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CFTC Comment Period on Additional Customer Protections

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Old 14-08-2012, 18:41
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Join Date: Aug 2012
Posts: 3
Default CFTC Comment Period on Additional Customer Protections

The CFTC is requesting comments on additional protections for customers trading with FCM’s in light of the bankruptcies of PFG and MF Global.

FXCM is encouraging traders to make their voices heard with regulators. We are also putting forward our own proposals to bring greater transparency to the futures/forex industry. At the moment, the CFTC is focusing largely on the futures industry. We encourage all forex traders to contact the CFTC about extending additional customer protections to forex traders as well.

Proposals to Bring Full Market Transparency and Accountability to the Futures/Forex Industry

1) Require All FCM’s to Publicly Publish Their Financials Once a Quarter:
Currently, the CFTC publishes monthly “Net Capital” reports that disclose to the public how much money a Futures Commission Merchant has set aside in capital. However, that report provides very little insight into how well the company is doing financially. By requiring FCM’s to publish their audited financials the trading public will know how much risk they are taking with each firm since investors will be able to weigh the liabilities along with the excess capital that a Futures Commission Merchant has.

Furthermore, the published financial statement should include everything (i.e. holding company’s financials) since what happens to other subsidiaries of the company can easily affect the regulated FCM. Each company should be required to provide a link to its financials on its own homepage so that the public can do its proper due diligence.

Too often, those FCM’s that are teetering on the edge of bankruptcy lure customers in by offering unsustainable gimmicks (dirt cheap commissions, account opening bonuses) that temporarily puts off the inevitable. Customers should be aware of the perilous finances of those FCM’s that would offer these kinds of gimmicks before opening an account with such a firm. PFG Best was a classic example of a firm that used such gimmicks as they routinely low balled their competitors with uneconomical discounts that no reputable, legally compliant firm could match.

2) Require all FCM’s to Employ a Top Ten Accounting Firm:
There need to be much higher accounting standards than currently exist in the FCM world. The Platt Group publishes an annual ranking of public accounting firms that could be used by FCM’s. Whether it is top 10 or top 25, the main point is that FCM’s must use a nationally recognized and respected accounting firm that could apply the same tough standards to FCM’s that publicly traded companies must meet.

While no one proposal will guarantee that a future FCM will not fail, these proposals will enhance the public’s due diligence capabilities by bringing greater market transparency and accountability to the world of futures/forex trading.

CFTC Public Roundtable on PFG and MF Global

Last Thursday the CFTC held a public hearing to determine what steps should be taken to repair the damage done by the bankruptcies of PFG and MF Global. I’d like to share with everyone some of the highlights of the hearing:

Better Accounting Standards: There was much discussion of auditing standards for both Regulators of FCM’s and the CPA’s who audit FCM’s. There was general agreement these standards need to be raised. FXCM believes FCM’s should be required to use a top accounting firm to avoid the kind of accounting issues that plagued PFG.

Additional Disclosure Requirements: An extensive discussion on FCM transparency was held and it is clear that FCM’s are going to have to make more disclosures of their books to regulators and to the public. The question is how much is to be disclosed? On the one hand there was testimony from FCM’s like Vision who publish their balance sheet on their website and on the other hand were those who were concerned that too much disclosure could lead to possible “bank runs” by investors. FXCM believes investors should be able to see a company’s audited financial statement once a quarter. Too many investors are forced to fly blind when they choose a Futures Commission Merchant or Forex Dealer. No trader should be subjected to this kind of risk post-PFG.

Insurance: Commissioner Bart Chilton released his proposal for a futures insurance fund on the same day of the hearing. Towards the end of the Roundtable the topic turned to insurance and John Roe of the Commodity Customer Coalition once again made a forceful case for a fully insured fund for the futures industry. As of now, Commissioner Chilton’s proposal does not include retail forex, but there is no reason that it shouldn’t. FXCM supports insurance for the futures/forex industry.

The CFTC will now deliberate into October before announcing their proposals.

Charles Delano
Director of Government Affairs
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Old 29-06-2021, 04:14
Level V Lasers Member
Join Date: Jun 2015
Posts: 755
Default Re: CFTC Comment Period on Additional Customer Protections

Okay. I just noted your messages in my notebook but just one question that do you have regulation from Cusec as its much more important to have permission from there also are you providing regional branch office for your broker. Let me know about these...
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Old 18-12-2021, 15:20
Level V Lasers Member
Join Date: Nov 2018
Posts: 1,152
Default Re: CFTC Comment Period on Additional Customer Protections

Between the pandemic and the resulting economic problems, regulators have been quick to protect consumers recently, which is a pretty good thing, I think.
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