CFTC Final Rule: Residual Interest Deadline for Futures Commission Merchants

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Gavel.png FINAL RULE: Approved by the commission March 17, 2015. The rule becomes effective 60 days after it enters the Federal Register.
Timeline, Residual Interest Deadline, CFTC
Proposal Date Comment Deadline Final Rule Issue
November 14, 2014 January 13, 2015 March 17, 2015

On March 17, 2015, the CFTC approved a final rule that alters sections of the CFTC Final Rule: Enhancing Protections Afforded Customers and Customer Funds Held by Futures Commission Merchants and Derivatives Clearing Organizations and, specifically, the "residual interest" rule to:

The rule becomes effective 60 days after it enters the Federal Register.


On October 30, 2013, the CFTC approved a final set of rules on customer protection. The rules cover FCM risk management, record keeping and disclosure, and the treatment of customer segregated funds secured funds in foreign futures and options accounts. Of particular note is the requirement that FCMs hold a "residual interest" in customer accounts in an amount least equal to its customers’ aggregate undermargined amounts for the prior trade date, in order to protect the funds of customers with excess margin. The rule became effective in January 2014.

The commission had set a phase-in of the residual interest rule whereby one year after the rule appears in the Federal Register, any margin deficit was be required to be topped up by 6pm Eastern time on the day after settlement (“T+1”). If the customer has not met such deficit, the FCM must take a capital charge on the amount of the deficit. After five years, the requirement would have from 6pm to the "first daily settlement."

The rule was first proposed on November 3, 2014 and a deadline for public comment ran through January 13, 2015. The final rule adopts the proposal with no material alterations. VIEW COMMENT LETTERS

The Final Rule[edit]

The rule removes the five-year phase-in and requires a separate rulemaking, including a public comment period, should the commission ever decide to alter the margin deficit timing gap from the 6pm T+1 deadline.

The rule was unanimously approved by commissioners Mark Wetjen, Sharon Bowen, Chris Giancarlo, and Chairman Tim Massad.

John Lothian News Special Report: Residual Interest, February 2013[edit]

After the rule was proposed by the CFTC the proposed “residual interest” provision introduced last fall was discussed in a CFTC roundtable on February 5. The meeting led by Robert Wasserman, chief counsel of the CFTC’s Division of Clearing and Risk, included panelists Mike Dawley of Goldman Sachs and FIA chairman and Kim Taylor, CME Clearing president who argued that the increased margin requirements under the proposal are substantial. Dawley said the rule, if passed in its current form, would be “one of the most monumental events” in his 30 years in the industry.

John Lothian News put together a special report on the issue.

Related Documents: Final Rule, Fact Sheet, Q&A, Federal Register Entry, FIA Statement from Proposed Rule[edit]


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