The Chicago Mercantile Exchange (CME) has announced new rules that, subject to the CME Clearing House Risk Committee and other approvals, would require customer “cleared over-the-counter (OTC) derivatives” to be held in a separate account. The CME rules implement recent amendments to the Commodity Futures Trading Commission’s Bankruptcy Rules, Part 190, creating a new, separate customer account class for “cleared OTC derivatives.” When the new rules become effective, existing customer positions in cleared OTC derivatives, currently held in CFTC Rule 30.7 secured amount accounts, will be required to be transferred to separate cleared OTC derivative customer accounts. Clearing futures commission merchants (FCMs) will be required to maintain funds for all amounts owed to cleared OTC customers in cleared OTC customer accounts and to prepare daily statements for cleared OTC customers. Clearing FCMs will be required to compute their cleared OTC customer requirement, the funds held in cleared OTC customer accounts and any excess (or deficiency) of funds in cleared OTC customer accounts. The rules will also require clearing FCMs to call for and collect performance bond collateral for positions in cleared OTC derivatives. FCMs will also be required to open new bank and safekeeping accounts for cleared OTC customer assets.

The CME plans to provide clearing firms with testing opportunities for the new cleared OTC derivatives account class in late July. The rules are expected to become effective on September 13.

The CME Advisory Notice can be found here.