CME Group members received a temporary reprieve from higher margin requirements earlier this month when the CTFC granted the Exchange a 90-day extension for implementing new requirements.
The new margin requirements for members come as the CFTC works to adopt and implement rules related to the Dodd-Frank Act. Previously, members and hedgers enjoyed a lower margin requirement than retail traders, but CFTC Regulation 39.13(g)(8)(ii) took away that special status for members. Members currently are treated as hedgers rather than speculators, even if they are entering into a speculative position.
“Hedgers and members only had to meet what’s known as maintenance margin, which typically is about 20% less than initial margin for retail customers,” says Marc Nagel, chief operating officer of Dorman Trading. “That’s still available to hedgers, but not for members.”
For a retail futures commission merchant like Dorman, Nagel says the change is minimal because it only affects the members who carry positions, and even then the change is negligible.
Jeffrey Blumberg, partner at Fox, Hefter, Swibel, Levin & Carroll, LLP, says it is not out of the ordinary for self-regulatory organizations (SROs), such as the CME Group, to need additional time to implement rule changes. “It’s not uncommon for the SROs to say, ‘We need more time to get our systems in place to implement the rule that you’ve now adopted,’” he says.