respective depositories holding customer funds.

CME Clearing operates a program that permits its clearing members to pledge certain types of high quality corporate bonds as initial margin for futures and certain cleared swaps positions. Under the program, a clearing member opens customer segregated accounts and/or cleared swaps customer accounts with a depository that participates in the program, and the bonds are pledged to such accounts as initial margin collateral. CME Clearing requested permanent relief to permit FCMs participating in this program to use a modified version of the template acknowledgment letter that would recognize that all property deposited in these accounts is subject to CME Clearing’s first priority, perfected security interest.

Last Updated: August 18, 2014