Commodity Futures Trading Commission 

 Office of Public Affairs 

 Three Lafayette Centre 

 1155 21st Street, NW 

 Washington, DC 20581 

 www.cftc.gov

Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

Proposed Rule on Regulations 1.25 and 30.7 Regarding Investment of 

Customer Funds and Credit Ratings 

Commodity Exchange Act, Section 4d(a)(2) provides that the investment of customer segregated funds is 

limited to obligations of the United States and obligations fully guaranteed as to principal and interest by the United 

States, and general obligations of any State or of any political subdivision thereof. 

Commission Regulations 1.25 and 30.7: Pursuant to authority under Section 4(c) of the CEA, the Commission 

substantially expanded the list of permitted investments by amending Commission Regulation 1.25 in December 

2000 to permit investments in general obligations issued by any enterprise sponsored by the United States, bank 

certificates of deposit, commercial paper, corporate notes, general obligations of a sovereign nation, and interests in 

money market mutual funds (MMMFs). In February 2004, the Commission adopted amendments regarding 

repurchase agreements using customer-deposited securities and time-to-maturity requirements for securities 

deposited in connection with certain collateral management programs of derivatives clearing organizations. In May 

2005, the Commission adopted amendments related to standards for investing in instruments with embedded 

derivatives, requirements for adjustable rate securities, concentration limits on reverse repurchase agreements, 

transactions by futures commission merchants (FCMs) that are also registered as securities brokers or dealers (inhouse transactions), rating standards and registration requirements for MMMFs, an auditability standard for 

investment records, and certain technical changes. Regulation 30.7 governs an FCM’s treatment of customer money, 

securities, and property associated with positions in foreign futures and foreign options. Regulation 30.7 was issued 

pursuant to the Commission’s plenary authority under Section 4(b) of the Act. Because Congress did not expressly 

apply the limitations of Section 4d of the Act to 30.7 funds, the Commission historically has not subjected those 

funds to the investment limitations applicable to customer segregated funds. 

Section 939A of the Dodd-Frank Act obligates Federal agencies to complete a review of their respective 

regulations for the use of assessments of the credit-worthiness of securities or money market instruments within 

one year. The Act requires Federal agencies to make appropriate amendments to those regulations in order to 

decrease reliance on credit ratings. 

The proposed rule would amend Regulations 1.25 and 30.7 in several respects. Certain amendments reflect the 

implementation of new statutory provisions enacted by Section 939A of the Dodd-Frank Act. The proposed rules 

address: (1) certain changes to the list of permitted investments, (2) a clarification of the liquidity requirement, (3) 

the removal of rating requirements, (4) an expansion of concentration limits including instrument-based, issuerbased, and counterparty concentration restrictions, (5) revisions to the acknowledgment letter requirement for 

investment in an MMMF, (6) revisions to the list of exceptions to the next-day redemption requirement for 

MMMFs, (7) the application of customer segregated funds investment limitations to 30.7 funds, (8) the removal of 

ratings requirements for depositories of 30.7 funds, and (9) the elimination of the option to designate a depository 

for 30.7 funds. 

 
Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

Comparison Chart – Regulation 1.25, Current vs Proposed Changes

INSTRUMENT RATING INSTRUMENTBASED 

CONCENTRATION 

(percentage of total assets in 

segregation) 

ISSUER-BASED 

CONCENTRATION 

(percentage of total assets in 

segregation)

CURREN

T 

PROPOSE

D 

CURREN

T 

PROPOSE

D 

CURREN

T 

PROPOSE

D 

CURREN

T 

PROPOSE

D 

Treasuries (No change) None (No change) No limit (No change) No limits (No change)

Municipals (No change) Highest shortterm rating of an 

NRSRO or one 

of the two 

highest long-term 

ratings of an 

NRSRO 

No credit 

rating 

No limit 10% 5% (No change)

GSE 

Securities 

GSE 

securities 

that are fully 

guaranteed 

as to 

principal 

and interest 

by the U.S. 

Highest shortterm rating of an 

NRSRO or one 

of the two 

highest long-term 

ratings of an 

NRSRO 

No credit 

rating 

No limit 50% 25% (No change)

CDs Nonnegotiable 

CDs 

Highest shortterm rating of an 

NRSRO or one 

of the two 

highest long-term 

ratings of an 

NRSRO 

No credit 

rating 

No limits 25% 5% (No change)

Commercia

l Paper 

Commercial 

paper that is 

fully 

guaranteed 

as to 

principal 

and interest 

by the U.S. 

Highest shortterm rating of an 

NRSRO or one 

of the two 

highest long-term 

ratings of an 

NRSRO 

No credit 

rating 

No limit 25% 5% (No change)
Commodity Futures Trading Commission ♦ Office of Public Affairs ♦ 202-418-5080 

INSTRUMENT RATING INSTRUMENTBASED 

CONCENTRATION 

(percentage of total assets in 

segregation) 

ISSUER-BASED 

CONCENTRATION 

(percentage of total assets in 

segregation)

CURREN

T 

PROPOSE

D 

CURREN

T 

PROPOSE

D 

CURREN

T 

PROPOSE

D 

CURREN

T 

PROPOSE

D 

Corporate 

Notes & 

Bonds 

Corporate 

notes & 

bonds that 

are fully 

guaranteed 

as to 

principal 

and interest 

by the U.S. 

Highest shortterm rating of an 

NRSRO or one 

of the two 

highest long-term 

ratings of an 

NRSRO, unless 

asset-backed. 

Asset-backed 

corporate notes 

or bonds must 

have the highest 

ratings of an 

NRSRO. 

No credit 

rating 

No limit 25% 5% (No change)

Foreign 

Sovereign 

Debt 

Eliminated 

Money 

Market 

Mutual 

Funds 

(No change) None (No change) No limit 10% No limit 2% 

(family of 

funds) 

In-house 

transactions 

Eliminated 

Additional notes:

• Repurchase agreements with affiliates would be eliminated. 

• Repurchase agreements would be subject to a 5% counterparty concentration limit (currently there is no 

such limit). 

• The requirement that all investments be “readily marketable” would be replaced with a “highly liquid” 

standard. 

• The rulemaking would clarify that acknowledgement letters for money market mutual funds (MMMFs) are 

to be from a party that has substantial control over the fund’s assets and has sufficient knowledge and 

authority to facilitate redemption. 

• The rulemaking would update and clarify the next-day redemption requirement for MMMFs. (Appendix has 

safe harbor language for MMMF prospectuses) 

• 30.7 funds, which currently have no instrument-related limitations, would follow Regulation 1.25 rules for 

investment of customer funds. 

• The rulemaking would require that a foreign depository have $1 billion of regulatory capital. Currently, a 

foreign depository may hold 30.7 funds if it has $1 billion of regulatory capital, but can also qualify through 

other means (such as having commercial paper or corporate notes/bonds that meet certain credit rating 

requirements or receiving specific permission from the Commission upon the request of a customer).