Release: 4748-03
For Release: January 31, 2003


WASHINGTON, D.C. -- In a move that eliminates major impediments to how customer funds are held outside the U.S., the Commodity Futures Trading Commission (CFTC) adopted a new rule to permit futures commission merchants (FCMs) and derivatives clearing organizations (DCOs), under certain conditions, to deposit customer funds in foreign depositories. New Rule 1.49 supersedes CFTC Financial and Segregation Interpretation No. 12, and adopts amendments to the CFTC’s bankruptcy rules to facilitate customer transactions and to ensure protection of customer funds in the event of an FCM’s bankruptcy.

The lifting of these restrictions is consistent with the Commission’s mandate to provide more flexibility in the regulatory framework for intermediaries and is in the spirit of the Commodity Futures Modernization Act of 2000 (CFMA) to enhance the competitive position of U.S. financial markets and institutions.

“I am pleased to announce the removal of these competitive barriers as the latest step by the Commission to provide more flexibility for U.S. firms and their customers, both those in the U.S. and those from around the world who want to trade on U.S. markets,” said CFTC Chairman James E. Newsome.

New Rule 1.49 provides, among other things, that customer funds may be held in: (1) U.S. dollars; (2) in any currency in which funds were deposited by the customer or into which funds were converted at the request of the customer; or (3) in a currency in which funds have accrued to the customer as a result of trading on a designated contract market or registered derivatives transaction execution facility. The rule permits an FCM or DCO generally to hold customer funds within the U.S. or within any money center country (the G7 countries, other than the U.S.) in the form of any currency. Further, any currency may be held in its country of origin

The amendments to the Commission's bankruptcy rules provide for a new distributional framework intended to ensure that, in the event an FCM is placed into bankruptcy, customers whose funds are held in a U.S. depository will not be adversely affected by a shortfall in the pool of funds held in a depository outside the U.S. resulting from the action of a foreign government.

The new rule is being published in the Federal Register and will become effective 30 days after such publication. Copies of the new rule can be obtained by contacting the Office of the Secretariat, Three Lafayette Centre, 1155, 21st Street, N.W., Washington, DC 20581, (202) 418-5100 or by accessing the Commodity Futures Trading Commission website.

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