According to a report by The Block, the US Commodity Futures Trading Commission (CFTC) has voted to propose a rule aimed at enhancing customer protection for investors trading through derivatives clearing organizations (DCOs).
The rule, titled “Protection of Cleared Swaps Customers’ Collateral Held by Derivatives Clearing Organizations,” will require DCOs that are registered and clearing trades to segregate customer funds, including funds from retail investors, from their own funds. The proposal will now be open for public comment.
CFTC Commissioner Kristin Johnson, who voted in favor of the proposal, stated that the bankruptcy of FTX served as a significant motivation for this proposal. The FTX incident “highlighted the extent of losses customers can suffer in the absence of rules prohibiting the commingling of customer funds or member property,” she said.
CFTC Chairman Rostin Behnam also voted in favor, noting that while the CFTC has protections in place for funds belonging to futures brokerage clients, there are no such protections for funds belonging to DCO clearing members. He stated, “CFTC is also voting on Wednesday to grant DCO licenses to cryptocurrency derivatives exchange Bitnomial, which means the company can conduct clearing operations for futures and options trading. Bitnomial claims to be the ‘first and only crypto-native exchange with a full U.S. derivatives exchange, clearinghouse, and brokerage license’.”
