FCM Regulations: Eurex Clearing AG supports CFTC Letter No. 19-17 regarding Separate Account Treatment

1.    Introduction

With this circular and in its capacity as a derivatives clearing organization (DCO), Eurex Clearing AG (Eurex Clearing) is clarifying that, consistent with the U.S. Commodity Futures Trading Commission’s (CFTC) Division of Swap Dealer and Intermediary Oversight and Division of Clearing and Risk issued CFTC Letter No. 19-17 dated 10 July 2019 (CFTC Letter), Eurex Clearing is permitting its FCM Clearing Members to treat separate accounts of the same beneficial owner as separate accounts of separate entities for purposes of Eurex Clearing’s margining rules and procedures, provided that each FCM Clearing Member availing itself of this relief must have written internal controls and procedures that require it to, and that it in fact does, comply with the conditions for the relief set forth in the CFTC Letter.

2.    Required action

FCM Clearing Members wishing to avail themselves of the relief set forth in the CFTC Letter must update or have already updated written internal controls and procedures to reflect the conditions in the CFTC Letter.

3.    Details of the initiative

On 10 July 2019, the CFTC Division of Swap Dealer and Intermediary Oversight and Division of Clearing and Risk issued the CFTC Letter, which provided market participants with guidance and time-limited no-action relief (until 30 June 2021), subject to specified conditions set forth in the CFTC Letter, with respect to CFTC Regulation 39.13(g)(8)(iii) as it relates to the treatment by FCMs of separate accounts of the same beneficial owner.

CFTC Regulation 39.13(g)(8)(iii) requires a DCO to require its clearing members to ensure that their customers do not withdraw funds from their accounts with such clearing members unless the net liquidating value plus the margin deposits remaining in a customer’s account after such withdrawal are sufficient to meet the customer initial margin requirements with respect to all products and portfolios held in such customer’s account which are cleared by the DCO. The CFTC Letter states that certain discussions with various entities have brought to light various diverse practices among FCMs and their customers with respect to the handling of separate accounts of the same beneficial owner where those accounts are held at the same FCM, including accounts with different account controllers.

Consistent with the CFTC Letter, until the earlier of 30 June 2021 or such time as the CFTC amends CFTC Regulation 39.13(g)(8)(iii), Eurex Clearing clarifies that it is permitting FCM Clearing Members to treat separate accounts of the same beneficial owner as separate accounts of separate entities for the purposes of Eurex Clearing’s margining rules and procedures, provided, however, that each FCM Clearing Member availing itself of this relief must have written internal controls and procedures that require it to, and it in fact does, comply with the conditions for the relief set forth in the CFTC Letter.

Terms used and not otherwise defined in this circular shall have the meaning ascribed to them in the FCM Regulations of Eurex Clearing AG.
 

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