The proposal also requires standardized OTC derivatives to be centrally cleared and executed on exchanges and requires transparency for all OTC trades and positions through recordkeeping and reporting requirements.
The CFTC also proposed to adjust net capital requirements for FCMs, amending the minimum dollar amount of required annual net capital to $1 million from $250,000 and amending the FCM capital computation to increase the applicable percentage of the total margin-based requirement for futures, options and cleared OTC derivative positions in customer accounts to 10% from 8%. Both the Futures Industry Association (FIA) and National Futures Association (NFA) support the raising of required net capital to $1 million, but oppose the increase in margin-based requirement percentage. The FIA said in a statement that an increase to 10% “has not been justified and could harm competition by encouraging the further concentration of customer funds in a handful of FCMs.” In a comment letter to the CFTC, NFA said “we question the efficacy of this rationale. During the past year’s significant market volatility, there has been no evidence that the current risk based capital requirement has failed or has placed FCMs in precarious financial situations.”
In its comment letter to the CFTC, CME Group said “raising capital requirements to the proposed levels may have the undesirable effects of further concentrating customer accounts among fewer FCMs, decreasing competition and increasing customer costs.”