National Futures Association Submits Comment Letter to CFTC on Proposed Rules for Enhancing Customer Protections

The NFA has submitted a comment letter to the CFTC regarding the CFTC’s proposal to enhance customer protections afforded customers and customer funds held by futures commission merchants (“FCMs”) and derivatives clearing organizations (“DCOs”) (see: 77 FR 67865).  The focus of the NFA’s letter is on the requirements that the CFTC would impose on the NFA and the other DSROs in respect of their programs to audit FCMs.

Lofchie Comment:  Although somewhat gently phrased, the comment letter is in many respects quite critical of the CFTC’s proposal.  For example, the comment describes an amendment to Rule 30.7 as “unnecessary and unworkable from a practical standpoint.”  The comment letter says that the leverage ratio suggested by the CFTC “may not be the most appropriate measure” and may “[not] provide a meaningful leverage metric.”  Other requirements of the proposed rule are criticized as being insufficiently defined.  The letter closes by suggesting that certain information the CFTC would require to be made public “may simply be too sensitive, and subject to misinterpretation. . . .”  I interpret this last comment as meaning that the disclosure of the information could precipitate a run that would collapse the FCM.

Click here to view letter in full (links externally to NFA website).
Related News Items: CFTC Roundtable on Enhancing Protections Afforded Futures Customers (February 6, 2013) and Enhancing Protections Afforded to Customers and Customer Funds Held by FCMs and Derivatives Clearing Organizations; Notice of Proposed Rulemaking (CFTC; Fed. Reg. Version) (November 15, 2012).

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