CFTC Staff Letter 25-38: Staff Interpretation Regarding FCM Deposits of Securities with Foreign Brokers and Foreign Clearing Organizations to Margin Customer Positions

CFTC Letter No. 25-38 Interpretative November 25, 2025 1 U.S. COMMODITY FUTURES TRADING COMMISSION Three Lafayette Centre, 1155 21st Street, NW, Washington, DC 20581 www.cftc.gov Market Participants

Division
Thomas J. Smith
Acting Director

RE: Staff Interpretation Regarding FCM Deposits of Securities with Foreign Brokers and Foreign Clearing Organizations to Margin Customer Positions Entered into on, or Subject to the Rules of, a Foreign Board of Trade The Market Participants Division (“MPD” or “Division”) of the Commodity Futures Trading Commission (“CFTC” or “Commission”) is issuing this letter in response to a request from the Futures Industry Association (“FIA”) on behalf of its members that are futures commission merchants(“FCMs”) and similarly situated FCMs. 1 FIA requests that MPD issue an interpretative letter pursuant to Commission Regulation 140.99 2 confirming that an FCM may post customer￾owned securities and securities purchased with customer funds (collectively, “Customer Securities”) with foreign brokers and foreign clearing organizations (together, “foreign intermediaries”) to margin customers’ foreign futures and foreign options positions 3 under circumstances where the foreign broker or foreign clearing organization is authorized or required 1 FIA is a global trade organization for futures, options, and centrally cleared derivatives markets. FIA’s core constituency consists of firms that operate as clearing members in global derivatives markets, including firms registered with the Commission as FCMs. 2 17 CFR 140.99. Commission regulations referred to in this interpretation may be found at 17 CFR Chapter I and are available through the Commission’s website, www.cftc.gov. 3 The terms “foreign futures” and “foreign options” are defined in Commission Regulation 30.1 to generally mean any futures or option positions made, or to be made, on or subject to the rules of any foreign board of trade. 17 CFR 30.1.

CFTC Letter No. 25-38 Interpretative November 25, 2025 2 by local law to obtain title to, or a right of re-use over, 4 the Customer Securities (the “Request for Interpretation”).
I. Regulatory Background
Section 4(b) of the Commodity Exchange Act (“CEA”)
5 grants the Commission authority to regulate an FCM’s foreign futures and foreign options activity. 6 The Commission has implemented this statutory authority through its Part 30 regulations. 7 As part of this regulatory authority, Commission Regulation 30.7 sets forth requirements regarding an FCM’s treatment and holding of funds deposited by customers as margin for foreign futures and foreign options transactions and positions (“30.7 Customers”). 8 The requirements include an obligation for an FCM to maintain at all times a sufficient amount of funds in specially designated accounts to satisfy the total account balances of all 30.7 Customers (“30.7 Customer Funds”). 9

The 30.7 Customer Funds also must be held by depositories specified by the regulations (“Permitted Depositories”) and titled under account names that clearly identify the funds as belonging to 30.7 Customers. 10 Commission Regulation 30.7 further requires an FCM to obtain from each Permitted Depository an acknowledgment letter that includes a provision specifying that the 30.7 Customer Funds must be treated by the depository in accordance with Section 4(b) of the Act and Commission Regulation 30.7. 11 Commission Regulation 30.7 also limits the amount of 30.7 Customer Funds that an FCM may deposit with certain Permitted Depositories located outside of the U.S. Pursuant to Commission 4 The term “right of use” or “right to re-use” in this interpretation refers to a customer granting a legal right to use Customer Securities transferred to a foreign intermediary as margin collateral, but only under specific conditions outlined in an agreement between the parties. 5 7 U.S.C. 1 et. seq. The CEA may also be accessed through the Commission’s website, www.cftc.gov. 6 7 U.S.C. 6(b). CEA Section 4(b)(2)(A) (7 U.S.C. 6(b)(2)(A)) states, in relevant part, that the Commission may adopt regulations requiring the safeguarding of customer funds by any person located in the U.S. who engages in the offer or sale of futures contracts or options on futures contracts that are made on, or subject to the rules of, a board of trade, exchange, or market located outside of the U.S. 7 17 CFR Part 30. 8 17 CFR 30.7. Commission Regulation 30.1 defines the term “30.7 customer” to include both U.S. and non-U.S. persons who trade foreign futures or foreign options through an FCM. 17 CFR 30.1. 9 17 CFR 30.7(a). Commission Regulation 30.1 defines the term “30.7 customer funds” to mean any money, securities, or other property received by an FCM from, for, or on behalf of 30.7 Customers to margin, guarantee, or secure foreign futures or foreign option positions. 17 CFR 30.1. 10 17 CFR 30.7(b). Permitted depositories are limited to banks or trust companies located in the U.S.; banks or trust companies located in non-U.S. jurisdictions that have in excess of $1 billion of regulatory capital; FCMs registered with the Commission; Commission designated clearing organizations; clearing organizations of foreign boards of trade; members of foreign boards of trade; or designated depositories of members of foreign boards of trade or foreign clearing organizations. 11 17 CFR 30.7(d) and Appendix E to Part 30.

