The US Commodity Futures Trading Commission (CFTC) has issued an order filing and simultaneously settling charges against Macquarie Futures USA, a New York-based registered futures commission merchant (FCM), for failing to maintain adequate funds in secured accounts.
The CFTC order requires Macquarie to pay a USD150,000 civil monetary penalty and to cease and desist from violating CFTC Regulation 30.7.
The order finds that on 15 October 2012 ICE Clear Europe converted its existing OTC swaps and options to US exchange-listed futures and options to be listed for trading on ICE Futures US Energy Division and ICE Futures Europe (ICE conversion). Assets held by ICE Clear Europe corresponding to assets under secured funds were to be re-designated as segregated funds. Notice was given to all concerned firms, including Macquarie, with instructions and support provided by ICE Clear Europe, according to the order.
In anticipation of this conversion, on 15 October 2012 Macquarie transferred certain secured assets to its segregated accounts, and kept certain positive balances in its secured accounts. However, later on 15 October, consistent with the notice given to Macquarie, ICE Clear Europe re-designated approximately USD45m of Macquarie’s secured funds to segregated funds, making the funds segregated assets rather than secured assets, the order finds. Because all of the secured assets pertaining to the ICE conversion were moved to the segregated account(s), but the entire secured client liability pertaining to the conversion was not timely moved on Macquarie’s books to segregated account(s), a secured deficiency occurred, according to the order.
The Commodity Exchange Act and CFTC regulations contain provisions to protect the funds of customers trading on both US and foreign exchanges. In relation to customers trading on foreign exchanges, an FCM must account for and maintain money, securities, and property in an amount at least sufficient to cover or satisfy all of its current obligations to foreign futures and options customers in a separate “secured account.” The funds in a secured account are referred to as secured funds.
On 16 October 2012, Macquarie discovered that it was undersecured in the amount of USD36.6m, based on calculations made from balances as of the close of business on 15 October. After learning of the deficiency, Macquarie immediately provided notice to the CFTC, the National Futures Association, and various exchanges, in accordance with its regulatory obligations. Macquarie also transferred approximately USD45m from its segregated account to its secured account, curing the deficiency.
During the relevant time, Macquarie maintained sufficient funds to satisfy its secured deficiency; however, funds required to be held in secured accounts are distinct from funds required to be held in segregated accounts, according to the order.
Macquarie immediately undertook measures to avoid a similar deficiency from occurring in the future, according to the order.