By: Turnkey Trading Partners

On June 27, 2023, the National Futures Association commented on amendments that the CFTC had proposed. These amendments were related to derivatives clearing organization risk management regulations. The proposed adjustments are set to impact all clearing futures commission merchants. The CFTC’s proposal would allow FCM’s to view multiple, single customer accounts, the same as accounts belonging to separate legal entities. This provides FCM’s more flexibility in how they manage risk, as well as margin accounts across their books of business. The intended adjustment from the CFTC is not entirely new. Rather, it is meant to codify an existing no action position the CFTC had issued during 2019 that is set to expire toward the end of 2023.

The National Futures Association did not necessarily disagree with the proposed CFTC amendment. They did however suggest an adjustment be made to where the CFTC might update the Commodity Exchange Act. The National Futures Association suggested the CFTC should update only part one regulations, as opposed to those listed under part thirty-nine. NFA’s rationale for this change is quite compelling. For those who are unfamiliar, part thirty-nine regulations are specific to derivatives clearing organizations or DCOs. On the other hand, part one regulations are general in nature. Part one, theoretically, should be applied to the entire commodity interest industry whereas part thirty-nine may not. By raising this concern NFA seems to be working to ensure that clearing and non-clearing FCM’s are treated equally. This would be of particular importance since NFA is the regulatory agency tasked with supervising regulatory compliance at non-clearing FCMs whereas clearing FCMs (at least in the US) are primarily regulated by CME Group.

Turnkey appreciates NFA’s attention to detail and specificity with this comment. We agree with their suggestion and are hopeful that it is accepted by the commission. Clearing and non-clearing futures commission merchants should be allowed to margin customer accounts the same way. It is not clear this would necessarily be the case if the commission were to move forward with its part thirty-nine proposal as originally intended. NFA should be granted the resources to ensure equal treatment of FCMs whether they are clearing firms or non-clearing firms.