Statement of Chairman Timothy G. Massad in Support of Adoption of Amendments to CFTC Regulation 1.22 (Residual Interest Deadline for Futures Commission Merchants)
March 17, 2015
Today we are finalizing a change to a rule that concerns one of the most important objectives of the Commission, which is to protect customer funds. In addition, today’s action reflects one of my key priorities since taking office, which is to make sure our rules do not impose undue burdens or unintended consequences for the nonfinancial commercial businesses that depend on the derivatives markets to hedge commercial risks.
Today’s action concerns Regulation 1.22, regarding the posting of collateral. When a customer’s account has insufficient margin, a futures commission merchant must commit its own capital – often referred to as the FCM’s “residual interest” – to make up the difference. Regulation 1.22 sets the deadline for posting residual interest. That deadline, in turn, affects when customers must post collateral. The regulation provided that the deadline, which is currently 6:00 p.m. on the next day, would automatically become earlier in a couple years, without any Commission action or opportunity for public input.
Last fall, we proposed to amend the rule so that the FCM’s deadline to post “residual interest” will not become earlier than 6:00 p.m. without an affirmative Commission action and an opportunity for public comment. Today, we are finalizing that change.
An earlier deadline can help make sure that FCMs always hold sufficient margin and do not use one customer’s margin to support another customer, but it can also impose costs on customers who must deliver margin sooner. We will do a study of how well the current rule and deadline are working, the practicability of changing the deadline, and the costs and benefits of any change. Today’s action will make sure that the Commission considers all those issues and that customers will have an opportunity to provide us with input on any future change the Commission may consider.
Last Updated: March 17, 2015