Futures Commission Merchant Regulation - Comment Letter - R.J. O'Brien - December 3, 2010

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Dodd-Frank Timeline, Investment of Customer Funds
Final Rule Issue Effective Date Compliance Deadline
December 19, 2011 February 17, 2012 June 18, 2012

Investment of Customer Funds and Credit Ratings
December 3, 2010

From the comment letter:

  • "The Commission implies that the list of newly designated permissible investments is intended to “guarantee” the principal of client assets. We disagree with this assumption and submit that credit, market and/or liquidity risk still exists even with the proposed list of permissible investments. It is our view that there is no guarantee, government or otherwise, that will fully eliminate all credit, market and/or liquidity risk when investing customer funds."
  • "With respect to repurchase agreements (“Repos”), the proposed counterparty limits of 5% would create significant operationally risk, eliminate efficiency related to larger denominated transactions and potentially expose the FCM community to a broader group of less capitalized counterparties. While RJO does not believe that a limit is necessary, if the Commission desires that one exist, RJO would suggest it be at least 25%, regardless of the status of the counterparty, i.e., an affiliate or a third party."
  • "Foreign sovereign debt, like other high quality asset classes, can be limited to those issuers with an acceptable credit quality and secondary market. We would propose G-7 only issuers with limits based upon the margin requirement of all client positions, as single currency margining is prevalent among FCMs."


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