In this statement, Commissioner Chilton puts forth a proposal for how Congress might craft a new law to protect customer funds. His proposal includes the following three recommendations:
- The establishment of a Futures Investor and Customer Protection Fund
- FICPA would create a separate nonprofit Corporation and a Board of Directors for Futures Interests
- Futures Customers would have the right to file claims with a Trustee for priority treatment
[SL Comment: To continue my general stream of cynical comments as to Dodd-Frank, to my mind, the statute was inappropriately sold to the press as a cure for financial risk when, in many respects, it increases financial risk. As the defaults of MF Global and Peregrine demonstrate, many clients would be far better off posting collateral for swaps into tri-party repo rather than posting collateral with an FCM. Further, the provision of any proposed futures insurance is not a “gift” from the government; it will be financed by a tax on FCMs that is passed along to customers. Finally, I would note that such an insurance scheme is far more meaningful as to securities and banking, where many of the customers are retail. The futures world is historically more institutional. For institutional customers, the $250,000 of potential insurance protection is far less meaningful than the possibility of very large losses, far exceeding the $250,000 if a financial intermediary fails.]
View statement in full here (links externally to CFTC website).