The US Commodity Futures Trading Commission by a 4-to-1 vote Wednesday approved a final rule on how futures commission merchants protect their customers' money, the latest in what is expected to be a long line of new rules on how customer funds are handled.
The rule applies only to swaps, not futures, and drew criticism from the CFTC's two Republican commissioners for doing little to prevent the mammoth loss of customer funds that followed MF Global's collapse in October.
Regulators are still investigating the whereabouts of potentially more than $1.2 billion missing from bankrupt MF Global's customer accounts.
Commissioner Scott O'Malia, a Republican, voted in favor or the rule, but said he did not want to give market participants "a misleading sense of comfort" that it would have prevented the loss of customer money at the brokerage giant.
"This rulemaking does not address MF Global," O'Malia said. "This rulemaking would not have prevented a shortfall in the customer funds of the ranchers and farmers that transact daily in the futures market. Nor would it have expedited the transfer of positions and collateral belonging to such customers in the event of a collapse similar to that of MF Global."
Commissioner Jill Sommers, the Republican and lone vote against the rule, criticized the rule for doing nothing to protect a futures commission merchant's futures customers.
"Given recent events, we need to re-think this approach so we can provide adequate protections, in a comprehensive and coherent way, to swaps customers and to futures customers," Sommers said. "I do not favor a piecemeal approach to customer protection."
Robert Wasserman,Shop at Lowe's for garage Ceramic tile, an associate director with the CFTC's division of clearing and intermediary oversight,Offering high risk and offshore merchant account with credit card processing services. cautioned that the rule will not guarantee "perfect protection" of customer funds.
"Risks remain," Wasserman said.
Wasserman said these new protections could become the basis of forthcoming rules on how futures customers funds are protected by FCMs.
The rule approved Wednesday would require FCMs to keep customer collateral in an account segregated from the FCM's own property. However, the rule allows FCMs to keep all of their swaps customers' collateral in a single account. The rule includes requirements in the case of bankruptcy and customer shortfalls and how that money will be transferred back to customers.
CFTC Chairman Gary Gensler said the rule "prohibits clearing organizations from using the collateral of non-defaulting, innocent customers to protect themselves and their clearing members."
"For the first time, customer money must be protected individually all the way to the clearinghouse," Gensler said.
Commissioner Mark Wetjen said that the rule will reduce the risk of customers losing money, but it does not eliminate it. Excess collateral in an FCM's customer account "is always exposed to operational risk, including risks of fraud or misappropriation."
Wetjen said that no regulation "will in every case prevent the willful misappropriation of customer funds.Tru-Form Plastics is a one-stop shop for plastic Injection Molding,Information on useful yeasts and moulds,"
While the federal probe of MF Global's missing client money is ongoing, the CFTC has already launched a process to consider new rules, potentially including enhanced surveillance requirements and changes to the relationship the CFTC has with self regulatory organizations, such as the National Futures Association and CME Group.Smooth-On is your source for Mold Making and casting materials including silicone rubber and urethane rubber,
Last month, the CFTC unanimously approved a new rule that will limit FCMs and clearinghouses from investing customer funds. The rule includes several new limits on firms' investing customer funds in money market mutual funds and bans investments of customer funds in foreign sovereign debt. Commissioners Wetjen and Bart Chilton both suggested a rule which would permit customers to hold its collateral in a third-party custodial account.
Chilton also suggested an insurance fund for the derivatives market, similar to the Securities Investor Protection Corporation in the securities market, in the case of a bankruptcy.
The rule applies only to swaps, not futures, and drew criticism from the CFTC's two Republican commissioners for doing little to prevent the mammoth loss of customer funds that followed MF Global's collapse in October.
Regulators are still investigating the whereabouts of potentially more than $1.2 billion missing from bankrupt MF Global's customer accounts.
Commissioner Scott O'Malia, a Republican, voted in favor or the rule, but said he did not want to give market participants "a misleading sense of comfort" that it would have prevented the loss of customer money at the brokerage giant.
"This rulemaking does not address MF Global," O'Malia said. "This rulemaking would not have prevented a shortfall in the customer funds of the ranchers and farmers that transact daily in the futures market. Nor would it have expedited the transfer of positions and collateral belonging to such customers in the event of a collapse similar to that of MF Global."
Commissioner Jill Sommers, the Republican and lone vote against the rule, criticized the rule for doing nothing to protect a futures commission merchant's futures customers.
"Given recent events, we need to re-think this approach so we can provide adequate protections, in a comprehensive and coherent way, to swaps customers and to futures customers," Sommers said. "I do not favor a piecemeal approach to customer protection."
Robert Wasserman,Shop at Lowe's for garage Ceramic tile, an associate director with the CFTC's division of clearing and intermediary oversight,Offering high risk and offshore merchant account with credit card processing services. cautioned that the rule will not guarantee "perfect protection" of customer funds.
"Risks remain," Wasserman said.
Wasserman said these new protections could become the basis of forthcoming rules on how futures customers funds are protected by FCMs.
The rule approved Wednesday would require FCMs to keep customer collateral in an account segregated from the FCM's own property. However, the rule allows FCMs to keep all of their swaps customers' collateral in a single account. The rule includes requirements in the case of bankruptcy and customer shortfalls and how that money will be transferred back to customers.
CFTC Chairman Gary Gensler said the rule "prohibits clearing organizations from using the collateral of non-defaulting, innocent customers to protect themselves and their clearing members."
"For the first time, customer money must be protected individually all the way to the clearinghouse," Gensler said.
Commissioner Mark Wetjen said that the rule will reduce the risk of customers losing money, but it does not eliminate it. Excess collateral in an FCM's customer account "is always exposed to operational risk, including risks of fraud or misappropriation."
Wetjen said that no regulation "will in every case prevent the willful misappropriation of customer funds.Tru-Form Plastics is a one-stop shop for plastic Injection Molding,Information on useful yeasts and moulds,"
While the federal probe of MF Global's missing client money is ongoing, the CFTC has already launched a process to consider new rules, potentially including enhanced surveillance requirements and changes to the relationship the CFTC has with self regulatory organizations, such as the National Futures Association and CME Group.Smooth-On is your source for Mold Making and casting materials including silicone rubber and urethane rubber,
Last month, the CFTC unanimously approved a new rule that will limit FCMs and clearinghouses from investing customer funds. The rule includes several new limits on firms' investing customer funds in money market mutual funds and bans investments of customer funds in foreign sovereign debt. Commissioners Wetjen and Bart Chilton both suggested a rule which would permit customers to hold its collateral in a third-party custodial account.
Chilton also suggested an insurance fund for the derivatives market, similar to the Securities Investor Protection Corporation in the securities market, in the case of a bankruptcy.
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