MFA, SIFMA and GFXD Submit Joint Letter to the CFTC with Proposed Safe Harbor for the ECP Definition

January 19, 2012

From: MFA, Stuart Kaswell, Global Foreign Exchange Division, James Kemp


Gary Gensler (CFTC), Mary Schapiro, (SEC)
Jill Sommers (CFTC), Bart Chilton (CFTC), Scott D. O'Malia (CFTC), Mark Wetjen (CFTC), David Stawick (CFTC), Daniel Berkovitz, Richard Shilts, Ananda Radhakrishnan, Elisse B. Walter (SEC), Luis Aguilar (SEC), Troy Paredes (SEC), Daniel M. Gallagher (SEC), Elizabeth Murphy (SEC), Robert Cook, David Blass

On January 19, MFA, SIFMA, and GFXD submitted a joint letter to the CFTC with a proposed safe harbor from its proposed eligible contract participant (ECP) definition. The proposed safe harbor makes it clear that notwithstanding any other language in the Commodity Exchange Act (CEA), a commodity pool shall be an eligible contract participant if the commodity pool: (1) has total assets exceeding $10,000,000; and (2) is not formed for the purpose of evading regulation under Sections 2(c)(2)(B) and 2(c)(2)(C) of the CEA. Due to the CFTCs proposed look-through where all direct and indirect participants of a commodity pool must be ECPs in order for the pool to be an ECP, in the absence of such a safe harbor, a significant number of investment funds will not qualify as ECPs and will have to exit the U.S. institutional foreign exchange markets.