Among the dozens of requirements made by Dodd-Frank on financial regulators is that the Commodity Futures Trading Commission (CFTC) develop new rules to protect trader’s collateral.
The endeavour has taken on an increased significance in the wake of MF Global’s collapse and the disappearance of more than one billion dollars in customers funders.
Hedge funds and mutual funds are getting involved, asking the CFTC to include additional safety measures to the regulations, Bloomberg reports. As currently written, sources say the rule insulates customer funds but allows them to be held in a pooled account.
That isn’t enough for some:
The investment companies [pushing for strong requirements], including Och-Ziff Capital Management Group LLC and Fidelity Investments, are asking the commission to reconsider its rule making until it can offer them the option of keeping their money in a separate account that can be independently monitored. They cited the $1.2 billion in customer funds that has gone missing at MF Global.
“The prolonged delay in determining both the amount and location of missing customer funds in the wake of MF Global’s collapse highlights the need for stringent measures,” Scott C. Goebel, senior vice president and general counsel at Fidelity, wrote in a Dec. 8 letter to the CFTC. The company asked for “full physical segregation” for the collateral they put up for swap trades.
However, not all fund managers share this concern. Investment manager BlackRock supports the CFTC measures as written and an industry association for fund managers has been working to develop a more coordinated response from the industry.