Futures Industry Association 

2001 Pennsylvania Ave. NW 202.466..5460 

FlA 

Received CFTC 

Records Section 

Suite 600 . 

Washington, DC 20006-1823 

202.296.3 l 84 (ax 

www.futuresindustry.org 

37J3/o~ 

March 23, 2009 

Mr. David A. Stawick 

Secretary to the Commission 

Commodity Futures Trading Commission 

1155 21st Street, NW . 

Washington, DC 20581 

COMMENT 

Re: Proposed Rules for· Acknowledgment Letters for Customer Funds i~!},nd 

Secured Amount Funds-- 74 Fed.Reg. 7838 (February 20, 2009) ~ .. : 

Dear Mr. Stawick, 

The Futures Industry Association ("FIA'') 1 is pleased to submit this letter in response to the 

Commodity Futures Trading Commission's ("Commission's") request for comments on 

the Commission's proposed amendments to its regulations requiring futures commission 

merchants ("FCMs") and derivatives clearing organizations ("DCOs") to obtain 

acknowledgement letters from depositories (each a "Depository") accepting customer 

funds and secured amount funds? The proposed amendments to regulations 1.20, 1.26 

and 30.7 set out specific representations that would be required in these acknowledgment 

FIA is a principal spokesman for the commodity futures and options industry. FIA 's regular 

membership is comprised of approximately 30 of the largest futures commission merchants in the United 

States. Among its associate members are representatives from virtually all other segments of the futures 

industry, both national and international. Reflecting the scope and diversity of its membership, FIA 

estimates that its members effect more than eighty percent of all customer transactions executed on United 

States contract markets. 

2 Currently, Regulation 1.20 requires such FCMs and DCOs to obtain from the bank, trust company, 

FCM or DCO holding customer funds in the capacity of a depository a written acknowledgement that the 

Depository was informed that the customer funds deposited therein are those of commodity or option 

customers and are being held in accordance with the provisions of the Commodity Exchange Act (Act) and 

CFTC regulations. Regulation 1.26 repeats the requirement to obtain ali aclmowledgment letter, and 

Regulation 30.7 requires FCMs to obtain a written acknowledgment from initial Depositories holding 

property and funds comprising the "secured amount" that such "secured amount" is being held for or on 

behalf of the FCM's foreign futures and foreign options customers "in accordance with the provisions of 

these regulations." 

.. } 

.. ::: 
Mr. David A. Stawick 

March 23, 2009 

Page 2 

letters in order to reaffirm and clarify the obligations Depositories incur when accepting 

customer funds or secured amount funds. 

FIA appreciates the Commission's concern underlying its proposal. Segregation is the 

lynch pin of the customer protection regime for futures in the United States. FIA generally 

supports the Commission's proposed inclusion of specific representations to reaffirm and 

clarify the obligations of Depositories accepting customer funds or secured amount funds 

(each an "Account"). Additionally, FIA also supports the proposed amendment to 

Commission Rule 1.26, which confirms that such letters should be held for as long as the 

Account remains open, and thereafter for the period provided in Rule 1.31 as may be 

amended from time to time. 

While generally supporting the proposed regulations, intemal counsel of both FCM and 

Depository members of the FIA have historically found that putting an acknowledgment 

letter in place with non-affiliate firms is more difficult and time consuming than it would 

appear, particularly in the case of foreign depositories. Each FCM and each Depository 

has its own preferred form letter. Depositories historically have preferred tenns which 

simply mirror the current language of Rule 1.20. However, many FCMs, in an abundance 

of caution and because of earlier experience with third-party custodial accounts, have 

added provisions to their letters which track applicable portions of the Commodity 

Exchange Act and CFTC regulations. 

The exchange of templates and negotiation of language to be included or removed from the 

final agreed document is frequently a lengthy process. Even when the parties have 

previously agreed to a letter, each subsequent letter often results in further negotiation. 

Our FCM and Depository members indicate that it may take several months to negotiate 

and put in place a single acknowledgment letter satisfying current Commission regulations. 

If the proposed amendments are adopted, one firm estimated it would have to renegotiate 

60- 80 letters. Complying with the Commission's proposed requirements would make 

finalization within the 180 day deadline problematic at best. Accordingly, we request that 

any final rules extend the proposed deadline for obtaining the new aclmowledgment letters 

well beyond 180 days. 

If the Commission determines to go forward with the proposed amendments, FIA 

recommends that the Commission defer setting an effective date in order to provide the 

affected members of the industry, i.e., FCMs, DCOs and their Depositories, in 

coordination with the Commission, an opportunity to work together to develop a standard 

template acknowledgment letter which will satisfy the proposed regulations. FIA believes 

this would be the best way to streamline the process of obtaining new aclmowledgment 

letters that would satisfy the proposed. A standardized letter would decrease the resources 

currently spent negotiating customized aclmowledgment letters and would likely shorten 

the time needed to obtain the letters. In addition to development of a standardized 

acknowledgment Jetter, our Depository members are very interested in working with the 
Mr. David A. Stawick 

March 23, 2009 

Page 3 

Cotnmission on a standardized not1ce, authei1tication and instruction protocol to help 

ensure against delay or confusion. 

Also, in the interest of further efficiency, we hope the Commission will consider electronic 

filing, which might be best satisfied by development of a system to centralize electronic 

adher~nce, submission, access and retention of acknowledgment letters. Electronic 

submission of and access to information by members on the National Futures 

Association's ("NFA") website has proven efficient and reliable, and the FIA hopes to 

leverage that expertise by enlisting the NF A to help develop and host a system for 

acknowledgment letters. 

FIA appreciates the opportunity to submit these comments in support of the proposed 

amendments and looks forward to working with the Commission, DCOs and Depositories 

to quickly develop an efficient working solution that satisfies the proposed regulations. If 

:you have any question concerning our comments, please feel free to contact Tammy 

Botsford, FIA's Assistant General Counsel, (202) 466-5460. 

Since ely, 

cc: Honorable Michael Dunn, Acting Chairman 

Honorable Walter Lukken, Commissioner 

Honorable Jill E. Sonnners, Commissioner 

Honorable Ba1i Chilton, Commissioner 

Division of Clearing and Intermediary Oversight 

Ananda K. Radhakrishnan 

Eileen A. Donovan