Futures Merchants Holding $166B for Customers, CFTC Says
January 27, 2012
The results of a recently released Commodity Futures Trading Commission (CFTC) review shows that as of January 25, future commissions merchants (FCMs) held a total of approximately $166 billion in segregated accounts.
This was approximately $13 billion (or 9 percent) in excess of the $153 billion owed to customers. The FCMs also had approximately $8 billion in so-called Part 30 secured accounts.
This was approximately $7 billion (or 17 percent) in excess of the secured amount obligation.
The FCMs posted approximately $74 billion of segregated funds with CFTC designed derivatives clearing organizations. They also held about $33 billion of secured funds deposited by customers for trading on foreign futures and options markets at affiliated banks and foreign brokers.
Last fall, after the collapse of MF Global, Inc. the CFTC initiated limited reviews of Futures Commission Merchants (FCMs) that carried customer funds to assess compliance with the protection of custion funds and Commission regulations.
The reviews also covered the FCMs’ obligation to set aside in secured accounts funds deposited by customers trading on foreign boards of trade under Section 4b of the Act.
As of October 31, 2011 120 FCMs were registered with the CFTC, 70 of which were subject to limited review (The remaining 50 did not maintain customer segregated funds and weren’t subject to limited reviews.)
The limited reviews relied largely on the records and third-party source documents maintained at the FCMs. The findings showed that each of the 70 FCMs maintained assets in Section 4d segregated accounts in excess of the net liquidating equities if each of its customers.
The reviews further found that each FCM maintained assets in secured accounts in excess of the aggregate margin required on all customers open futures positions, plus unrealized gains.
The CFTC did not conduct an audit of the FCMs, which would entail and more detailed and lengthy examination.
