Release: 4806-03
For Release: June 30, 2003


Washington, D.C. -- The Commodity Futures Trading Commission (CFTC) announced today that it is proposing to modernize its rules regarding the investment of customer funds by futures commission merchants and clearinghouses to facilitate the use of certain repurchase agreements and certain collateral management programs. The Commission is also soliciting comments on whether several other provisions of its rule governing the investment of customer funds should be modified.

“This proposal is part of the CFTC’s ongoing commitment to review its rules to ensure their effectiveness in promoting both the efficient use of capital and the protection of customers,” said Chairman James E. Newsome.

Rule 1.25 sets forth the types of instruments in which futures commission merchants and derivatives clearing organizations are permitted to invest customer segregated funds. Rule 1.25 was substantially amended in December 2000 to expand the list of permitted investments. In connection with the expansion, the Commission added several provisions intended to minimize the credit, liquidity, and volatility risk associated with the additional investments.

The Commission is proposing to modify some of those provisions regarding the use of repurchase agreements and collateral management programs. The Commission is also requesting comment on whether several other provisions of the rule should be modified including, for example, permitted benchmarks for variable note securities.

The proposed rule amendments will be published in the Federal Register with a 30-day comment period. Copies may be obtained by contacting the Commission’s Office of the Secretariat, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, (202) 418-5100 or by accessing the Commission’s website,