Release Number 8645-22

CFTC Staff Issues No-Action Letter Regarding Investments of Customer Funds in Securities Benchmarked to SOFR

December 23, 2022

Washington, D.C. The Commodity Futures Trading Commission’s Market Participants Division today announced it is extending CFTC Staff Letter No. 21-02 regarding investments of customer funds by futures commission merchants (FCMs). In issuing the extension in conjunction with the Division of Clearing and Risk, the scope of the letter was expanded to include investments by derivatives clearing organizations (DCOs).

In light of the transition from the London Interbank Offered Rate (LIBOR) interest rate benchmark, and the increasing reliance on the Secured Overnight Financing Rate (SOFR) as an alternative benchmark, under the no-action letter, FCMs may continue to invest customer funds in securities that contain an adjustable rate of interest that is benchmarked to SOFR. DCOs also may make such investments under the letter. The no-action letter is conditioned upon an FCM or DCO otherwise complying with all relevant terms and conditions of the CFTC’s regulations governing the investment of customer funds, including the requirement that the adjustable rate security is one of the enumerated permitted investments. 

This no-action letter will expire on the earlier of December 31, 2024 or the effective date of a CFTC action, including, without limitation, a rulemaking or order that addresses SOFR as a permitted benchmark.