FDIC Temporary Liquidity Guaranteed Collateral - Performance Bond

Recently, the Division of Clearing and Intermediary Oversight of the Commodity Futures Trading Commission issued guidance for the treatment of collateral issued under the Federal Deposit Insurance Corporation (“FDIC”) Temporary Liquidity Guarantee Program (“TLGP”) as acceptable readily marketable securities, and clarification of such guidance is outlined in the attached Joint Audit Committee (“JAC”) Regulatory Update #10-02.  A copy of this JAC Update is also available at http://www.wjammer.com/jac/jacUpdates/jac1002.pdf.

Chicago Mercantile Exchange Inc. (“CME”), Chicago Board of Trade, Inc. (”CBOT”), New York Mercantile Exchange, Inc. (“NYMEX”) and Commodity Exchange, Inc. (“COMEX”) allow clearing members to accept readily marketable securities (as defined by SEC Rule 15c3-1(c)(11) and applicable SEC interpretations) as performance bond from their account holders under CME Rule 930.C.1., CBOT Rule 930.C., and NYMEX Rule 930.C. respectively. 

As a result, exchange clearing members may accept FDIC TLGP collateral from their account holders as acceptable performance bond provided such collateral meets the requirements outlined within JAC Regulatory Update #10-02.  Additionally, when determining the performance bond value of FDIC TLGP collateral, the clearing member should apply the haircuts specified in FINRA Regulatory Notice 09-38.  A copy of this FINRA notice is available at http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p119382.pdf.

In addition, CME Clearing House Advisory Notice #10-173 introduced the acceptance of collateral issued under the FDIC TLGP as acceptable performance bond at CME’s Clearing House under certain criteria.  A copy of this Advisory Notice is attached and is also available at http://www.cmegroup.com/tools-information/lookups/advisories/clearing/files/Chadv10-173.pdf.

This Audit Information Bulletin supersedes Audit Information Bulletin #09-01 issued on February 10, 2009.

If you have any questions, please call the Audit Department at (312) 930-3230 or at (212) 299-2120.