Although only a third of the Dodd-Frank rules have been enacted, the CFTC is moving forward with new regulations on top of that infamous reform package. It begs the question, how many changes can Wall Street take?
Next Tuesday, the CFTCwill host public, daylong talks aimed at gaining further comments regarding the regulator’s proposed rule that would beef up protections for futures customers.
The rule was formulated after two futures commission merchants—MF Global and Peregrine— disastrously failed. These infamous bankruptcies called into question the safety of customer-segregated funds, prompting new and tougher regulations.
Tuesday’s agenda includes sessions to review the self-regulatory organization examination programs, as well as proposed rules regarding reporting requirements and the proposed residual interest requirements for futures commission merchants, which include some of the largest players on Wall Street including Goldman Sachs and broker dealers such as Merrill Lynch, Morgan Stanley and UBS.
Although most of the industry agrees that changes need to be made, not all agree with all of the provisions outlined in the proposed rule.
Specifically, the SRO and auditing provisions has already been called into question in letters submitted by organizations including Ernst Young, Forex Capital Markets and the National Futures Association.
“We also are concerned that several elements of the proposed rule related to this requirement are not supported under any current reporting framework, such that implementation of those elements will not be practicable,” Ernst & Young said in its comment letter.
Vael Asset Management added “there remain critical open issues in the CFTC's proposed changes that need to be addressed. “In order for the market to operate efficiently there must be confidence and mutual trust, neither of which exists right now as a lasting result of the recent collapses of multiple FCMs.”
The Feb. 5 meeting is set to start at 9:30 a.m. at the CFTC’s headquarters in Washington D.C. Those interested can also listen in by phone and a video of the proceedings will be available on the CFTC website.