Financial Safeguards
CFTC Regulations 1.20 and 30.7 are designed to protect customer funds through requiring the continuous segregation of customer assets supported by two main reports: (1) segregation statement and (2) secured amount statement (required for Futures Commission Merchant’s that carry customer accounts/hold customer funds trading on U.S. or foreign commodity exchanges respectively).
CFTC Regulations 1.20 and 30.7 require, among other things, that an FCM shall deposit customer funds under an account name which clearly identifies them as such and shows that they are segregated or secured pursuant to these aforementioned rules. A futures commission merchant must at all times maintain in the separate account or accounts money, securities and property in an amount at least sufficient in aggregate to cover its total obligations to all futures customers. In the event of an FCM insolvency, customer funds may still be lost.
CME Group Clearing
The safety and security of the Chicago Mercantile Exchange clearing process is described below:
In today’s market environment, effective risk management is a business imperative. At CME Group, we believe our financial safeguards system, designed for the benefit and protection of both clearing members and their customers, is second to none.
Our centralized clearing capability and comprehensive set of risk management services provide the security, transparency and confidence our market participants need to operate, invest and grow.
Additionally, CME Group’s Audit department routinely inspects the books and records of clearing members to ensure compliance with these regulations.
Performance bond requirements. Each of our customers is required to put up a “good faith deposit,” or performance bond, to cover the maximum likely loss a position could suffer between each mark-to-market cycle. In turn, our clearing member firms must post to CME Clearing at least the maintenance performance bonds for all positions carried. Performance bonds are calculated by our Standard Portfolio Analysis of Risk (SPAN) system that today is used by over 50 exchanges and clearing organizations around the world, making it the global standard for portfolio margining.
Twice daily mark-to-market process. Accumulation of debts/losses is limited and transparency is achieved as CME Clearing marks your positions to market twice daily, once in the morning and again in the late afternoon, so you always know where you and your customers stand.
24-hour monitoring by an experienced risk-management team. Over 120 employees on the CME Clearing and Audits Risk staff use a variety of sophisticated tools to carefully observe risk 24 hours a day, six days a week. These teams work closely with Products and Services, Market Regulation, Legal and other divisions across the exchange as well as our clearing members to help clients manage risk during periods of unprecedented growth and at times of economic uncertainty.
For More Information:
For questions related to our Financial Safeguards, please contact CME Clearing at 312-930-3170.