CFTC Votes 4-1 to Complete Fund-Segregation Rule After MF Global Collapse
The U.S. Commodity Futures Trading Commission completed Dodd-Frank Act regulations to protect swap traders’ collateral that is used to reduce risk in trades.
CFTC commissioners voted 4-1 today to complete the rule, which gained urgency after as much as $1.2 billion in client funds went missing as MF Global Holdings Ltd (MFGLQ). collapsed last year. The CFTC, Securities and Exchange Commission, Justice Department and bankruptcy trustee are investigating if funds were misused before the New York-based broker filed for bankruptcy protection Oct. 31.
The rule approved today seeks to insulate clients’ collateral if their broker defaults, while also allowing the customer funds to be pooled before a bankruptcy, according to a CFTC summary.
Moore Capital Management LP, Paulson & Co. Inc., Fidelity Investments, Tudor Investment Corp. and Och-Ziff Capital Management Group LLC (OZM) had urged the CFTC to adopt tougher standards than those completed today. The CFTC should allow investors the option to set aside collateral in separate accounts at third-party banks instead of allowing the funds to be pooled, the investment firms said.
To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net
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