September 15, 2022

CFTC Staff Extends No-Action Relief for FCM Separate Accounts

Nihal Patel Commentary by Nihal Patel

The CFTC Division of Clearing and Risk and the Division of Swap Dealer and Intermediary Oversight (the "Divisions") extended no-action relief on the treatment of separate accounts by futures commission merchants ("FCMs").

As previously covered, the CFTC issued Letter 19-17 to provide guidance relating to the treatment of separate accounts of the same customer, a beneficial owner. The letter provided no-action relief through June 30, 2021, which was later extended by CFTC staff to September 15, 2021 and again in Letter 20-28 until December 31, 2021. In response to a request from the Futures Industry Association ("FIA"), the Divisions extended the relief with respect to CFTC Rule 39.13(g)(8)(iii) ("Withdrawal of customer initial margin") until September 30, 2022. FIA also petitioned the CFTC to amend CFTC Rule 39.13(g) ("Margin Requirements") and requested another extension of the relief until a rule change is implemented.

In response, CFTC staff extended the relief until the earlier of (i) September 30, 2023 or (ii) the effective date of any final commission action relating to Rule 39.13(g).

Commentary

This latest extension of the relief comes more than three years after the CFTC staff issued a strange statement saying it "will not be extending [the then Sept 15, 2020 deadline] at any point." Even this latest extension seems likely to be considered again a year from now, given that the CFTC has yet to propose amendments to the rules.

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