VOLUME 21 - BULLETIN #160
TO:
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ALL CLEARING MEMBERS
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FROM:
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BUSINESS SYSTEMS GROUP
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DATE:
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July 27, 2001
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SUBJECT:
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Money Market Funds as Collateral
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The CFTC has amended Rule 1.25 to permit the investment of customer funds by futures commission merchants into money market mutual funds ("Fund" or "Funds"). In connection with that amendment, the Clearing Corporation will permit shares of Funds, subject to certain conditions, to be deposited as original margin for both house and customer origin.
The Clearing Corporation must approve each Fund before its shares can be deposited as original margin. Under the policies of the Clearing Corporation, no more than 5% of the total number of outstanding shares of a fund will be accepted from any clearing member as margin collateral. All such shares will be subject to a 5% haircut and may be deposited with the Clearing Corporation only in increments of 1000 shares. Depending on the practices of a given Fund, such shares will either be transferred to a Clearing Corporation account established at the Fund, or deposited in the existing Clearing Corporation custody account at a settlement bank. If the Fund requests that shares be held in a Clearing Corporation account established at the Fund, the clearing member will need to establish an account or accounts with the Fund to purchase shares and transfer them to the account of the Clearing Corporation. If the Fund requests that shares be held in existing custody accounts at the settlement bank, the clearing member will need to purchase shares through that settlement bank for deposit in the Clearing Corporation custody account. Clearing members investing in Funds using the latter method will be required to maintain at least one demand deposit account at that settlement bank (and supply the account number(s) to the Clearing Corporation). Such clearing members should also contact the settlement bank directly to determine what, if any, additional documents or accounts may be required.
Currently, the Clearing Corporation has approved shares of the following Funds for deposit as original margin:
FUND
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ACCOUNT STRUCURE
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SETTLEMENT BANK/FUND
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BBH Common Settlement Fund
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Existing Custody Accounts
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Brown Brothers Harriman & Co
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Goldman Sachs - Financial Square Prime Obligations Fund
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Existing Custody Accounts
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Brown Brothers Harriman & Co.
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Goldman Sachs - Financial Square Money Market Fund
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Existing Custody Accounts
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Brown Brothers Harriman & Co.
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BlackRock Provident Institutional Funds, TempFund
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Fund Accounts
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BlackRock Provident Institutional Funds, TempFund
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Federated – Prime Obligations Fund
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Fund Accounts
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Federated - Prime Obligations Fund
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Federated – Prime Cash Obligations Fund
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Fund Accounts
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Federated - Prime Cash Obligations Fund
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The Clearing Corporation continues to review applications from other Funds and will advise members when and as shares of such Funds are approved for deposit as original margin.
Should you have any questions, please call or e-mail one of the following Business Systems Analysts:
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