CFTC Grants Exemption from Regulations on Holding Customer Funds at Banque de France
The CFTC Division of Clearing and Risk ("Division") granted relief to a derivatives clearing organization ("DCO") to permit the holding of customer funds at the Banque de France ("BdF").
Letter 24-01 grants no-action relief for the DCO with regard to CFTC Rule 1.20(g)(4) ("Futures customer funds to be segregated and separately accounted for") and Rule 22.5 ("Futures commission merchants and derivatives clearing organizations: Written acknowledgement"), and an exemption from the requirements of Rule 1.49(d)(3) ("Denomination of customer funds and location of depositories") for customer accounts held at BdF.
The exemptions relate to (i) the standard requirement for a Template Acknowledgment Letter and (ii) the regulatory capital requirement for depositories, allowing BdF to hold customer funds even though it does not meet the regulatory capital requirement. The letter outlines specific conditions under the BdF Acknowledgment Letter and noted that any changes in circumstances or regulations might affect the validity of this exemption.
Commentary
As the Letter states, the CFTC approaches requests of this type on a "case-by-case basis" and has previously granted similar relief for holding of funds at the Bank of Canada, Deutsche Bundesbank and the Bank of England. Further, the CFTC notes that CPMI-IOSCO principles support holding of customer of funds at central banks.