CFTC Receives Pressure from Farmers to Change Rule
According to agri-pulse.com, the Commodity Futures Trading Commission (CFTC) has come under some heat recently for a rule they’ve proposed by futures market regulators and traders who feel the proposal may actually harm the agricultural community.
The CFTC, which was created in the 70’s to take over for the U.S. Department of Agriculture’s Commodity Exchange Authority, was made responsible for a significantly larger portion of the futures market after the 2008 financial crisis.
Acting in response to scandals by both MF Global and Peregrine Financial Group where each company lost or stole large sums of customer funds, the CFTC is planning to implement some new rules in an attempt to protect future customers from huge loses. However, while the rules are meant to protect customers, they may actually harm the industry as a whole, leaving these customers with no funds to protect.
As of right now, the CFTC plans to cut the time margin calls must be reported from three days to just one day. The CFTC would also require that all customer funds be fully margined at all times.
This would cause small Futures Commission merchants, many of whom deal largely with farmers, to ensure that all customer’s funds are covered at all times. In order to accomplish this, FCMs would have to require customers to severely increase their funds in order to continue trading. This is not something many farmers would be able to do, causing both the farmers and the FCMs to be unable to participate in futures trading.
As it stands, the CFTC does not seem willing to reconsider these new rules.
Quotes and a more details on this story can be found at agri-pulse.com.