WASHINGTON The U.S. futures regulator said on Monday it will vote at its December 5 meeting on a rule that would prohibit brokerage firms known as futures commission merchants from investing customer funds, a measure that now-bankrupt MF Global had encouraged the agency to delay.
The Commodity Futures Trading Commission has proposed a rule under its Dodd-Frank authority that would virtually eliminate the brokers' ability to invest their clients' excess margin, or collateral for future trades, in corporate notes, bonds and commercial paper.
The futures commission merchants, such as MF Global, are permitted to keep the proceeds of such investments.
The measure, which was proposed by the CFTC last year, drew opposition from industry groups. Many firms, including MF Global and its former chief executive, Jon Corzine, lobbied against the rule and asked the CFTC to hold back on tightening up the regulation.
"I think we have seen and heard quite enough on this rule and I have urged that we move forward on it at the very earliest opportunity," Bart Chilton, a Democratic commissioner at the CFTC, said earlier this month.
MF Global filed for Chapter 11 protection on October 31 after the New York-based company revealed it had made a $6.3 billion bet on European sovereign debt, spooking investors.
Regulators are trying to determine what happened to hundreds of millions of dollars in missing money and whether MF Global may have improperly mixed customer funds with its own, a violation of industry rules.
The proposed revision of Rule 1.25 of the Commodity Exchange Act also would impose a limit on the amount of customer margin that can be invested in municipal bonds, agency securities, money-market funds and municipal securities, and would eliminate repo transactions made with an affiliate.
The futures regulator also said it will vote on a final rule on the registration of Foreign Boards of Trade on December 5. In addition, it will vote on proposals on the process for making a swap to trade under the CEA, and an interpretation of retail commodity transactions under the act.
The CFTC, which is running behind on implementing the rules, has yet to finalize many of the rules to complete a regulatory framework for the previously opaque $600 trillion over-the-counter derivatives market required under last year's Dodd-Frank law.
The regulator so far has finalized 18 rules, but most of the high-profile and controversial rules remain including end-user exception and capital and margin requirements.
(Editing by Gary Hill)