CFTC Proposal to Change Futures Margin Payments May ‘Kill’ Brokerage Model (Bloomberg)

The CFTC is thinking about extending some of its proposed margin rules for OTC derivatives clearing to the futures market. The part that matters here is if they require FCM’s to segregate margin for each client rather than pooling into one big account. If FCM’s can no longer get (and pass on to their clients) the benefits of netting out client positions to limit margin requirements, costs will go up for clients and the value of the FCM could be limited to simply providing market connectivity – a commodity these days.

“In the best case, it would cost the FCMs a lot of money, and in the worst case it would kill the FCM model completely,” said Kevin McPartland, a senior analyst with Tabb Group, a capital-markets strategic advisory and research firm in New York.

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