Other potential beneficiaries might be the existing clearinghouses. After all, the back office of a repository would include many functions similar to those now performed by clearinghouse managers. Is there an affiliate in their future?
But wait! This may be the first time in eons that a serious customer funds shortfall has occurred. Are we over-reacting? True, the recent events are nearly unprecedented. But suppose that there were dozens of similar incidents, with aggregate potential losses of over $1 billion affecting an aggregate 35,000 customers. That question would not be asked. The magnitude and impact are immense. Once is enough (remember, we only die once, too).
1) Based on the concept that each customer will maintain two (2) accounts, one with the futures commission merchant (FCM) for trading purposes and one with a CFTC-regulated central customer funds repository (Repository) where all customer funds are held, received, dispersed and refunded. It is also contemplated that amounts payable to or receivable from the clearinghouse for cleared customer positions will be coordinated by the Repository with the clearinghouse.
2) FCMs will continue to handle all proprietary trading using their own resources. The broker-customer relationship remains largely intact, except that funds flows now occur directly between the customers and the Repository.
3) The Repository will need complete details on customer activity, including margin calls, account closures, new trades and liquidations, and other funding matters.
4) Because the Repository will invest customer funds in permitted ways, the FCMs will no longer earn income from this activity. It is proposed that a substantial part of the Repository’s gains from these investments be remitted to the FCMs as compensation for providing extensive customer activity information to the Repository (see note 3).