November 17, 2011

CFTC back track – O’Malia speech

In light of MF Global, Scott O’Malia has some motherhood and apple pie style suggestions:

  • Check the customer accounts contain the money they should:
The Commission should ensure that all intermediaries are in compliance with segregation requirements. I support the Commission’s plan to immediately spearhead the review of certain intermediaries, while ordering designated self-regulatory organizations (“DSROs”) to review others. All intermediaries should actively facilitate such a review by engaging a third party (such as an independent accountant) to verify their segregation balances (including investment valuations, if necessary and possible). 
  • Check again, every day:
provide daily – instead of monthly – reports of segregation balances to their DSROs
  • Maybe letting intermediaries freely invest customer funds isn’t such a good idea:

First and foremost, we must reconsider the proposal that would limit investments of segregated customer funds.

  • Maybe the rules for who can be an intermediary need a second thought:
Finally, MF Global was a clearing member at multiple clearing organizations and one of the main proponents of lower capital requirements for swaps clearing. In light of MF Global’s demise, the Commission should revisit the open access discussion, to ensure that clearing organizations are able to diversify their membership without introducing risk. Specifically, the Commission needs to give greater guidance on the minimum membership standards that a clearing organization can legitimately set ex ante, without incurring questions from the Commission ex post.:

Pretty fundamental stuff, full speech here:



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