Futures' alphabet soup

As if we were not blessed enough already, the Dodd-Frank Act has given us some new acronyms like SD (swap dealer), MSP (major swap participant), SEF (swap execution facility), and SDR (swap data repository). This, atop a heap of others like FCM, IB, AP, FB, FT, CTA and CPO, not to mention (though I am) DCM, DCO and DSRO. The reader is spared the full name of each for mental health reasons.

In World War II, we used native Indian dialects to confuse the enemy. Futures acronyms are evidently used to confuse everyone else. Look at the faces of members of Congress during hearings on the subject. Is that a translator sitting behind them?

Special kudos to the Hill staffers in the 1920s who implanted into law the phrase "futures commission merchant." Could any more complex a phrase for the humble futures broker have been adopted? Is this a seller of futures (no, that is illegal)? A vendor of commissions (good luck trying to pry commissions from them!)?

The "introducing broker" has the last word right but what is he/she introducing? Is this a dating service, or worse? And who is the "associated person" associating with? I am too discrete to ask.

The "commodity trading advisor" is more forthcoming but sounds like a professor explaining buying and selling. The "commodity pool operator" could work at the local YMCA or country club.

But I digress. The curious thing is that the acronyms are unpronounceable. If I refer to myself as a "SEF," am I engaged in self-criticism (think: putz)? And don't even try to sound out "MSP" or risk confessing to a disease.

We need to change this so that people can understand what these letters really mean. Congress seems to be able to name legislation using lyrical acronyms. I would suggest delegating the task to the Hill but its past decisions in this area argue otherwise.

So we are stuck with what we have. Last fall, I argued on these pages for the creation of a "regulated customer funds repository" to prevent those deposits from "going missing." But RCFR sounds like a curse or a pig in heat. There is no escape.


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