The CFTC issued an amended order that allows the Chicago Mercantile Exchange, a derivatives clearing organization ("CME"), to commingle certain customer funds used to margin, secure, or guarantee futures contracts, with customer funds related to contracts that are listed or will be listed on the Dubai Mercantile Exchange ("DME"). The order was expanded to include certain DME-listed products in the energy sector.
The customer funds must be held in accounts segregated in accordance with CEA Sections 4d(a) and (b). CME clearing members that are futures commission merchants also may commingle funds consistent with the amended order.
Commentary / Bob Zwirb
In the wake of several broker insolvencies, CFTC rules were amended in 2013 to prevent an FCM or DCO from commingling funds deposited by futures customers with funds of foreign futures or cleared swaps customers, except by Commission order. The general prohibition on commingling was adopted as part of an effort to enhance the protection of customer funds. Commingling, however, may serve legitimate purposes, e.g., to permit portfolio margining or to allow a DCO to transition from swaps to futures to avoid regulatory costs associated with the former. Under CFTC rules, DCOs and FCMs may engage in such commingling provided permission is obtained from the CFTC.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.