According to a report by “The Block,” the U.S. Commodity Futures Trading Commission (CFTC) has voted to propose a rule to enhance customer protection for investors trading through Derivatives Clearing Organizations (DCOs).
The rule, titled “Protection of Customer Funds Held by Derivatives Clearing Organizations,” will require DCOs registered with the commission and clearing trades to separate customer funds (including retail investors’ funds) from their own funds. The proposal will next seek public comments.
CFTC Commissioner Kristin Johnson, who voted in favor, stated that the bankruptcy of FTX was a significant impetus for this proposal, as the FTX incident “illustrates the extent of losses that customers may suffer in the absence of rules prohibiting the commingling of customer funds or member property.”
CFTC Chairman Rostin Behnam also voted in favor, noting that while there are protections in place for funds belonging to futures commission merchant customers, there are none for funds belonging to DCO clearing members. He stated that CFTC also voted on Wednesday to grant a DCO license to the cryptocurrency derivatives exchange Bitnomial, allowing the company to conduct clearing operations for futures and options trading. Bitnomial stated in a release that it is the “first and only cryptocurrency-native exchange with full U.S. Derivatives Exchange, Clearinghouse, and Broker licenses.”