Capital Relief Granted for Related Options and Futures on Bond ETFs

SEC staff issued no-action relief permitting broker-dealers to offset certain futures contracts and options on ETFs for risk-based haircut calculations under Appendix A to Rule 15c3-1 ("Net capital requirements for brokers or dealers") of the Exchange Act.

In a letter responding to a request from a Cboe entity, SEC staff allowed broker-dealers to treat a number of Cboe contracts on debt ETFs as closely related to investments in an iShares ETF and options on that ETF.  The staff noted that futures contracts and ETFs that track related indexes had not previously been treated as having hedging benefits. SEC staff agreed with the requestor's argument that the different ETFs were highly correlated, thereby making the recognition of hedging appropriate.  

The staff conditioned the no-action relief on ensuring that the different ETFs remain highly correlated.