Portions of a proposed rule to enhance the protection of customer’s margin funds could prohibit hedgers from using this risk management tool. The CFTC is suggesting a provision that would require the Futures Commission Merchant or FCM to take a capital charge one day after a margin call was issued on a customer account. Todd Kemp with the National Grain and Feed Association says they’re opposed to this change because it would hurt traditional hedgers, especially smaller farmers that send checks.
Kemp says the proposed rule also requires futures commission merchants to keep enough money in segregated customer accounts to cover all margin deficits. This would likely require customers to prefund margin calls.
And Kemp says that puts customer funds at even greater risk if an FCM failure occurs.
The rule is in the comment period and the CFTC will consider the changes before issuing the final rule.