CFTC overhauls customer protection requirements

Abstract

Purpose

The purpose of the paper is to summarize the Commodity Futures Trading Commission's (CFTC) recent overhaul of its customer protection rules, which regulate how futures commission merchants (FCMs) and derivatives clearing organizations (DCOs) handle customer funds.

Design/methodology/approach

The paper summarizes the most significant aspects of the CFTC's October 30, 2013 customer protection rulemaking, explains FCM and DCO obligations under the new regulatory regime, and sets forth a compliance timeline.

Findings

The CFTC's recent overhaul of its customer protection rules impose significant new requirements on FCMs and DCOs in their handling of customer funds.

Practical implications

All FCMs and DCOs that handle customer funds should review these new rules and begin putting into place policies and procedures to ensure their compliance as each new requirement comes into effect.

Originality/value

The CFTC's overhaul of its customer protection regime is new and significant. FCMs and DCOs need to understand their new obligations under the rules. As these new rules are the CFTC's regulatory response to the events that led to the insolvencies of MF Global and Peregrine Financial Group, these developments also should be of interest to futures and swaps market participants generally.

Citation

M. Brown, R. (2014), "CFTC overhauls customer protection requirements", Journal of Investment Compliance, Vol. 15 No. 1, pp. 25-32. https://doi.org/10.1108/JOIC-01-2014-0010