CFTC Issues Extension of Temporary Relief Concerning Deposit of Customer Funds with Hong Kong Depositories (CFTC Letter 14-120)

The CFTC Division of Swap Dealer and Intermediary Oversight ("DSIO") issued an extension of No-Action Letter 14-08 and stated that the CFTC would not take enforcement action against a registered futures commission merchant ("FCM") that holds certain 30.7(c) customer accounts in London and Hong Kong. CFTC Letter 14-08 provides time-limited no-action relief to Rule 30.7(c) ("Treatment of Foreign Futures or Foreign Options Secured Amount").

CFTC Rule 30.7(c) provides that an FCM must deposit customer funds according to the laws and regulations of the foreign jurisdiction that affords the greatest degree of protection to such funds, and also provides that an FCM may not waive any of the protections afforded to customer funds under the laws of that foreign jurisdiction.

On August 28, 2014, DSIO issued an interpretation of Rule 30.7(c) that permits FCMs to hold customer funds for trading on foreign futures markets in bank deposit accounts maintained with banks licensed in the United Kingdom. Since the interpretation did not address Hong Kong, DSIO is extending the original no-action position contained in Letter 14-08 with respect to accounts maintained with banks in Hong Kong.

This relief expires on March 31, 2015.

See: CFTC No-Action Letter 14-120.
Related news: CFTC Issues Rule Interpretation Concerning Deposit of Customer Funds with U.K. Depositories (CFTC Letter 14-110) (with Zwirb Comment) (August 28, 2014); CFTC Issues a Time-Limited No-Action Letter Regarding FCM Holding Foreign Futures Secured Amount Outside the U.S. (CFTC Letter 14-08) (February 7, 2014).