CFTC Letter No. 25-38 Interpretative November 25, 2025 3 Regulation 30.7(c), an FCM may deposit with a foreign broker a maximum of 120 percent of the total amount of margin required by the foreign broker for the foreign futures and foreign options positions of 30.7 Customers. 12 The restrictions that are most relevant to FIA’s Request for Interpretation, however, are: (i) that an FCM must deposit 30.7 Customer Funds under the laws and regulations of the foreign jurisdiction that provide the greatest degree of protection to such funds, and (ii) that an FCM may not waive any of the protections afforded 30.7 Customer Funds under the laws of the foreign jurisdiction (collectively, the “Customer Funds Restrictions”). 13 The Commission adopted the Customer Funds Restrictions in 2013 as part of the overall enhancement of the protections afforded to customers, including the holding of their funds. 14 The Customer Funds Restrictions were also adopted in response to a dispute in an FCM bankruptcy proceeding concerning the legal status of Customer Securities that were deposited by the FCM with its foreign broker affiliate as margin for
30.7 Customers’ foreign futures and foreign options positions. The Trustee for the FCM in the
bankruptcy proceeding asserted that the Customer Securities should be returned by the foreign affiliate to the 30.7 Customers as protected client assets under relevant foreign law. The administrator for the foreign affiliate that was in an insolvency proceeding under local law, however, appeared to claim that the FCM opted out of the standard client asset protection regime and elected an alternative legal structure under local law. The alternative regime, if elected, would involve an absolute title transfer of the Customer Securities to the foreign affiliate and would have further resulted in the FCM and 30.7 Customers effectively becoming general creditorsin the event of the insolvency of the foreign affiliate. 15 The Customer Funds Restrictions are intended to ensure that an FCM maintains 30.7 Customer Funds with foreign intermediaries consistent with applicable customer asset protections offered in the foreign jurisdictions and does not elect alternative regimes that provide less protection to 30.7 Customer Funds in the event of the insolvency of a foreign intermediary. Commission staff also issued two no-action letters for an FCM depositing Customer Securities with a foreign broker affiliate under a right of re-use. 16 In discussing the facts presented in the 12 17 CFR 30.7(c). Commission Regulation 30.7(c) limits the amount of 30.7 customer funds that may be deposited with any non-U.S. depository to the amount of margin required for the 30.7 customers’ foreign futures and foreign option positions, plus an additional 20 percent of the required margin to minimize the frequency of transfers between U.S. and non-U.S. depositories. MPD staff, however, issued a no-action position for FCM deposits of 30.7 Customer Funds with non-U.S. banks and non-U.S. clearing organizations that otherwise meet the qualifications as a Permitted Depository from the restriction. CFTC Staff Letter No. 14-138 (Nov. 13, 2014), available at:
https://www.cftc.gov/sites/default/files/idc/groups/public/@lrlettergeneral/documents/letter/14-138.pdf. 13 17 CFR 30.7(c). 14 Enhancing Protections Afforded Customers and Customer Funds Held by Futures Commission Merchants and Derivatives Clearing Organizations, 78 FR 68506 (Nov. 14, 2013). 15 Report of the Trustee’s Investigation and Recommendations, In re MF Global, Inc., Debtor, Case No. 11-2790 (MG) (SIPA), (Bankr. S.D.N.Y). The legal dispute was ultimately settled by the parties. 16 CFTC Staff Letter No. 16-88 (Dec. 19, 2016), available at: https://www.cftc.gov/csl/16-88/download, as modified by CFTC Staff Letter No. 18-26 (Oct. 31, 2018), available at: https://www.cftc.gov/csl/18-26/download. Letter 16-

