According to a report by “The Block,” the U.S. Commodity Futures Trading Commission (CFTC) voted to propose a rule to strengthen customer protection for investors trading through derivatives clearing organizations (DCOs).
The rule, titled “Protection of Cleared Swaps Customer Collateral Held by Derivatives Clearing Organizations,” will require DCOs registered with the agency and clearing trades to segregate customer funds (including funds from retail investors) from their own funds. The proposal will now be subject to a public comment period.
CFTC Commissioner Kristin Johnson, who voted in favor, stated that the bankruptcy of FTX was a significant impetus for the proposal, as the FTX incident “highlighted the extent of losses that customers could 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 CFTC has protections in place for funds belonging to futures brokerage customers, there are currently no protections for funds belonging to DCO clearing members. He also mentioned that CFTC 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. In a statement, Bitnomial claimed to be the “first and only cryptocurrency-native exchange with full U.S. derivatives exchange, clearinghouse, and broker licenses.”