Statement of Commissioner Caroline D. Pham on Staff Letter Regarding ADM Investor Services, Inc.
June 16, 2023
I support letter 23-08 from CFTC Market Participants Division (MPD) staff regarding ADM Investor Services, Inc. (ADMIS) because it addresses a conflict between CFTC regulations and Taiwan laws in a workable way that promotes access to markets and does not increase risks to the global financial system.
Because ADMIS is a CFTC-registered futures commission merchant with a branch in Taiwan[1], there is a technical issue regarding conflict between the CFTC’s regulations regarding the holding of its Taiwan customers’ funds[2] and Taiwan laws.[3]
I believe in good policy that enables growth, progress, and access to markets. The CFTC must address conflict of laws issues that hinder market access and cross-border activity. If left unresolved, these technical issues regarding conflict of laws may lead to unintended market fragmentation and can have negative implications for the overall efficiency, resilience, safety, and competitiveness of our derivatives markets.[4] I commend the staff for taking a pragmatic approach to resolve this technical issue due to ADMIS’ branch structure in Taiwan, while still ensuring robust protection of customer funds.[5]
[1] The Taiwan branch of ADMIS is registered as a futures broker with the Taiwan Securities and Futures Bureau.
[2] Specifically, Commodity Exchange Act section 4d(a) and Regulation 1.20. See 7 U.S.C. § 6d(a); 17 CFR § 1.20.
[3] Specifically, Article 42, Regulations Governing Futures Commission Merchants, Laws & Regulations Database of The Republic of China (Aug. 2, 2016); Articles 70, 71, Futures Trading Act, Laws & Regulations Database of the Republic of China (Jan. 16, 2019).
[4] C.f. Commissioner Pham “Statement of Commissioner Caroline D. Pham in Support of Proposed Order and Request for Comment on Comparability Determination for EU Nonbank Swap Dealer Capital and Financial Reporting Requirements” (June 7, 2023).
[5] According to ADMIS, Article 42 of the Taiwan Financial Supervisory Commission’s (FSC) Regulations requires ADMIS’ Taiwan branch to deposit its Taiwan customer funds received for trading U.S. futures contracts in designated customer margin accounts only with authorized FSC Taiwan banking institutions. Further, Articles 70 and 71 of the Taiwan Futures Trading Act require ADMIS’ Taiwan Branch to deposit and segregate its Taiwan customer funds into designated customer margin accounts and that the branch’s creditors, including the authorized FSC Taiwan banks holding the designated customer margin accounts, from filing an attachment suit or claiming any right to funds held by ADMIS’ Taiwan Branch in the accounts. See Article 42, Regulations Governing Futures Commission Merchants; Articles 70, 71, Futures Trading Act.
-CFTC-