The House Committee on Agriculture held a public hearing on the CFTC’s proposed customer protections rule.
According to the Delta Strategy Group summary (which is linked below), much of the discussion focused on the impact of two CFTC rule proposals: (1) the requirement that, at all times, an FCM must maintain residual interest of their own collateral in segregated accounts so that one futures customer’s funds are not used to margin or secure the positions of another futures customer and (2) the change in time allowed for margin calls to be met by customers before the FCM must take a capital charge (going from 3 days after the issuance of a margin call to a proposed period of 1 day).
The following witnesses testified:
- Mr. Terrence A. Duffy, Executive Chairman and President, CME Group, Inc., Chicago, Illinois (written testimony)
- Mr. Daniel J. Roth, President and CEO, National Futures Association, Chicago, Illinois (written testimony)
- Dr. Christopher L. Culp, Senior Advisor, COMPASS LEXECON, Chicago, Illinois (written testimony)
- Mr. Michael J. Anderson, Regional Sales Manager, The Andersons Inc., Union City, Tennessee, on behalf of the National Grain and Feed Association (written testimony)
- Mr. James L. Koutoulas, Esq., President and Co-Founder, Commodity Customer Coalition, Inc., Chicago, Illinois (written testimony)
- Mr. Theodore L. Johnson, President, Frontier Futures, Inc., Cedar Rapids, Iowa (written testimony)
Lofchie Comment: One theme which comes through in the hearings is that, in the CFTC’s push for tougher rules it asserts will increase safety, the CFTC may not fully take into account the costs of these safety improvements, the extent of their actual benefits, and the unintended negative consequences. While the hearings largely focused on regulations governing the futures markets, the same criticisms may be made (and are made) as to the CFTC’s approach to rulemaking in the swaps markets.