Abstract
The Commodity Futures Trading Commission (CFTC) implemented rules last month that it claims will provide greater assurance that customer segregated funds are protected. These rules do not involve any type of reimbursement fund, and instead are designed to prevent the types of problems that may lead to customer losses. Preventive steps involve such things as more fully informing customers of the possible risks of futures trading, requiring brokerage firms to more closely monitor and manage risks, boosting the capital and liquidity requirements for brokerage firms, and strengthening audit and examination requirements. One of the more controversial requirements involves how margin calls are funded. To fully appreciate the impact of these margin-related changes, we first need to review how the margining and segregated funds process currently operates.
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