CFTC Requests Comment On Proposal To Create New Type Of Clearing Membership

The CFTC requested comment on a proposal by Chicago Mercantile Exchange, Inc. to create a new category of direct clearing member called a "Direct Funding Participant" ("DFP").

As previously covered, the proposal would allow a DFP firm to clear trades on a CME-operated exchange solely for its own account, as long as obligations to CME's clearinghouse that arose from the firm's DFP activity were guaranteed by at least one other clearing member registered with the CFTC as a futures commission merchant ("DFP Guarantor"). Unlike existing customers of FCMs, a DFP would post collateral to and settle all payments with the clearinghouse directly. The CME represented that the DFP program would allow firms to eliminate certain customer risk through individual account segregation, and would allow the DFP's collateral to prevent exposure to the risk of pro rata loss allocation that it might otherwise face if the DFP instead were a customer of an FCM.