Washington, D.C.—May 27, 2014—FIA today issued an updated guide to the rules and regulations relating to customer fund protections in the U.S.
The guide, which was first issued in February 2012, provides futures commission merchants and customers with easy-to-use information about the relevant provisions of the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission. The guide is not intended to serve as legal advice but rather to promote better understanding of these protections among all users of futures and cleared swaps.
“Since we first issued this guide, it has proven to be a valuable resource for FCMs and their customers in understanding the various rules and regulations that protect customer funds,” said Walt Lukken, president and chief executive officer of FIA. “The confusion after MF Global’s collapse demonstrated the need for a plain-English explanation of how customer funds are protected in futures and cleared swaps markets. This is a complex subject, and recent amendments to the CFTC’s rules have made it even more important to provide a simple yet precise explanation for all market participants.”
The guide describes the protections for customer funds held as collateral for futures and options traded on U.S. and foreign exchanges as well as collateral for cleared swaps. It contains frequently asked questions and answers addressing the basics of three broad areas of customer fund protections:
- Segregation, collateral management and investments
- Minimum financial and other requirements for FCMs and joint FCM/broker-dealers
- Clearinghouse guarantee funds
The updated version of the FAQ reflects the significant amendments to the CFTC’s rules that were adopted in November 2013 to enhance customer protections in response to the bankruptcies of MF Global and Peregrine Financial Group. Those amendments are taking effect in phases, starting in January 2014 and continuing through the rest of this year. The updated FAQ also reflects new rules governing the protection of collateral for cleared swaps that have been finalized since the first version of the FAQ.
For example, the updated FAQ includes sections that discuss the CFTC’s “residual interest” requirements, the Part 22 rules that apply to cleared swaps, the financial information publicly available for each FCM, and a glossary of terms. In addition, the updated FAQ has been simplified and condensed into 24 questions and answers.
“I want to thank the members of the FIA Law & Compliance Division and the FIA Financial Management Committee for their dedication in updating this document to reflect the latest rule changes from the CFTC as well as the feedback we have received from customers and regulators,” Lukken said.
