CFTC Division Grants Relief Permitting Withdrawal of Residual Interests

The CFTC Division of Swap Dealer and Intermediary Oversight (“DSIO”) granted no-action relief, subject to specified conditions, to FIA and member futures commission merchants (“FCMs”) from CFTC Rule 22.17(b) requirements with respect to certain withdrawals of FCM excess residual interest. In particular, the relief allows FCMs to withdraw such funds prior to the completion of a daily segregation calculation pursuant to Rule 22.17(b) interest, subject to strict conditions, where a previously undermargined customer meets the customer’s margin obligations.

As explained by the CFTC, the relief addresses a “timing gap” created by the Rule 22.17 requirement that results in “significant amounts of FCM liquid capital, above the Cleared Swaps targeted residual interest amount, being held in Cleared Swaps Customer Accounts for the duration of the day.”

Lofchie Comment: This relief may seem technical, but it is highly material to FCMs who otherwise would be required to tie up their proprietary cash needlessly during the business day. As noted previously, the number of FCMs has declined substantially in the past several years. The decline likely is driven by increased regulatory costs and burdens, and decreased revenue opportunities. This relief is a step toward righting that wrong direction.