Week in Review: CFTC Approves New Rules on Customer Collateral, Swap Dealer Business Conduct & Volcker Rule

Jan 13, 2012

New rules on customer collateral with talk of extending protection to futures in addition to swaps markets; registration requirements for swap dealers confirmed in new rules

The top news this week is that the Commodity Futures Trading Commission (CFTC) approved final rules under the Dodd-Frank Wall Street Reform & Consumer Protection Act regarding the protection of customer funds and business conduct of swaps dealers (SDs) and major swap participants (MSPs). The US regulator also approved proposed rules regarding the Volcker Rule and opened up public comment on this controversial proposed rule for the next 60 days.

In a meeting Wednesday, the CFTC approved a rule to by a 4 - 1 vote to restrict the co-mingling of customer and proprietary collateral within banks and to also limits a CCP's ability to use customer collateral to cover a default within a CCP. The ruling is a victory for many asset managers who called for more protections of customer collateral in the wake of the MF Global collapse, however, the ruling fell short in its requirements for segregation of funds at third-party firms for those who wanted even stronger protections. (Rules Fact Sheet on Customer Collateral)

Speeches made by Commissioners Bart Chilton and Scott O'Malia revealed individual views on where this ruling may extend into next. O'Malia warned that the ruling "does not address MF Global" and he, among others, suggested the rule be extended to include futures customers.

Separately, the CFTC also approved final rules regarding the business conduct for SDs and MSPs, which include registration requirements. (Full Fact Sheet on Rules).

In the same meeting, the Volker rule, which limits bank's proprietary trading, was approved and opened up public comment. Read full details via the Volcker Rule Fact Sheet. SIFMA has already issues a statement to reveal its concerns. 

Listen in on the entire meeting via the CFTC Webcast: http://onlinevideoservice.com/clients/cftc/archive.htm 

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