The CFTC Division of Swap Dealer and Intermediary Oversight (the "Division") granted relief from the requirements of CFTC Rule 30.7 to a futures commission merchant ("FCM") and an investment firm incorporated under the laws of England and Wales, and which is a member of the principal central counterparties ("CCPs") authorized under the European Market Infrastructure Regulation.
The relief allows the FCM to deposit customer-owned securities with the investment firm to margin such customers' foreign futures or foreign options positions executed on a foreign board of trade located in the United Kingdom and cleared through the CCP. The Division previously granted these parties no-action relief to this arrangement in Letter 16-88, subject to a number of conditions, including that such securities be deposited in an individual segregated client account ("ISA") established with an EU CCP. Such relief was necessary because the arrangement, which allows the CCP to have a "limited right to reuse" such collateral, would have violated CFTC Rule 30.7(c).
The parties requested further relief due to changes in EU law governing ISAs that resulted in EU CCPs no longer offering ISAs for such "indirect clearing arrangements." Instead, the parties proposed allowing the CCP to hold customer-owned securities in a "gross omnibus segregated account" ("GOSA") as an alternative to an ISA. The Division granted such relief subject to the condition that each CCP holding the FCM's customer-owned securities in a GOSA be an authorized CCP.
CFTC Chair J. Christopher Giancarlo described the no-action relief as reflecting the agency's efforts to accommodate cross-border derivatives activity in an evolving global regulatory landscape.
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