NATIONAL FUTURES ASSOCIATION 

David A. Stawick 

Secretariat 

Received CFTC 

Records Section 

74~7 

Commodity Futures Trading Commission 

1155 21st Street, N.W. 

Washington, DC 20581 

July 21, 2009 

COMMENT 

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Re: Advance Notice of Proposed Rulemaking for Regulations 1.25 and 30.7 

Dear Mr. Stawick: 

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National Futures Association appreciates this opportunity to comment on 

the Commission's advance notice of proposed rulemaking regarding the investment of 

customer segregated funds under Commission Rule 1.25 and the treatment of foreign 

futures or foreign options secured amount under Commission Rule 30.7. 

As the Commission's release notes, the primary objective of Commission 

Rules 1.25 and 30.7 is to preserve principal and maintain liquidity of customer funds. 

Given recent events in the financial markets, NFA applauds the Commission's timely 

reassessment of the different collateral classes available for investing customer funds 

and we believe this reassessment will provide the Commission with an excellent 

opportunity to review how well the current list of permitted investments satisfies these 

rules' primary objective. 

As you are aware, in late 2007, NFA developed an electronic system to 

track the collateral classes in which the FCMs for which we serve as the DSRO invest 

their customer funds. NFA reviews this information, which has remained relatively 

static, on a monthly basis. In particular, these firms hold the majority of their customer 

segregated funds in bank accounts or on deposit with a carrying broker. They also, 

however, invest a significant portion of their funds (approximately one-third) in U.S. 

government securities and a smaller amount (approximately ten percent) in money 

market funds. Other investments are negligible. NFA recognizes that the CFTC as part 

of its reassessment will conduct its own review of the asset classes in which FCMs 

300 South Riverside Plaza Suite 1800 Chicago, Illinois 60606 312.781.1300 800.621.3570 312.781.1672 fax www.nfa.futures.org 
invest their customer funds, including those for which NFA is not the DSRO. For 

simplicity purposes, NFA would support the elimination of any asset classes that have 

not historically been utilized to any material extent. 

In conducting its review, NFA also encourages the Commission to 

consider whether it is appropriate to tighten the concentration limits contained in 

Regulation 1.25(b)(4) with respect to asset classes covered by these limits, and the 

amount of customer funds that can be invested in a single issuer and a particular 

collateral sector. Additionally, the Commission should clarify that it has the authority to 

change any established concentration limits if market circumstances warrant. In 

conducting its review, NFA also encourages the Commission to consider new 

investment vehicles that are compatible with the Commission's objectives, such as 

securities issued by a bank and guaranteed by the Federal Deposit Insurance 

Corporation (FDIC) in accordance with the FDIC's Temporary Liquidity Guarantee 

Program. 

Finally, NFA supports applying the investment requirements of 

Commission Rule 1.25, including any prospective amendments, to investments of 30.7 

funds. In applying Regulation 1.25's standards to 30.7 funds, the Commission should 

consider adding liquid securities issued by foreign banks and guaranteed as to principal 

and interest by certain relevant foreign governments. 

NFA thanks the Commission for the opportunity to comment on this 

rnatter. If the Commission. would like any further information on investment of 

segregated funds by FCMs for which NFA is the DSRO, NFA would be happy to provide 

that information. We also look forward to commenting on any proposed amendments to 

Regulations 1.25 and 30.7 that the Commission believes appropriate in light of its 

reassessment of these rules. If you have any questions on these comments or would 

like to further discuss them, please do not hesitate to contact me. 

(caw: comment letter- Rule 1.25, 30.7 funds) 

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Sincerely, 

Thomas W. Sexton, Ill 

Senior Vice President and 

General Counsel