Derivatives Regulators (CFTC, SEC) Back Customer Protection Rules

Derivatives Regulators (CFTC, SEC) Back Customer Protection Rules

Entities that regulate the derivatives industry, like the SEC and CFTC, are proposing a new rule that increases protections for customer funds.

Commodity and Futures Trading Commission (CFTC) Chairman Gary Gensler said yesterday that the CFTC voted 5-0 behind closed doors to endorse the proposal.

“This proposal is about ensuring customers have confidence that the funds they post as margin or collateral are fully segregated and protected,” Gensler said. According to Gensler, the new rule has several component parts.

The proposed rule lays out strategies that enhance the ability of futures brokerages to disclose information about risks specific to certain firms. Also, more controversially, the proposed rule gives derivatives regulators access to brokerages’ bank accounts.

Failure of Derivatives Regulation: MF Global and Peregrine

Perhaps heading off complaints from the derivatives industry, CFTC commissioners conjured up past misdeeds on the part of MF Global and Peregrine Financial in order to explain the need for the proposed rule.

“I believe the events of Peregine this summer highlight that we need to do more,” said Gensler.

“We all learned from both MF and Peregrine that taking people at their word isn’t good enough,” said commissioner Bart Chilton.

Chilton added, “We need electronic access to accounts so that we know customers’ money is there 24-7-365. We can’t have folks taking advantage of customers with Photoshop and a post office box anymore.”

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About The Author


Felix Shipkevich

Felix Shipkevich

Mr. Shipkevich’s practice focuses on regulatory, transactional, and enforcement matters in the fields of futures, commodities, and derivatives. He works with Futures Commission Merchants (FCMs), Retail Forex Exchange Dealers (RFEDs), Introducing Brokers (IBs), Commodity Pool Operators (CPOs), Commodity Trading Advisors (CTAs), Swap Dealers (SDs), Swap Execution Facilities (SEFs), and domestic and offshore hedge funds. Mr. Shipkevich guides clients on procedures related to registration with the U.S. Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), as well as domestic and international regulators in local jurisdictions. Mr. Shipkevich prepares and helps implement compliance, anti-money laundering (AML), and Electronic Trading Systems (ETS) procedures for clients in the commodities and derivatives fields.

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