CFTC votes on proposed rules to strengthen customer protections following FTX collapse
A little more than a year after the collapse of the FTX cryptocurrency exchange, the Commodity Futures Trading Commission voted to propose rules that would strengthen customer protections for those trading through derivatives clearing houses.
The rules, called “Protection of Clearing Member Funds Held by Derivatives Clearing Agencies,” require institutions and DCOs registered for clearing transactions to segregate client funds, including money from individual investors, from their own home funds.
CFTC Commissioners Summer Mersinger and Christy Goldsmith Romero voted against, while CFTC Commissioner Kristin Johnson and CFTC Chairman Rostin Behnam voted in favor on Wednesday. Commissioner Caroline Pham agreed. This proposal will be made public through the next round of public comment.
“One of the key motivations for taking the actions we are taking today is the bankruptcy of FTX and its demonstration of significant risk management corporate governance failures,” CFTC Commissioner Johnson said at the meeting. “This shows the scale of losses customers could experience if there were no regulations prohibiting the commingling of customer funds or member assets.”
FTX is not registered with the CFTC. Last year, the agency said the exchange commingled customer funds, and later this year CEO Sam Bankman-Fried was found guilty of misappropriating billions of dollars in customer funds.
The CFTC provides protection for funds belonging to the clients of futures commission traders. CFTC Chairman Behnam is sad, but not so when it comes to funds belonging to DCO clearing members.
“The proposed rule would require clearing member funds to be segregated from the DCO’s own funds to ensure that in the event of a DCO’s bankruptcy, clearing member funds and assets receive appropriate treatment and that the funds will be used to liquidate the members and not the DCO.” Behnam said.
Bitnomial first obtains a cryptocurrency license.
The commission also decided Wednesday to grant DCO status to cryptocurrency derivatives exchange Bitnomial. This means that DCOs can clear futures and options trades. Bitnomial said: name That’s it “It is the first and only cryptocurrency exchange with a U.S. derivatives exchange, clearinghouse and broker license.”
“Our goal is to introduce a global derivatives trading platform regulated in the U.S. This marks a pivotal shift away from traditional USD and Treasury margin collateral to incorporating digital assets as collateral. This change will not only affect cryptocurrency trading, but also Luke Hoersten, CEO of Bitnomial, said:
Commissioners Pham, Johnson, and Chairperson Behnam voted in favor. Mersinger agreed and Romero voted against.
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