The UK Financial Services Authority has published a proposed rule that would put an end to Title Transfer Collateral Arrangements (“TTCA”) used in foreign exchange (“forex”) trading with retail clients. In December 2010, the FSA introduced a prohibition on TTCAs used in spread bets and contracts for difference (“CFDs”). The proposed rule extends that prohibition to rolling spot forex contracts.
TTCAs are agreements under which a client allows assets placed with a firm to be treated as collateral for any current or future obligations, essentially transferring ownership unconditionally to the firm. They are not subject to the FSA’s usual client money protections, including Client Assets Sourcebook (“CASS”) segregation requirements.
The proposed rule requires that all money and assets from retail clients be treated as client money and therefore be subject to segregation requirements. This gives retail clients a proprietary claim to their money and assets in case of a firm failure.