The CFTC Division of Clearing and Risk granted (i) no-action relief to the Chicago Mercantile Exchange, Inc. ("CME") from the requirement that it obtain a template acknowledgement letter from the Bank of Canada ("BoC") for customer accounts maintained at BoC; and (ii) exemptive relief to permit CME to hold customer funds at the BoC. The BoC, the central bank of Canada, is technically not a qualified depository for customer funds under CFTC rules.
Pursuant to CFTC Rules 1.20(g)(4) and 22.5, derivatives clearing organizations ("DCOs") must obtain a Template Acknowledgment Letter from a depository with the opening of a customer account. The CFTC reasoned that permitting CME to maintain customer accounts at the BoC is appropriate because: (i) a central bank does not present the same types of risks as traditional commercial banks; and (ii) deposits at a central bank have the lowest credit risk and are the best source of liquidity as to the central bank's home country currency.
In addition, the CFTC granted an exemption from CFTC Rule 1.49(d)(3), which requires that in order to hold customer funds with a depository located outside the United States, the depository must be: (i) a bank or trust company that has in excess of $1 billion of regulatory capital, (ii) a registered futures commission merchant, or (iii) a DCO. The CFTC found that these requirements would "unintentionally preclude the BoC from acting as a depository for customer funds, notwithstanding that it is a central bank for a money center country, because the BoC cannot satisfy the regulatory capital requirement." The CFTC determined that granting the relief would not be contrary to the public interest or the purposes of Regulation 1.49(a)(3).
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