“We commend the Commodity Futures Trading Commission (CFTC)
for its decision to permit futures commission merchants to continue to provide critical
protections for customers’ swap collateral,” Deborah Forbes, Executive Director
of the Committee on Investment of Employee Benefit Assets (CIEBA) said last week.
“The Commission made it clear yesterday that futures commission merchants can now
voluntarily provide full physical segregation for pension plans’ cleared swaps
collateral,” Forbes said. Forbes referred to Commissioner Mark Wetjen’s opening
statement in which he noted that the CFTC had taken “the initial step of
clarifying that customer collateral may be deposited, at the election of the [futures
commission merchant] and its customers, in a “third-party safekeeping account.”
“CIEBA is grateful that the CFTC has taken this important
first step, that Chairman Gary Gensler has asked the CFTC staff to “to
make recommendations on further safeguarding client collateral on an individual
basis” and that the CFTC’s lead staff attorney on the
rule, Robert Wasserman, stated yesterday that the Commission will propose
these additional enhancements “with dispatch.”
Forbes noted that CIEBA agrees with Commissioner Scott O’Malia’s
public statement that the CFTC should provide these enhancements “before mandatory clearing becomes effective. Otherwise, we
may be subjecting a substantial portion of cleared swaps customer collateral to
operational risk and investment risk.” Forbes noted that CIEBA shares
the interests of Commissioner Jill Sommers and others in protecting futures
customers from fellow customer risk.
Forbes quoted Commissioner Bart Chilton’s
opening remarks, “the lessons of MF
Global teach us that we don’t have the luxury of time in making additional
progress to protect customers. We need to do more. And we need to do it now.”