A rule proposed by the CFTC in November 2012 would require FCMs and DCOs to determine a necessary level of excess funds that the firm should hold in segregated or secured accounts to ensure against becoming undersegregated or undersecured, and to maintain residual interest in excess of the sum of all margin deficits. For more information on the proposed rule, visit the affiliated page in MarketsReformWiki.
John Lothian News Special Report: Residual Interest, February 2013
CFTC Proposal Poses “Monumental” Challenge to FCMs
A rule proposed by the Commodity Futures Trading Commission (CFTC) designed to strengthen safeguards for customer deposits at futures commission merchants (FCMs) is threatening to overhaul the futures brokerage system.
The proposed “residual interest” provision introduced last fall, and discussed in a CFTC roundtable on February 5, would require substantial increases in margin buffers by FCMs.
The meeting led by Robert Wasserman, chief counsel of the CFTC’s Division of Clearing and Risk, included panelists Mike Dawley of Goldman Sachs and FIA chairman and Kim Taylor, CME Clearing president who argued that the increased margin requirements under the proposal are substantial. Dawley said the rule, if passed in its current form, would be “one of the most monumental events” in his 30 years in the industry.
- Enhancing Protections Afforded Customers and Customer Funds Held by Futures Commission Merchants and Derivatives Clearing Organizations; Proposed Rule. Commodity Futures Trading Commission.