Eminence submitted a supplemental comment letter to the Commodity Futures Trading Commission (CFTC) concerning proposed amendments to derivatives clearing organization (DCO) risk management rules. Initially, the proposal aimed to allow futures commission merchants (FCMs) to treat separate accounts of a single customer as entities for margining and other regulations. However, this proposal was replaced by a new one, requiring FCMs to prevent customers from withdrawing funds that would leave insufficient balances to meet margin requirements.
While Eminence supports the CFTC’s efforts to regulate relief granted in CFTC Staff Letter 19-17, the letter expresses concerns about the potential unintended consequences of the new proposal that could potentially upend longstanding practices of the FCMs and their customers. The letter argues that FCM risk management practices have evolved significantly since the 2008 financial crisis and caution against changes that could disrupt established practices.
Eminence appreciates revisions to the definition of “business day” but criticizes the narrow definition of “ordinary course of business,” which it believes could limit FCMs and customers in addressing operational challenges. The letter advocates for additional flexibility in the one-business-day margin cutoff, provided it aligns with risk management controls and applicable laws.
