Feds Look to Limit Futures Firms' Power and Protect Customer Cash
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A federal agency is expected to announce its decision Monday on new restrictions for Futures firms and how the firms may handle their customer's cash, amid the debacle at MF Global.
One of the major new rules the agency is seeking to pass is a ban on internal repurchase agreements. The WSJ defines it as when a futures firm transfers customer assets into securities at another part of the firm in an effort to collect a higher interest rate and pocket the profits.
The new rule preventing internal repurchase agreements is defined as Rule 1.25 and is essentially designed to protect customer's funds and assets. The new proposal will require futures firms to go through a third party, such as a bank, before investing customer's assets.
The push for the new proposal comes following MF Global's bankruptcy and the loss of $600 million to $1.2 billion in customer's funds.
One of the major new rules the agency is seeking to pass is a ban on internal repurchase agreements. The WSJ defines it as when a futures firm transfers customer assets into securities at another part of the firm in an effort to collect a higher interest rate and pocket the profits.
The new rule preventing internal repurchase agreements is defined as Rule 1.25 and is essentially designed to protect customer's funds and assets. The new proposal will require futures firms to go through a third party, such as a bank, before investing customer's assets.
The push for the new proposal comes following MF Global's bankruptcy and the loss of $600 million to $1.2 billion in customer's funds.
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