CFTC Letter No. 25-38 Interpretative November 25, 2025 4 request for a no-action position, staff stated that Commission regulations prohibit an FCM from transferring Customer Securities by title transfer. Staff Letters 16-88 and 18-26, however, were in response to specific facts and circumstances applicable to the regulatory requirements of the United Kingdom, including the applicable title transfer and right of re-use requirements, and were not intended to represent the Division’s views with respect to all circumstances involving title transfer, including situations where title transfer or right of re-use is authorized or required under the applicable local regulatory regime and/or rules of the foreign board of trade or foreign clearing organization.
II. Summary of the Request for Interpretation
FIA’s Request for Interpretation seeks clarification and confirmation that an FCM would not be in violation of its obligations under Commission Regulation 30.7 and the Customer Funds Restrictions, and a foreign broker or foreign clearing organization that is a Permitted Depository under Commission Regulation 30.7(b) would not be in violation of its obligations under the acknowledgment letter required by Commission Regulation 30.7(d), if the foreign broker or a foreign clearing organization were to take title to, or invoke a right of re-use over, Customer Securities that the FCM deposits to margin the foreign future and foreign option positions of 30.7 Customers. The Request for Interpretation specifies that any title transfer or right of re-use must be authorized or required under the applicable local regulatory regime or rules of the foreign board of trade or foreign clearing organization, and that the Customer Securities may be used or re-used by the foreign broker or foreign clearing organization solely for the purpose of margining or securing 30.7 Customer obligations arising from 30.7 Customers’ foreign futures and foreign option positions. In support of its Request for Interpretation, FIA asserts that FCMs are currently operating in foreign futures markets at a significant disadvantage to their foreign competitors, including competitors located, or participating on markets located, in the European Union and United Kingdom. FIA states that firms operating in non-U.S. jurisdictions are not constrained in their ability under applicable foreign law to post securities belonging to customers with other foreign brokers or foreign clearing organizations as margin for customer positions. In addition, FIA notes that certain jurisdictions in Europe and Asia affirmatively require clearing members of a foreign board of trade to transfer title of customer securities deposited as margin funds to foreign clearing organizations. FIA also represents that the competitive disadvantage is heightened by the fact that most institutional customers of FCMs prefer to meet margin requirements for foreign futures and foreign options positions with securities, consisting primarily of U.S. Treasury securities and other highly liquid foreign sovereign debt securities. FIA notes that as of July 2025, FCMs collectively held 88 and Letter 18-26 were issued by staff in MPD’s predecessor division, the Division of Swap Dealer and Intermediary Oversight.

CFTC Letter No. 25-38 Interpretative November 25, 2025 5 $55.2 billion of 30.7 Customer Funds for trading foreign futures and foreign options, with approximately $22.7 billion comprised of Customer Securities. 17 FIA further argues that due to the uncertainty stemming from Staff Letters 16-88 and 18-26, many FCMs feel compelled to either limit their 30.7 Customers’ ability to deposit Customer Securities as margin for foreign futures and foreign option positions or to source cash from the FCMs’ residual interest in the 30.7 Customer accounts to meet margin obligations to foreign brokers or foreign clearing organizations. Alternatively, FIA states that FCMs must require their 30.7 Customers to post cash as margin, limit their 30.7 Customers’ activity on foreign markets, or accept Customer Securities as margin without being able to pass the securities on to foreign brokers or foreign clearing organizations that operate in title transfer regimes. FIA asserts that none of these options are desirable or serve the interest of the FCMs or their 30.7 Customers as the options raise significant funding challenges to FCMs and may result in increased costs or reduced access to foreign markets and clearing for 30.7 Customers. FIA also states that its Request for Interpretation is consistent with longstanding Commission guidance. FIA notes that in October 2000, the Commission revised an interpretation regarding the holding of 30.7 Customer funds contained in Appendix B to Part 30. 18 Prior to the October 2000 revision of Appendix B, the Commission interpreted Commission Regulation 30.7 to require each FCM to deposit proprietary funds in a designated 30.7 Customer segregated account (i.e., set aside proprietary funds in a “Mirror Account”) in the event that the FCM became aware of facts leading it to conclude that 30.7 Customer Funds were not being handled by the initial depository (e.g., a foreign broker), or any subsequent depository, in a manner consistent with the requirements of Commission Regulation 30.7. 19 The October 2000 revisions to Appendix B eliminated the Mirror Account requirement provided that the FCM obtains the acknowledgment letter specified in Commission Regulation 30.7(d) from the initial Permitted Depository and provides the 30.7 Customers with specific disclosures regarding the risks of trading on foreign markets. The specific disclosure that an FCM is required to provide include statements informing 30.7 Customers that: (i) the CFTC does not regulate the 17 Request for Interpretation at fn. 4 (referring to Selected FCM Financial Data as of July 31, 2025 available here). Customer-owned securities and securities purchased with 30.7 Customer Funds represented approximately $14.7 billion and $6 billion, respectively, of the $22.7 billion in securities held by FCMs in July 2025. FCMs are permitted by Commission Regulation 30.7(h) to invest 30.7 Customer funds in U.S. Treasury securities and obligations fully guaranteed as to principal and
interest by the U.S.; municipal securities; U.S. agency obligations; U.S. Government money market funds; exchange-traded funds comprised of short-term U.S. Treasury securities; and general sovereign debt obligations of Canada, France, Germany, Japan, and the U.K. 17 CFR 30.7(h). 18 Foreign Futures and Foreign Options Transactions, 65 FR 60558, 60559 (Oct. 11, 2000), codified as Appendix B to Commission Rule 30.7 (“Appendix B”). 19 The Mirror Account helped ensure that an FCM would meet its obligations to 30.7 Customers in the event of the insolvency of the FCM and the failure of the depository to return the 30.7 Customer Funds.

