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Coalition of end users and market participants respond to CFTC staff report on residual interest

CFTC

Coalition of end users and market participants respond to CFTC staff report on residual interest

13 May 2016 8:15pm EDT

Washington, D.C. — Today, a coalition of associations representing agricultural producers, hedgers, and the clearing members who serve their risk-management needs responded to the Commodity Futures Trading Commission (CFTC) staff report on the residual interest deadline

The Commodity Markets Council (CMC) and FIA joined the National Council of Farmer Cooperatives (NCFC), the National Grain and Feed Association (NGFA), and the National Pork Producers Council (NPPC) in agreement with the CFTC’s conclusion that changing the residual interest deadline would not be practicable for clearing members and their customers.

In prior written comments to the CFTC and in remarks at the Commission’s roundtable on the subject on March 3, 2016, the groups noted that moving the residual interest deadline would impose significant costs on customers and their clearing members, thereby reducing liquidity and making it difficult for producers to hedge risk.  

The groups pledged to continue working to ensure the Commission maintains the current deadline of 6 p.m. (Eastern) on the settlement date which, in combination with other regulations, provides protection for customer funds without harming the ability to hedge.

Background: The residual interest deadline is the time by which an FCM must assure that it is holding in its customer segregated accounts residual interest that is at least equal to the amount its customers’ segregated accounts, in the aggregate, are undermargined. Rule 1.22(c)(5) sets the residual interest deadline at 6 p.m. (Eastern) on the settlement date, i.e., the business day following the trade date. As a result of recent amendments to Rule 1.22(c)(5), the deadline cannot be amended absent a Commission rulemaking and opportunity for public comment. 

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