Amendments to Regulation 1.25, Permissible Investments of Customer Funds by Futures Commission Merchants and Derivatives Clearing Organizations
Commodity Futures Trading Commission (CFTC)
Research Complete
Hallucination findings published
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Rich-narrative analysis of how AI models fail on this regulation, written for
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Both Claude Opus 4.7 and Claude Sonnet 4.6 (each with web search active) failed on the CFTC's 2024 amendments to Regulation 1.25 across the rule's three operative pillars: the size-triggered 50 per cent concentration ceiling under 17 CFR 1.25(b)(3)(ii), the 24-month portfolio...
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Hallucination Shape
(5 Response Hallucination + 24 Citation Hallucination = 29 Hallucination findings)
Citation Hallucination Modes (24 failures)
Fabricated
0
Pretextual
0
Contradictory
24
Hallucination findings
5 finding cards across
2 AI Models —
covering 5 Response Hallucinations +
24 Citation Hallucinations
(29 hallucination failures total).
Each card pairs the AI's answer against the authenticated regulator-text excerpt that contradicts it, and flags every AI-cited source as Fabricated / Pretextual / Contradictory.
What are the updated concentration limits that apply to government money market funds and Treasury ETFs under the 2024 Regulation 1.25 amendments, including any tiered or size-based thresholds based on fund and management company asset sizes?
Claude Opus 4.7 (web search on) answered
the final rule did not adopt tiered or FCM-size-based thresholds — the percentage limits apply uniformly regardless of FCM size
Regulator text says
Investments in government money market funds or qualified ETFs whose assets are ≥$1B and whose management company manages ≥$25B: may not exceed 50% of total segregated assets.
Verbatim source
p_03_REGULATION_17_CFR_1_25_b__3__ii____two_tier_asset_b_download.pdf
— 17 CFR 1.25(b)(3)(ii) — two-tier asset-based concentration limits for government MMFs and Treasury ETFs
substrate/US/CFTC/FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024/_raw_manual_substrate/p_03_REGULATION_17_CFR_1_25_b__3__ii____two_tier_asset_b_download.pdf
What dollar-weighted average maturity limit applies to an FCM's overall portfolio of customer segregated fund investments under the 2024 Regulation 1.25 amendments, and which asset classes are excluded from that portfolio-level calculation?
Claude Opus 4.7 (web search on) answered
with U.S. Treasuries held under repurchase agreements excluded from the calculation
Regulator text says
The dollar-weighted average of the time-to-maturity of the portfolio may not exceed 24 months. This limit excludes government money market funds, Treasury ETFs, and foreign sovereign debt from the calculation.
Verbatim source
p_03_REGULATION_17_CFR_1_25_b__3__iv____dollar_weighted_download.pdf
— 17 CFR 1.25(b)(3)(iv) — dollar-weighted average portfolio maturity limit: 24 months for general portfolio
substrate/US/CFTC/FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024/_raw_manual_substrate/p_03_REGULATION_17_CFR_1_25_b__3__iv____dollar_weighted_download.pdf
What are the key compliance dates under the 2024 Regulation 1.25 amendments — specifically the general effective date for conforming investment policies and the separate deadline for updating Segregation Investment Detail Reports and customer risk disclosure statements?
Claude Opus 4.7 (web search on) answered
the rule sets the SIDR-revision compliance date at a separate, later date (commonly described as roughly six months to a year after the effective date)
Regulator text says
SIDR Report and Risk Disclosure Statement updates: compliance date March 31 2025.
Verbatim source
R1-ACT-Q4_7_USC_6d_Commodity_Exchange_Act.pdf
— Effective date vs compliance date — February 21 2025 general effective date vs March 31 2025 SIDR-specific compliance date
substrate/US/CFTC/FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024/_raw_manual_substrate/R1-ACT-Q4_7_USC_6d_Commodity_Exchange_Act.pdf
A Chief Risk Officer preparing an FCM investment policy statement asked for the updated concentration limits applying to government money market funds and Treasury ETFs under the 2024 Regulation 1.25 amendments, including any size-based or tiered thresholds.
Claude Sonnet 4.6 (web search on) answered
there is no size-based tier that changes the percentages based on the FCM's total assets — the limits apply uniformly: Tier 1 — Per Instrument: No more than 10% of total assets held in customer segregation may be invested in any single government money market fund
Regulator text says
Investments in government money market funds or qualified ETFs whose assets are ≥$1B and whose management company manages ≥$25B: may not exceed 50% of total segregated assets.
Verbatim source
p_03_REGULATION_17_CFR_1_25_b__3__ii____two_tier_asset_b_download.pdf
— 17 CFR 1.25(b)(3)(ii) — two-tier asset-based concentration limits for government MMFs and Treasury ETFs
substrate/US/CFTC/FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024/_raw_manual_substrate/p_03_REGULATION_17_CFR_1_25_b__3__ii____two_tier_asset_b_download.pdf
Does a portfolio maturity constraint apply to direct US Treasury securities held in an FCM's customer segregated account under Regulation 1.25, and if so, what is the dollar-weighted average maturity limit?
Claude Sonnet 4.6 (web search on) answered
The 2024 amendments do not impose a new dollar-weighted average maturity (DWAM) standard or a maximum remaining-maturity cap specifically on direct U.S. Treasury obligations...No DWAM standard or individual-maturity cap found in the 2024 amendments applies to that category.
Regulator text says
The dollar-weighted average of the time-to-maturity of the portfolio may not exceed 24 months. This limit excludes government money market funds, Treasury ETFs, and foreign sovereign debt from the calculation.
Verbatim source
p_03_REGULATION_17_CFR_1_25_b__3__iv____dollar_weighted_download.pdf
— 17 CFR 1.25(b)(3)(iv) — dollar-weighted average portfolio maturity limit: 24 months for general portfolio
substrate/US/CFTC/FCM-DCO-CUSTOMER-FUNDS-INVESTMENTS-REG-1-25-2024/_raw_manual_substrate/p_03_REGULATION_17_CFR_1_25_b__3__iv____dollar_weighted_download.pdf
Affected audiences
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Practitioners
Sectors × Departments
Every finding on this page compares an AI subject's account of the rule
against the regulator's verbatim text from the regulator's own portal.
Both are linked. Each delta, its root causes, and impact analysis are
documented and published with immutable Citation IDs.