CFTC Letter No. 25-38 Interpretative November 25, 2025 6 activities of foreign exchanges, including the execution and clearing of transactions; (ii) transactions on foreign markets may be subject to foreign regulations which offer different or diminished investor protections than Commission regulations and thus may expose the 30.7 Customers to additional risk; and (iii) 30.7 Customer Funds may not be provided the same protections as funds deposited to margin positions on CFTC-regulated markets. 20 The disclosures further provide that 30.7 Customers should familiarize themselves with the foreign rules that will apply to their transactions before trading on foreign markets. 21 FIA asserts that, provided that a foreign regime has adopted rules protecting the value of securities over which title has been transferred in the event of an insolvency, it believes that an FCM may deposit Customer Securities with foreign brokers and foreign clearing organizations operating under such rules, consistent with the requirements of Commission Regulation 30.7 and Appendix B to Part 30. FIA states that the requested relief would allow FCMs to more readily compete on foreign markets and would bring meaningful savings to FCMs and 30.7 Customers, as FCMs would be able to accept and use Customer Securities to margin positions of 30.7 Customers without having to finance offshore margin deposits with proprietary cash.
III. MPD Staff Interpretation
Based on the facts presented in the Request for Interpretation, the Division confirms that:
(1) An FCM is not in violation of Commission Regulation 30.7 if it transfers Customer Securities to a foreign broker, foreign board of trade, or foreign clearing organization under a title transfer or right of re-use, provided that such title transfer or right of re-use is authorized or required under the applicable local regulatory regime and/or rules of the foreign board of trade or foreign clearing organization and the Customer Securities are being transferred solely for purposes of margining or securing 30.7 Customer obligations arising from 30.7 Customers’ foreign futures and foreign options positions; and (2) A foreign broker or foreign clearing organization would not be in violation of its obligation under the acknowledgment letter set forth in Appendix E to Part 30 if the foreign broker, a foreign board of trade, or the foreign clearing organization takes title to, or invokes a right of re-use over, Customer Securities deposited by an FCM, provided that title transfer or right of re-use is authorized or required under the applicable local regulatory regime and/or rules of the foreign board of trade or foreign clearing organization and the Customer Securities are being transferred solely for purposes of margining or securing 30.7 Customer obligations arising from 30.7 Customers’ foreign futures and foreign options positions. 20 17 CFR 1.55. 21 Id.

CFTC Letter No. 25-38 Interpretative November 25, 2025 7 The Division is issuing this interpretation in recognition that the Part 30 regulations were developed under Section 4b of the CEA to provide a framework for FCMs to provide their customers with access to foreign future and options markets. As discussed above, the Part 30 framework is designed to both protect 30.7 Customers and to inform 30.7 Customers of potential differences in regulatory requirements that may present risks to 30.7 Customers. The Division, however, recognizes that foreign brokers, exchanges, and clearing organizations operate under laws and regulations that may differ from the Commission’s, including the laws and regulations regarding the holding of customer funds. The Customer Funds Restrictions discussed above are intended to ensure that 30.7 Customer Funds are held in accordance with the applicable laws and regulations governing the holding of customer funds deposited for trading futures and options on futures in the relevant foreign jurisdictions and are used by the FCM and foreign intermediaries solely to margin 30.7 Customers’ foreign futures and foreign options positions. This interpretation also addresses any legal uncertainty arising from Staff Letters 16-88 and 18-
26. Confirmation from the Division that the title transfer of Customer Securities is not subject to
an outright prohibition under Commission Regulation 30.7 will remove the competitive disadvantages that FCMs experience with respect to customers trading on foreign markets that are discussed above. This confirmation and interpretation also have the potential to make foreign futures markets more readily available to 30.7 Customers and reduce costs to 30.7 Customers and FCMs. This interpretation represents the position of the Division and does not necessarily represent the views of the Commission or those of any other division or office of the Commission. This letter and the interpretation set forth herein are based upon the facts and circumstances represented to the staff of the Division. Any different, changed, or omitted material facts or circumstances may require a different position or render this letter void. As with all interpretative letters, the Division retains the authority to condition further, modify, suspend, terminate, or otherwise restrict the interpretation provided herein, in its discretion. Sincerely, ___________________________________ Thomas J. Smith Acting Director Market Participants Division