Proposed amendment of section 4d(2) of the commodity exchange act: Concerning investment of customer funds
✍ Scribed by Leslie A. Blau; James S. Barber
- Publisher
- John Wiley and Sons
- Year
- 1981
- Tongue
- English
- Weight
- 149 KB
- Volume
- 1
- Category
- Article
- ISSN
- 0270-7314
No coin nor oath required. For personal study only.
✦ Synopsis
n the normal course of trading commodity futures contracts, customers post I margin monies with their futures commission merchant. The margin acts as a security deposit signalling the good faith of the parties to these transactions.
These customer funds may be invested by the futures commission merchant in certain selected securities. The nature and conditions of these investments are regulated by Section 4d(2) of the Commodity Exchange Act, 7 U.S.C. §6d(2). That section permits customers' money to "be invested in obligations of the United States, in general obligations of any State or of any political subdivision thereof, and in obligations fully guaranteed as to principal and interest by the United States" in accordance with CFTC regulations. Elsewhere, the section, which was intended to segregate and protect customer funds held by commodity brokerage firms, states that customer funds shall not "be used to . . . secure or extend the credit, of any customer or person other than the one for whom the (funds) are held." That prohibition, which dates back to 1936,' has created a problem not envisioned at that time.
Today commodity brokerage houses frequently invest customer funds in repur-'49 Stat. 1494, 74th Cong., 2d Sess.