CFTC Permits DCOs to Invest Customer Funds in European Sovereign Debt
The Commodity Futures Trading Commission has issued an order granting limited relief from the provisions of CFTC Rule 1.25 that will allow derivatives clearing organizations (DCOs) to invest euro-denominated futures and cleared swap customer funds in euro-denominated sovereign debt issued by France and Germany. Among other requirements, the order provides that the dollar-weighted average of the time-to-maturity of a DCO’s portfolio of investments in each sovereign’s debt must not exceed 60 days. In addition, any direct investment in foreign sovereign debt must have a remaining maturity of 180 days or less.
The order further permits DCOs to use customer funds to enter into repurchase agreements with foreign banks and foreign securities broker-dealers for euro-denominated sovereign debt issued by France and Germany. DCOs also may hold the sovereign debt purchased under a repurchase agreement in a safekeeping account at a foreign bank.
The CFTC issued the order in response to a petition from ICE Clear Credit, ICE Clear US and ICE Clear Europe.
The CFTC’s order is available here.