WASHINGTON, DC –Cantrell Dumas, Director of Derivatives Policy, issued the following statement in connection with the submission of a comment letter to the Commodity Futures Trading Commission (CFTC) in response to a proposed rule aimed at providing protections for the funds and assets of clearing members to determine the event that a derivatives clearing organization (DCO) files for bankruptcy.
“The CFTC's recent proposal to protect customers from bankruptcies in the derivatives market is not sufficient to address the full spectrum of risks, including combating financial crime. The rule's limited focus on the segregation of customer funds, while important, does not address money laundering and leaves a gaping hole in the regulatory framework, particularly when retail customers interact directly with clearinghouses rather than intermediaries, where serious safeguards against these crimes already exist.
“The CFTC's attempt to address the impact of the FTX bankruptcy by proposing rules to protect DCOs' clearing members is a good, if very limited, idea. However, a fully secured direct-to-consumer marketplace simply must have the full spectrum of customer protection. The proposed rulemaking does not do this, and therefore, rather than seize the opportunity to make comprehensive changes, the CFTC has adopted an incremental strategy that will require additional changes in the future if customers are to be adequately protected. The proposed regulation should have provided parallel protection for clients of intermediaries and clearing members while preventing criminals from using the financial system for illegal activities such as money laundering and terrorist financing.”
You can read our full public comment letter here.
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