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The Resource for the Global Finance Profession

CIEBA Commends CFTC For Taking Important Initial Step in Protecting Customer Cleared Swap Collateral

  • By Staff Writers
  • Published: 2012-01-17

“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.

Copyright © 2015 Association for Financial Professionals, Inc.
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