VOLUME 21 - BULLETIN #104

Recently, the CFTC 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 to be deposited as original margin, both for house and customer origin.

Each Fund must be approved by the Clearing Corporation before its shares can be deposited as original margin. Under the policies of the Clearing Corporation, no more than the greater of (i) 25% of a clearing member's margin requirement, by origin, or (ii) $250,000 may be satisfied with the shares of any one Fund. 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 such 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 four Funds for deposit as original margin:

The Clearing Corporation is currently reviewing applications from another nine Funds and will advise members when and as shares of such Funds are approved for deposit as original margin.

The Clearing Corporation’s acceptance of a Fund’s shares for margin purposes does not constitute a representation that such Fund complies with Rule 1.25 or a recommendation or advice with respect to an investment in such Fund.

Should you have any questions, please call or e-mail one of the following Business Systems Analysts: