Customer Protection Regulation - Comment Letter - Rosenthal Collins Group - February 12, 2013

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Timeline, Enhanced Customer Protections, CFTC
Proposal Date Comment Deadline Final Rule Approved Effective Date
November 14, 2012 February 15, 2012 October 30, 2013 January 13, 2014

Enhancing Protections Afforded Customers and Customer Funds Held by FCMs and DCOs
February 12, 2013

In the comment letter, Rosenthal Collins Group (RCG) expresses concern with an aspect of the rule known as "residual interest," which would require substantial capital contribution by FCMs and could result in unintended consequences for FCMs and, ultimately, farmers, ranchers and other commercial end users. Key points include:

  • FCMs should not nave to maintain residual interest exceeding the sum of all margin deficiencies and, practically speaking, it would be impossible to do so.
  • Requiring FCMs to take a capital charge for any margin calls outstanding for more than one day is unreasonable.
  • Requiring FCMs to separate the risk management function from the "business unit" is unnecessary, counterproductive, and will likely result in increased risk to the FCM and its customers.
  • Public disclosure of FCMs' target residual interest would pose substantial risks to FCMs, their customers and the markets.
  • Final rules should not be published until a cost-benefit analysis can be completedand the FCM community has had an opportunity to engage in a productive dialog with Commission staff.

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