ARTICLE
3 August 2018

Federal Register: CFTC Grants Exemption Allowing Certain DCOs To Invest Customer Funds In French And German Sovereign Debt

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The CFTC Order granting an exemption allowing certain registered derivatives clearing organizations ("DCOs") ...
United States Finance and Banking

The CFTC Order granting an exemption allowing certain registered derivatives clearing organizations ("DCOs") to invest futures and swap customer funds in French and German sovereign debt was published in the Federal Register. The relief became effective on July 25, 2018.

As previously covered, the relief is intended to reduce risk by allowing DCOs to invest customer euro cash in "high-quality European sovereign debt" rather than holding the funds at commercial banks. The Order also includes a limited exemption that will allow registered DCOs to (i) "use customer funds to enter into repurchase agreements for Designated Foreign Sovereign Debt with foreign banks and foreign securities brokers or dealers" and (ii) hold French and German sovereign debt "purchased under a repurchase agreement in a safekeeping account at a foreign bank." This relief would permit the DCOs to hold the securities acquired through reverse repurchase agreements in a safekeeping account with a non-U.S. bank.

The DCOs that qualify for the relief are ICE Clear Credit LLC, ICE Clear US, Inc. and ICE Clear Europe Limited.

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