CFTC Grants Eurex Clearing No-Action Relief for Customer Swap Margin Securities Held at Clearstream

Key Takeaways

• CFTC staff (DCR and MPD) will not recommend enforcement action against Eurex Clearing or its FCM clearing members for holding customer securities as cleared swap margin at Clearstream Banking S.A.
• (CBL) in Luxembourg, despite Regulations 1.49(c)(1), 1.49(e)(1)(i), and 22.9.
• The relief carries seven conditions, including customer disclosures, a six-jurisdiction collateral restriction, and annual custody-chain due diligence.
• FCMs and customers need to confirm they can meet these conditions before relying on it.

Deep Dive

CFTC staff (DCR and MPD) will not recommend enforcement action against Eurex Clearing or its FCM clearing members for holding customer securities as cleared swap margin at Clearstream Banking S.A. (CBL) in Luxembourg, despite Regulations 1.49(c)(1), 1.49(e)(1)(i), and 22.9. The relief carries seven conditions, including customer disclosures, a six-jurisdiction collateral restriction, and annual custody-chain due diligence. FCMs and customers need to confirm they can meet these conditions before relying on it.

Key conditions:
- Disclosure: Each FCM clearing member must give prospective customers a written disclosure before they enter into Eurex-cleared swaps. It must cover the clearing process, the risks of holding securities in foreign jurisdictions (including at CSDs and sub-custodians), and the operation of Part 190 Framework 2 in an FCM bankruptcy.
- Omnibus accounts: FCMs carrying omnibus accounts for non-clearing FCMs must take reasonable steps to ensure those FCMs deliver the same disclosure to their customers.
- Acknowledgment letters: FCMs must obtain an acknowledgment letter from CBL under Regulations 1.20 and 22.5 when opening an account.
- Eligible collateral: Only securities issued by governments or issuers in Canada, France, Germany, Japan, the United Kingdom, and the United States are permitted.
- Annual due diligence: Eurex Clearing must confirm at least annually that every custody-chain entity is a bank with at least USD $1 Billion in regulatory capital, a PFMI-consistent CSD, or a central bank, and that it remains in good regulatory standing. If an entity fails, Eurex Clearing must notify the CFTC and FCMs immediately, and the entity ceases to be an eligible depository within 14 days.
- Other rules: All other CFTC requirements still apply, including Regulations 1.11 and 39.15.
- Scope: The limitation to CBL's holding of customer-owned securities as swap margin is itself a condition.

Recommended actions:
- FCM clearing members should draft or update disclosure statements and add delivery to onboarding workflows.
- They should also confirm the account-opening process for CBL acknowledgment letters.
- Collateral eligibility controls should be configured to enforce the six-jurisdiction limit.
- Transition plans should be built for the CEU-to-CBL move ahead of Q1 2027.
- Eurex Clearing should establish its annual custody-chain diligence program, with escalation and 14-day delisting procedures.
- Counsel should monitor changes to the facts represented in the request letter.

The relief is staff-level only. It is not binding on the Commission, addresses enforcement and not legal applicability, and may be modified, suspended, or withdrawn. Any material change or omission in the representations could void it. Residual risks include foreign custody and insolvency risk, sub-custodian chain risk (CBL uses a network of 60 linked CSDs), and reliance on Luxembourg law protections represented as comparable to UCC Article 8. Firms that fail the disclosure or due diligence conditions risk losing their protection from enforcement.

Source: Commodity Futures Trading Commission