Many NIBA Members are already feeling the effects of CFTC Regulation 1.22 as FCMs begin to phase in the changes to margining customer accounts as enumerated. The so-called "residual interest" provision in the rule, due in November 2014, shortens the three-day period which customers currently have to meet margin requirements. The time period further shortens in four years.
The NIBA has vigorously opposed CFTC Reg. 1.22 since it was proposed. Included as part of the sweeping customer protection rules enacted by the Commission as a result of the Dodd-Frank Act and in response to the failures of MF Global and PFG Best, we have argued implementation of this rule could drive our customers, including farmers, ranchers and small hedgers, out of the futures markets by requiring "pre-margining" to maintain their accounts. Pre-margining would eliminate their ability to use futures as a risk management tool due to higher costs, and put more customers' money at risk if another FCM should become insolvent and fail. We feel Reg. 1.22 needlessly ties up funds which should be used to implement additional risk management strategies, as well as for other costs associated with the businesses of these customers.
Currently NIBA is working with other industry groups to present members of the CFTC and Congress with viable alternatives to this rule. A delegation from the NIBA will be in Washington, DC in August to further discuss this regulation among other concerns. Please forward any suggestions or comments to me, melinda@futuresrep.com; Steve Petillo, petillo@coquest.com; or Mike Burke, mikeb@highgroundtrading.com, before August 15.
Regulation 1.22 was one of the issues we focused on during a July 8 meeting in Chicago. Co-sponsored by DePaul University, over 140 NIBA Members registered to attend the program, where we also talked about managed futures as an alternative asset class. DePaul recorded both business sessions; the video will be available on this site within a few days. All of the July 8 speakers welcome your questions and other follow-up to the program.
Save-the-date now for our fall membership meeting. On September 22, the NIBA will hold its annual full-day program in Chicago. CME Group is the primary event sponsor. Morning sessions will be held at the CBOT Building; afternoon sessions are at the CME Group Building. Topics focus on business development and compliance for IBs and CTAs, whether business is conducted as a swaps participant, managed accounts office or a traditional futures and options firm. Planning for the presentations is taking place right now. If you would like to suggest a topic, please contact me.