Futures Commission Merchant Regulation - Comment Letter - CME Group - January 18, 2011

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Protection of Cleared Swaps Customers Before and After Commodity Broker Bankruptcies
January 18, 2011

CME Group is very concerned that adopting an individual-segregation model for customer cleared swaps would undermine Dodd-Frank’s key principles. Such models would impose significantly higher costs on customers and clearing members, and inject moral hazard into the system at the customer and FCM levels… Consequently, smaller FCMs may be forced out of the business, larger FCMs may not be incented to stay in the business, and firms otherwise qualified to act as FCMs may be unwilling to do so if the risk and cost profile of the FCM model is adversely impacted by requirements of individual segregation. This may lead to a larger concentration of customer exposures at fewer FCMs, further increases to margin and guaranty fund requirements, and further increased costs to customers.”

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